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Let us begin with the General Banking Law of 2000 RA 8791. It was signed into law on a! 2"# 2000.

SECTION 1. Title. The short title of this Act shall be "The General Banking La of !"""." $he law it re%la&ed was General Banking Law# so it add 2000. SECTION !. #eclaration of $olic%. The State recogni&es the 'ital role of banks in (ro'i)ing an en'iron*ent con)+ci'e to the s+staine) )e'elo(*ent of the national econo*% an) the fi)+ciar% nat+re of banking that re,+ires high stan)ar)s of integrit% an) (erfor*ance. In f+rtherance thereof- the State shall (ro*ote an) *aintain a stable an) efficient banking an) financial s%ste* that is globall% co*(etiti'e- )%na*ic an) res(onsi'e to the )e*an)s of a )e'elo(ing econo*%. .n/ 'e had seen this alread! in (ew )entral Bank A&t. $he whole %ar is an e*hortation and there is no legal +easure+ent to ,erif! the fulfil+ent of this %ro,ision. 'hat is a bank0.1. "Banks" shall refer to entities engage) in the len)ing of f+n)s obtaine) in the for* of )e(osits. an! &o++entators sa! this definition is inferior to the definition in the old law be&ause the old law sa!s# banks are entities dul! authori.ed b! the +onetar! board to engage in the business of regularl! lending funds obtained regularl! fro+ the %ubli& to the re&ei%t of de%osits of an! the bank. /o it0s a +ore %re&ise definition be&ause in the %resent definition# entities whi&h lend funds obtained fro+ the %ubli& but not as de%osits but rather as debts for their a&&ounts whether done regularl! or not and those whi&h regularl! regulated obtained fro+ o&&asional re&ei%t of de%osit should not be &onsidered as a bank. /o what is the differen&e between the old and the new definition- $he 1ualifier regularly be&ause it would see+ fro+ this new definition e,en if !ou do not regularl! re&ei,e de%osits fro+ the %ubli&# !ou &an be bank. 'hat is the differen&e between a bank and a 1uasi2bank whi&h also falls under the 3urisdi&tion of B/4A 1uasi2bank does not re&ei,e de%osits but it re&ei,es what is &alled de%osit substitutes.

'hat is a de%osit substitutesAs !ou well know# de%osits are not &ontra&t of de%osits in the )). 5e%osits +ade to the bank are a&tuall! +utuu+. $he de%ositor is lending +one! to the bank and the bank lends the +one! to the borrowers that it a%%ro,es. And the %ur%ose of +one! goes in and out on a regular basis be&ause !ou the de%ositor &annot# u%on noti&e# withdraw !our de%osit. In %ra&ti&e !ou &an withdraw !our de%osits although the s+all %rint of the %assbook it sa!s# bank reser,es the right to re1uire ad,an&e noti&e 122 da!s before it will gi,e !ou ba&k the +one! !ou de%osited in the bank. 67r dis&ussed ti+e de%osits and &onse1uen&es of %re ter+inating the sa+e 8 %ero asa ang de%osit substitute didto- 9: )an the bank be for&ed to a&&e%t %a!+ent before the end of the ter+- Is it so+ething like subs&ri%tion of shares- In subs&ri%tion# !ou ha,e subs&ribed# !ou ha,e a balan&ed# !ou gi,e the +one! and the &or%oration &annot but a&&e%t it- Is it the sa+e ruleIn a de&ided &ase# the /) ruled that the bank &annot refuse earl! %a!+ent. $he onl! thing it &an do is the bank &an ask for a fine or %enalt!# a reasonable %enalt! for earl! %a!+ent. 'hat 3ustifies it- $he bank has a right to rel! on the ter+ that this +u&h of the fund has alread! been allo&ated and earning this +u&h. ;ou &hanged that< it will ha,e to re,ise its %lan. 7or the trouble of re,ising the %lan# equitable considerations grant the bank the right to e*a&t fine. $he essen&e of a bank is that it a&&e%ts de%osits on a regular basis. In fa&t# that is its work. It borrows +one! fro+ the %ubli&. It %uts the %ortion of it as &ash in its ,ault. 4at of the &ash &an be treasur! bills. 'hat does it do with the rest- It lends it to the %ubli&. $he differen&e between the interest it gets fro+ the borrowers and the interest it %a!s to the %ubli& is the +argin of the bank. 'hat +ake a bank run fro+ debt of loan are the %rofits that are +ade out of its treasur!. If it is &o++er&ial bank or a thrift bank# the treasur! &an bu! and sell or e*&hange# that alone !ou &an +ake +one!. ;ou &an bu! and sell &or%orate bonds# go,ern+ent bonds# treasur! bills# treasur! bonds. And the treasur! a&ti,ities %a! the bank. (ow# we go to 1uasi2bank 6oooo%s= /i 7r. na 3ud. $aaaaaaaaaaaaaas kaung entrada. Latttttttttttttter %art ka!ong de%osit substitute 9:

It a&&e%ts de%osit substitutes. 5e%osit substitutes are trade a&&e%tan&es# sale of re&ei,ables. $he 1uasi bank is a&tuall! an inter+ediar!. 7r. s&ribbled so+ething on the board> ?ere is the borrower @&ontra&tor.A ?ere is the lender ())). ?ere is the 1uasi2bank. $he +o+ent borrower wins a bid to build a bridge# he re&ei,es a re&ei,able fro+ the go,0t. 5alaon na ni!a sa 1uasi2bank. Let us sa! the re&ei,able is 4100 . Ihatag na ni!a sa 1uasi2bank %ara +atagaan si!a ug 4100 ka!sa +aghulat si!a sa 4100 gikan sa go,0t. I+bis na dawaton sa borrower ang 4100 ihatag na ni!a sa 1uasi2bank. /o ang 1uasi2bank +aghatag ug 4100 . 4ero asa +ana ni!a kwaon- 5idto sa kung kinsa +an ang naa! kwarta- Binsa +an ang na! &ash adlaw2adlaw- Ang ()))= $agbuon na dinhi ug a%il. It is the %a%er of the 1uasi2bank stating that the +one! fro+ the &ontra&tor is gi,en to the lender at a gi,en interest. If it is with kuros2kuros# with re&ourse# the lender &an run after the 1uasi2 bank. /o that is the +eaning of trade a&&e%tan&es# assign+ents# sale of re&ei,ables. Instead of the %ubli&# !ou 3ust ha,e a few &lients. 'hat will +easure the interest rate here$he deter+ination of the interest rate is the &redit standing of the borrower. If the borrower is ,er! big 6banko# /an iguel:# ga+a! ra ka! dili na +ana +odagan# unlike the bank# this has no &ollateral be&ause this is so &alled +one! +arket transa&tions. $hese are obligations that ri%en within one !ear. In fa&t# a %a%er like this is dee+ed %erfe&ted the +o+ent ())) re&ei,es the %ost dated &he&k of B4I. Bung naa kuros2 kuros# +ao na tong with re&ourse. 4ag2untol anang &he&k# +aa!o unta nga naa with re&ourse. $hat is 1uasi2banking. If !ou &hanged fro+ 1uasi2bank to 4/ 6%awnsho%: and borrower to s C. $here is still a %ledge# a &ollateral# %agbalik ni+o naa da!on kwarta. 'h! is it o,er &ollaterali.ed sa %awnsho%- Be&ause it should not be a burden to !ou to redee+ it. 'h! is it not regulated b! the B/4- Be&ause the +one! the! used to lend to the borrower is their own# it is not other %eo%le0s +one!. In 1uasi banking# it is other %eo%le0s +one! but in 4/ it is a&tuall! the owner0s +one!. 4/ is not &o,ered with the General Banking Law but the 1uasi banks are &o,ered. $he! ha,e

regular ins%e&tion. $he! ha,e %ro&edural e*a+ination. )lassifi&ation of Banks 0.!. Banks shall be classifie) into1 .a/ 2ni'ersal banks3 .b/ Co**ercial banks3 .c/ Thrift banks- co*(ose) of1 .i/ Sa'ings an) *ortgage banks- .ii/ Stock sa'ings an) loan associations- an) .iii/ $ri'ate )e'elo(*ent banks- as )efine) in 4e(+blic Act No. 56"7 .hereafter the "Thrift Banks Act"/3 .)/ 4+ral banks- as )efine) in 4e(+blic Act No. 5080 .hereafter the "4+ral Banks Act"/3 .e/ Coo(erati'e banks- as )efine) in 4e(+blic Act No. 7609 .hereafter the "Coo(erati'e Co)e"/3 .f/ Isla*ic banks as )efine) in 4e(+blic Act No. 79:9- other ise kno n as the "Charter of Al A*anah Isla*ic In'est*ent Bank of the $hili((ines"3 an) .g/ Other classifications of banks as )eter*ine) b% the ;onetar% Boar) of the Bangko Sentral ng $ili(inas. .7<Aa/ .c/ Thrift banks- co*(ose) of1 .i/ Sa'ings an) *ortgage banks- .ii/ Stock sa'ings an) loan associations- an) .iii/ $ri'ate )e'elo(*ent banks- as )efine) in 4e(+blic Act No. 56"7 .hereafter the "Thrift Banks Act"/3 'hat is the differen&e between sa,ings and +ortgage banks and sa,ings and loan asso&iations/a,ings and +ortgage banks are usuall! housing loans. /a,ings and loan asso&iations are usuall! salar! loans. (B> 1: A7/LAI D Ar+ed 7or&es /a,ings and Loans Asso&iations In& 2 4ro,ides the highest returns# &o,ered b! 45 e*e+%ting it fro+ dedu&tion at sour&e 2 ar&os0 gift to Ar+ed 7or&es 2 Enl! the +e+bers of A74 &an %ut their +one! there 2 E%en to retired +e+bers of the A74 2 )o,ered b! the general banking law be&ause it is &lassified as a thrift bank

2: 4ri,ate 5e,elo%+ent Banks

It is a thrift bank# not a big bank. $he onl! de,elo%+ent bank &lassified as a big bank is 5e,elo%+ent Bank of the 4hili%%ines 65B4:< it is not a thrift bank. 5B4 is a go,ern+ent de%ositor!.

&ategor! of other &lassifi&ations of banks in&ludes +i&ro bank whi&h is now a &ategor! that is re&ogni.ed b! the B/4. In all these &ategories of bank# +i&ro finan&ing used to &ater unbankable %eo%le be&ause if !ou ha,e no assets or &ollateral !ou &annot borrow fro+ banks. And banks &annot lend without &ollateral. $he +o+ent the bank does that# the bank is in ,iolation of the regulations. (ow it &ould be that so+eone gets a &lean loan but +an! ti+es he has a de%osit in the bank whi&h is 8so the! still has the se&urit! for his loans. But when we talk about +i&ro finan&ing# !ou talk about %eo%le who traditionall! &annot borrow fro+ the banks be&ause the! ha,e no &ollateral. $he nu+ber one e*a+%le of this is 4akistani. 90H of these borrowers are wo+en who engage in s+all businesses. $he &redit here is not a transa&tion but a &ultural# so&ial +o,e+ent intended to transfor+ so&iet!. $his is the whole gos%el %ro%agated b! those who stud! +i&ro finan&ing. In the 4hili%%ines there ha,e been rural banks to bridge in +i&ro finan&ing. $he B/4 is e+%owered under se&tion I /e&tion I. Policy Direction; Ratios, Ceilings and Limitations. 2 $he Bangko /entral shall %ro,ide %oli&! dire&tion in the areas of +one!# banking and &redit. 6n: 7or this %ur%ose# the onetar! Board +a! %res&ribe ratios# &eilings# li+itations# or other for+s of regulation on the different t!%es of a&&ounts and %ra&ti&es of banks and 1uasi2 banks whi&h shall# to the e*tent feasible# &onfor+ to internationall! a&&e%ted standards# in&luding of the Bank for International /ettle+ents 6BI/:. $he onetar! Board +a! e*e+%t %arti&ular &ategories of transa&tions fro+ su&h ratios# &eilings. and li+itations# but not li+ited to e*&e%tional &ases or to enable a bank or 1uasi2bank under rehabilitation or during a +erger or &onsolidation to &ontinue in business# with safet! to its &reditors# de%ositors and the general %ubli&. 622)a: Ratios are ,er! i+%ortant for the B/4. $he! are sa!ing# 10H of !our funds should be +i&ro finan&ing. /o the rural banks are for&ed to lend out for +i&ro finan&ing. $o gi,e &redit to the lowest le,el. 'here is it written that B/4 has the %ower of su%er,ision- It is written in se&tion J ;ou know su%er,ision in !our %oliti&al law. 'hat is su%er,ision under %oliti&al law-

If !ou are go,ern+ent# there are onl! 2 banks that !ou &an %ut !our +one!> 5e,elo%+ent Bank or Land Bank

.)/ 4+ral banks- as )efine) in 4e(+blic Act No. 5080 .hereafter the "4+ral Banks Act"/3 Fa&h of the Rural Banks has their own s%e&ial laws.

.g/ Other classifications of banks as )eter*ine) b% the ;onetar% Boar) of the Bangko Sentral ng $ili(inas. .7<Aa/ 'hat is a new &lassifi&ation of bank &reated b! the B/4- $he i&ro Bank su%%osed to engage in +i&ro finan&ing. $he +ost dangerous kind of bank. 6GL): 5e&e+ber 19# 2012 0.!. Banks shall be classifie) into1 .a/ 2ni'ersal banks3 .b/ Co**ercial banks3 .c/ Thrift banks- co*(ose) of1 .i/ Sa'ings an) *ortgage banks- .ii/ Stock sa'ings an) loan associations- an) .iii/ $ri'ate )e'elo(*ent banks- as )efine) in 4e(+blic Act No. 56"7 .hereafter the "Thrift Banks Act"/3 .)/ 4+ral banks- as )efine) in 4e(+blic Act No. 5080 .hereafter the "4+ral Banks Act"/3 .e/ Coo(erati'e banks- as )efine) in 4e(+blic Act No. 7609 .hereafter the "Coo(erati'e Co)e"/3 .f/ Isla*ic banks as )efine) in 4e(+blic Act No. 79:9- other ise kno n as the "Charter of Al A*anah Isla*ic In'est*ent Bank of the $hili((ines"3 an) .g/ Other classifications of banks as )eter*ine) b% the ;onetar% Boar) of the Bangko Sentral ng $ili(inas. .7<Aa/ /e&tion " lists down the different &ategories for bank and ea&h of these &ategories are &o,ered b! s%e&ifi& legislation. And the last

It is &o+%ared to the definition of &ontrol. )ontrol in %oliti&al law is the %ower of the e*e&uti,e to substitute for his own 3udg+ent of that of his alter ego. /u%er,ision# howe,er# is a%%lied to lo&al go,ern+ents. $he e*e&uti,e &annot re%la&e his own 3udg+ent< he onl! has the %ower to su%er,ise. $o see to it 'E( the offi&er is &ondu&ting hi+self in a&&ordan&e of law. $ake a look what is su%er,ision in se&tion J. /e&tion J. Supervisory Powers. $he o%erations and a&ti,ities of banks shall be sub3e&t to su%er,ision of the Bangko /entral. K/u%er,isionK shall in&lude the following> J.1. $he issuan&e of rules of# &ondu&t or the establish+ent standards of o%eration for unifor+ a%%li&ation to all institutions or fun&tions &o,ered# taking into &onsideration the distin&ti,e &hara&ter of the o%erations of institutions and the substanti,e si+ilarities of s%e&ifi& fun&tions to whi&h su&h rules# +odes or standards are to be a%%lied< /o the su%er,ision here is not e*a&tl! the sa+e in %oliti&al law be&ause the law here gi,es the B/4 the %ower to fi* the law 2 the !ardsti&k itself as to be used on 'E( the bank or 1uasi2bank +eets the legalit!. ?e does not onl! +easure but also the authorit! to establish the +easure+ent. J.2 $he &ondu&t of e*a+ination to deter+ine &o+%lian&e with laws and regulations if the &ir&u+stan&es so warrant as deter+ined b! the onetar! Board< $his is su%er,ision in the traditional sense D to deter+ine 'E( there is &o+%lian&e with the laws and regulations. J." E,erseeing to as&ertain that laws and regulations are &o+%lied with< Gust a re%etition J.J Regular in,estigation whi&h shall not be oftener than on&e a !ear fro+ the last date of e*a+ination to deter+ine whether an institution is &ondu&ting its business on a safe or sound basis> 4ro,ided# $hat the defi&ien&iesLirregularities found b! or dis&o,ered b! an audit shall be i++ediatel! addressed< $his is a li+itation. $he B/4 &annot &ondu&t an audit in for+ of in,estigation +ore often than on&e a !ear. And then# if defi&ien&ies and irregularities are found# the banks and 1uasi2banks +ust re%ort to B/4 onetar! Board on how these defi&ien&ies and irregularities are addressed.

J.I In1uiring into the sol,en&! and li1uidit! of the institution 6225:< or Re+e+ber the differentiation and e*a+ination. In,estigation is +ore fo&us# e*a+ination is wider. It in&ludes %oli&ies of +anage+ent# !ardsti&ks of li1uidit!# sol,en&! e*a+ination and enfo&i,e and &orre&ti,e a&tions. J.M Fnfor&ing %ro+%t &orre&ti,e a&tion. 6n: $he Bangko /entral shall also ha,e su%er,ision o,er the o%erations of and e*er&ise regulator! %owers o,er 1uasi2banks# trust entities and other finan&ial institutions whi&h under s%e&ial laws are sub3e&t to Bangko /entral su%er,ision. 622)a: 7or the %ur%oses of this A&t# K1uasi2banksK shall refer to entities engaged in the borrowing of funds through the issuan&e# endorse+ent or assign+ent with re&ourse or a&&e%tan&e of de%osit substitutes as defined in /e&tion 9I of Re%ubli& A&t (o. 7MI" 6hereafter the K(ew )entral Bank A&tK: for %ur%oses of re2lending or %ur&hasing of re&ei,ables and other obligations. 6225a: 7inan&ial institutions D leasing &o+%anies# +one! &hangers. /o banks and 1uasi2banks# entities in engage in the borrowing of funds through the issuan&e or assign+ent with re&ourse or a&&e%tan&e of de%osit substitutes as defined in the (ew )entral Bank A&t. ;ou &annot 3ust %ut u% a sign @I bu! 5ollarsA. ;ou need authorit! fro+ the onetar! Board. ;ou ha,e to be li&ensed to be a +one! &hanger. 'hat if !our friend wants to e*&hange his dollars to %eso with !ou- )an !ou do that- Is that a ,iolationIt used to be that %ossession of dollars was not allowed# onl! the banks. But now it0s no longer a fraud. ;ou &an do that. 'h!- $hat is an ordinar! &ourse of business. 4ero kung naa ka sa kanto# naa ka! %westo dira# !ou &an be re%orted to the B/4 and &an be su++oned for 1uestioning. /e&tion I. Policy Direction; Ratios, Ceilings and Limitations. 2 $he Bangko /entral shall %ro,ide %oli&! dire&tion in the areas of +one!# banking and &redit. 6n: 7or this %ur%ose# the onetar! Board +a! %res&ribe ratios# &eilings# li+itations# or other for+s of regulation on the different t!%es of a&&ounts and %ra&ti&es of banks and 1uasi2 banks whi&h shall# to the e*tent feasible# &onfor+ to internationall! a&&e%ted standards# in&luding of the Bank for

International /ettle+ents 6BI/:. $he onetar! Board +a! e*e+%t %arti&ular &ategories of transa&tions fro+ su&h ratios# &eilings. and li+itations# but not li+ited to e*&e%tional &ases or to enable a bank or 1uasi2bank under rehabilitation or during a +erger or &onsolidation to &ontinue in business# with safet! to its &reditors# de%ositors and the general %ubli&. 622)a: /o there is a wide dis&retion on the %art of B/4 with res%e&t to %oli&ies regarding +one!# banking and &redit. /e&tion M. Aut ority to !ngage in "an#ing and $uasi%"an#ing &unctions. 2 (o %erson or entit! shall engage in banking o%erations or 1uasi2banking fun&tions without authorit! fro+ the Bangko /entral> .4ro,ided# howe,er# $hat an entit! authori.ed b! the Bangko /entral to %erfor+ uni,ersal or &o++er&ial banking fun&tions shall likewise ha,e the authorit! to engage in 1uasi2banking fun&tions. Right then and there# !ou will see how wide the s&o%e and authorit! of a uni,ersal banks.b! the li&ense that a uni,ersal bank re&ei,es# it &an engage in 1uasi2banking# thrift banking# rural banking that0s wh! it is &alled uni,ersal banking. $he authorit! to ad+inister oath is gi,en not onl! to onetar! Board but also to de%art+ent heads. $he de%art+ent head and the e*a+iners of the a%%ro%riate su%er,ising and e*a+ining de%art+ent are hereb! authori.ed to ad+inister oaths to an! su&h %erson# e+%lo!ee# offi&er# or dire&tor of an! su&h entit! and to &o+%el the %resentation or %rodu&tion of su&h books# do&u+ents# %a%ers or re&ords that are reasonabl! ne&essar! to as&ertain the fa&ts relati,e to the true fun&tions and o%erations of su&h %erson or entit!. 7ailure or refusal to &o+%l! with the re1uired %resentation or %rodu&tion of su&h books# do&u+ents# %a%ers or re&ords within a reasonable ti+e shall sub3e&t the %ersons res%onsible therefore to the %enal san&tions %ro,ided under the (ew )entral Bank A&t. /o the e*a+iner of B/4 is 3ust like a %rose&utor. ura na nag 4I 6%reli+inar! in,estigation: under oath. 4ersons or entities found to be %erfor+ing banking or 1uasi2banking fun&tions without authorit! fro+ the Bangko /entral shall be sub3e&t to a%%ro%riate san&tions under the (ew )entral Bank A&t and other a%%li&able laws. 6Ja:

/e&tion 7. !'amination by t e "ang#o Sentral. 2 $he Bangko /entral shall# when e*a+ining a bank# ha,e the authorit! to e*a+ine an enter%rise whi&h is wholl! or +a3orit!2owned or &ontrolled b! the bank. 622 Ba: A%%li&able e,en if it is not a bank. Before under the old )entral bank Law# if a bank has a subsidiar! and it is not a bank or not a 1uasi2bank# it &ould not be a sub3e&t of e*a+ination or ins%e&tion. (ow the law s%e&ifi&all! grants the B/4 the authorit! to ins%e&t and e*a+ine a non2bank whi&h is a subsidiar! of a +a3orit! owned &or%oration or entit! of a bank. Gi,e an e*a+%le. 1. Banko ka# uni,ersal bank# !ou ha,e a subsidiar! ar+oured &ar &or%oration. 4uros na ar+oured &ar. And !ou ha,e &onta&ts with other banks. Before that &ould not be sub3e&t to ins%e&tion. But not it &an be. 2. /ubsidiar! of a bank 2 the &redit &ard &o+%an!# the B/4 &an e*a+ine that. ". An A$ &o+%an! as a subsidiar! that i+%ortsLsells &redit &ard# B/4 &an also e*a+ine that.

/e&tion 8. (rgani)ation. 2 $he onetar! Board +a! authori.e the organi.ation of a bank or 1uasi2bank sub3e&t to the following &onditions> 8.1 $hat the entit! is a sto&k &or%oration 67:< 8.2 $hat its funds are obtained fro+ the %ubli&# whi&h shall +ean twent! 620: or +ore %ersons 6225a:< and 8." $hat the +ini+u+ &a%ital re1uire+ents %res&ribed b! the onetar! Board for ea&h &ategor! of banks are satisfied. 6n: (o new &o++er&ial bank shall be established within three 6": !ears fro+ the effe&ti,it! of this A&t. In the e*er&ise of the authorit! granted herein# the onetar! Board shall take into &onsideration their &a%abilit! in ter+s of their finan&ial resour&es and te&hni&al e*%ertise and integrit!. $he bank li&ensing %ro&ess shall in&or%orate an assess+ent of the bankNs ownershi% stru&ture# dire&tors and senior +anage+ent# its o%erating %lan and internal &ontrols as well as its %ro3e&ted finan&ial &ondition and &a%ital base. $he highest &a%ital re1uire+ent is the uni,ersal bank< the lowest is the rural bank. Before its a+end+ent# the Rural Bank

re1uires onl! 100#000. $hat was in the 19M0s. /e&tion 9. *ssuance o+ Stoc#s. 2 $he onetar! Board +a! %res&ribe rules and regulations on the t!%es of sto&k a bank +a! issue# in&luding the ter+s thereof and rights a%%urtenant thereto to deter+ine &o+%lian&e with laws and regulations go,erning &a%ital and e1uit! stru&ture of banks< 4ro,ided# $hat banks shall issue %ar ,alue sto&ks onl!. $ro'i)e)- That banks shall iss+e (ar 'al+e stocks onl% === it &annot issue nor+al ,alue sto&ks. $here is what we &all a se&ond2tier &a%ital. B/4 now a%%ro,es banks floating a bond abroad. $hen the 8 that is &onsidered as the se&ond &a%ital of the bank. If !ou0re LB4# !ou &an do that without ne&essar! &learan&e fro+ B/4. /e&tion 10. ,reasury Stoc#s. 2 (o bank shall %ur&hase or a&1uire shares of its own &a%ital sto&k or a&&e%t its own shares as a se&urit! for a loan# e*&e%t when authori.ed b! the onetar! Board> 4ro,ided# $hat in e,er! &ase the sto&k so %ur&hased or a&1uired shall# within si* 6M: +onths fro+ the ti+e of its %ur&hase or a&1uisition# be sold or dis%osed of at a %ubli& or %ri,ate sale. 62Ja: /o this is notwithstanding the fa&t that the shares of sto&ks are redee+able shares. $he bank &an onl! %ur&hase its shares with %rior %er+ission fro+ B/4 and the longest it &an hold its share is M +onths and it +ust be sold or dis%osed at a %ubli& or %ri,ate sale. 6GL): >an+ar% 1"- !"10 ?1 @here is that fo+n)A A> that is found in the8se&tion M# 1st %aragra%h it sa!s>

No person or entity shall engage in banking operations or quasi-banking functions without authority from the Bangko Sentral: .Provided however !hat an entity authori"ed by the Bangko Sentral to perform universal or commercial banking functions shall likewise have the authority to engage in quasi-banking functions.

If %o+ )o atten) to (erfor* banking f+nctions hat a aits %o+A Last senten&e sa!s

Persons or entities found to be performing banking or quasi-banking functions without authority from the Bangko Sentral shall be sub#ect to appropriate sanctions under the New $entral Bank %ct and other applicable laws.

/e&. 8 %uts down the &onditions under whi&h a bank +a!be organi.ed.

Birst. It +a! be a sto&k &or%oration. Is there an e=ce(tionA ;es# there is. 'hat is the e*&e%tion- It is the B/. It is also a bank and !et it is own onl! b! the re%ubli&. It has no other shareholders. It has &a%ital sto&ks but it is own onl! b! the Re%ubli&.

Section 8. Organization. - !he &onetary Board may authori"e the organi"ation of a bank or quasi-bank sub#ect to the following conditions: '.( !hat the entity is a stock corporation

If I a+ not +istaken we %arted last !ear with the beginnings of organi.ing a bank. $hat is &ha%ter " of the Gen Banking A&t. Secon) con)ition1 Onder the )ha%ter " organi.ation# +anage+ent and ad+inistration of banks and 1uasi2banks and trust entities# !ou ha,e a %arti&ular %ro,ision addressed to the /e&urities and F*&hange )o++ission 6/F):. I+agine that in law for banks has a %ro,ision %rohibiting the /F) fro+ a%%ro,ing the arti&les of in&or%oration of +ain bank unless it is indorsed b! the +onetar! board of the Bangko /entral. $hat is wh! s%e&ifi& %ro,ision of the General Banking Law.

'.) !hat its funds are obtained from the public which shall mean twenty *)+, or more persons- and

;ou &annot register a &or%oration whose %ur%ose is to organi.e a bank and to +aintain and ad+inister a bank if it has less than 20 sto&kholders.

Thir) con)ition.

'.. !hat the minimum capital requirements prescribed by the &onetary Board for each category of banks are satisfied.

Section (/. Certificate of Authority to Register. - !he Securities and 01change $ommission shall no register the articles of incorporation of any bank or any amendment thereto unless accompanied by a certificate of authority issued by the &onetary Board under it seal. Such certificate shall not be issued unless the &onetary Board is satisfied from the evidence submitted to it.

$he +ini+u+ &a%ital re1uire+ent is not found in the law go,erning the banks. If !ou go to the rural banks a&t !ou will be sur%rised be&ause the +ini+u+ re1uire+ent there is 100#000 %esos that was long ti+e ago. $he B/ %uts out &ir&ulars ad3usting the +ini+u+ &a%ital re1uire+ents of a bank. 7or instan&e a uni,ersal bank now is su%%osed to be &a%itali.ed at ".2 %esos222 I think it has been subse1uentl! in&reased to a little higher a+ount but !ou don0t find the +ini+u+ &a%ital re1uire+ents fro+ the law that authori.es !ou a %arti&ular8bank that dis&o,ered b! thePit is &o,ered in the &ir&ulars of the Bangko /entral.

?1 @hat are the e'i)ences s+b*itte) to itA

(/.( !hat all requirements of e1isting laws and regulations to engage in the business for which the applicant is proposed to be incorporated have been complied with(/.) !hat the public interest and economic conditions both general and local #ustify the authori"ation- and

/o there is an e&ono+i& i+%a&tP

Again# issuan&e of sto&ks /e& 9>

Section 9. Issuance of Stocks. - !he &onetary Board may prescribe rules and regulations on the types of stock a bank may issue including the terms thereof and rights appurtenant thereto to determine compliance with laws and regulations governing capital and equity structure of banks-

(/.. !hat the amount of capital the financing organi"ation direction and administration as well as the integrity and responsibility of the organi"ers and administrators reasonably assure the safety of deposits and the public interest.

/o there is a ba&kground &he&k as to the organi.ers# in&or%orators. 'ho will do this/u%%osed to be the B/. /o o%en !ourself to thoseP

$hen there is a %ro,iso> 7irst !ou +ake a de&laration. $here is a biodata of ea&h in&or%orator# dire&tor. $hen#

Provided !hat banks shall issue par value stocks only.

$his doesn0t +ean that the banks &annot issue22shares. $his +eans that the banks &annot issue no %ar ,alue shares. /o# not e,en the Bangko /entral &an authori.e banks to issue no %ar ,alue shares. Banks shall issue %ar ,alues sto&ks. ;our arti&les of in&or%oration is %resented to the Bangko /entral. $he Bangko /entral will indorse it to the +onetar! board and the B issues what is &alled in /e& 1J# a certificate of a+thorit% to register.

!he Securities and 01change $ommission shall not register the by-laws of any bank or any amendment thereto unless accompanied by a certificate of authority from the Bangko Sentral

$ake a look of /e&.1J. $his is a &o++and to the /F).

$his se&ond one the &ertifi&ate of authorit! of b! laws is onl! found in the General Banking law. ;ou re+e+ber of &ourse# /e&.M of the )or%. )ode. Ene of those ,ested kinds of &or%orations that +ust ha,e an endorse+ent in a%%ro%riate go,ern+ent agen&! or instru+entalit!# banksLnot banks# insuran&e &o+%anies# %ubli& utilities !ou +ust ha,e an endorse+ent fro+ the a%%ro%riate go,ern+ental agen&! for it the a%%ro,al of !our arti&les. $hat is re%eated here. $hen

there is the addition that !our b!2laws too +ust ha,e an authorit!# certificate of a+thorit% to register issued b! the B/ and later on if !ou a+end it# for e,er! a+end+ent !ou +ust ha,e an authorit!# &ertifi&ate of authorit! to a+end it. $hat is how grossl! su%er,ised for the for+ation and alteration based in the do&u+ents of the bank.

(ow# is a bank unlike an! other &or%oration &losel! s&rutini.ed when it &o+es to bu!ing its own shares-

I bring !ou but to /e&.10 be&ause !ou +ust re+e+ber this. 4rohibition one of the %owers we saw in the &or%oration that has its %ower to a&1uire his own shares. $he li+itation being# it +ust ha,e unrestri&tedPearnings but for the banks under se&.10 treasur! sto&ks.

Re+e+ber &a%ital raised b! the bank b! issuing shares is not the %ur%ose of funds that is used to lend out loans to the %ubli& before that is not for it0s used b! banks to lend +one!. @hat is +se) b% the bank to len) *one%A $he de%osits of the de%ositing %ubli&. 'hen !ou o%en an a&&ount in the bank where !ou de%osit +one! the subtotal of de%osits is the sour&e of +one! that is lend out b! the bank. ;ou will see later on banks are %rohibited fro+ lending out +ore than its de%osits.

Section 10. Treasury Stocks. - No bank shall purchase or acquire shares of its own capital stock or accept its own shares as a security for a loan e1cept when authori"ed by the &onetary

@h% is it these ! (rohibitions is (+t togetherA (o bank &an %ur&hase its own shares and no bank &an a&&e%t as &ollateral for a loan of its sto&kholder# its shares of sto&k- 'h! is it %ut together- Be&ause the se&ond is a for+ of the first.

@hat then is the (+r(ose of the ca(ital that is raise) b% the o nerA It is used to %ur&hase other assets that the banks needs in its 22.let sa! &o+%uters# furnitures# ,ehi&les# building# real %ro%ert! for the e*tent that the law allows it to a&1uire. $he &a%ital is used when there is a failure on the %art of its lenders# its borrowers to bring ba&k the loans. $he &a%ital is used to# in other words the &a%ital there to a&t as buffer in &ases when there are non2%erfor+ing loans that is where the +ost i+%ortant fun&tions of &a%ital sto&ks raised b! the owner.

If !ou sa!# no banks shall %ur&haseL a&1uire its own &a%ital sto&k and then a shareholder if !ou wants to get out of the bank he will 3ust offer it as a &ollateral of a loan of so+ebod! and he will tell the owner# gi,e +e the %ro&eeds of the loan Pasagdan na lang na nato. Dili na lang nato bayaran na #warta lang nimo ang imong s ares. 'hat is that$hat is 3ust like a bank %ur&hasing its own shares. $he shares of the bank &annot be used as &ollateral for a loan with the sa+e bank. $ake note there is no %rohibition fro+ +aking &ollateral or a loan so+ewhere else. ;ou &an +ake it a &ollateral of a loan so+ewhere else# but !ou &an0t +ake it a &ollateral of a loan in the sa+e bank be&ause in so doing !ou will fa&ilitate that whi&h is alread! %rohibited# for the bank to bu! its own shares.

Alright# the %rohibition against the bank bu!ing its own shares is not absolute. It &an be allowed be&ause the law sa!s# e*&e%t if author b! B. But then again the B is sub3e&ted to &ertain li+itations. 'hat are those/e&tion 10 further sa!s>

Provided !hat in every case the stock so purchased or acquired shall within si1 *2, months from the time of its purchase or acquisition be sold or disposed of at a public or private sale.

/o again the bank is %rohibited fro+ +aintaining treasur! shares indefinitel!. $he longest that the bank &an ha,e treasur! shares is M +onths. 'ithin whi&h it +ust again sell its

shares to the %ubli&. In other words the law is &lear that the bank should not ha,e an! e*&use to be defi&ient in its &a%ital sto&k. /o# that it +ust alwa!s ha,e read! assets to buffer so &alled %ast due loans# non2%erfor+ing loans be&ause the failure of the banks is not like the failure of an! business &or%oration. $he failure of the bank &ould result in a &riti&al in3ur! to the finan&ial industr!. $his is an ad+ission of how &riti&al the roles of the banks in the finan&ial industr!. /o# within M +onths fro+ the ti+e of its %ur&haseLa&1uisition the bank should sellL dis%ose the treasur! shares at a %ubli&L%ri,ate sale.

own shares as bank as there &an be owned. /e&tion 12 sa!s>

Section 12. Stockholdings of Family Groups of Related Interests. - Stockholdings of individuals related to each other within the fourth degree of consanguinity or affinity legitimate or common-law shall be considered family groups or related interests and must be fully disclosed in all transactions by such corporations or related groups of persons with the bank.

$hen# &or%orate sto&kholdings.

In organi.ing a bank# hat is the role of foreignersA Co *+ch if at all are foreigners is allo e) to in'est in banksA $he general rule is %ut here in se&tion11>

Section 13. Corporate Stockholdings. - !wo or more corporations owned or controlled by the same family group or same group of persons shall be considered related interests and must be fully disclosed in all transactions by such corporations or related group of persons with the bank.

Section 11. Foreign Stockholdings. - 3oreign individuals and non-bank corporations may own or control up to forty percent */+4, of the voting stock of a domestic bank. !his rule shall apply to 3ilipinos and domestic nonbank corporations. !he percentage of foreign-owned voting stocks in a bank shall be determined by the citi"enship of the individual stockholders in that bank. !he citi"enship of the corporation which is a stockholder in a bank shall follow the citi"enship of the controlling stockholders of the corporation irrespective of the place of incorporation.

Be&ause again there is a li+it to the a+ount of shares or &ontrol that a fa+il! &an ha,e.

/o it tells !ou the nationalit! rule for banks. 7irst# the in&or%oration test is set aside. $he situs of in&or%oration doesn0t refle&t on the &iti.enshi% of the bank Lsto&kholder of the bank. @hat is )eter*inati'eA It is the &ontrol of the bank# the &iti.enshi% of the &ontrolling sto&kholder of the bank. If the &ontrolling sto&kholder is M0 %er&ent# if he sa! natural %erson# then ,er! si+%le it0s 3ust its &iti.enshi%. If it0s a &or%oration# then !ou +ust deter+ine whether that &or%oration is M0 %er&ent also &ontrolled b! 7ili%inos. $he rule laid down here is nationalit! of banks is deter+ined b! the &ontrol test.

)entral bank &ir&ulars are take effe&t that a single fa+il! grou%Lrelated interest &annot be in &ontrol for +ore than 1 bank that is wh!# what is the %ur%ose of that rule is to broaden the ownershi% %a&e of that bank. If !ou are able to &ontrol banks then !ou &an be able to &ontrol e&ono+! of 4hil. As +u&h as %ossible we don0t want %eo%le to &ontrol +ore than1 bank. Although if !ou own# or !ou are a &ontrolling owner of a uni,ersal bank# ne&essaril! !ou &an also run a rural bank# a thrift bank it is all through a s1uand uni,ersal bank but &ertainl! !ou are not allowed to own 2 uni,ersal banks.

Besides the &ontrol test there is the so &alled &ontrol of fa+il! grou%s or related interest that is se&tion 12. A fa+il! grou% or related is not allowed 3ust to

7ourth degree of &onsanguinit! Laffinit!. /o u% to 1st &ousin and then there is also this &or%orate sto&kholdings rule.

/e&tion 1I Board of 5ire&tors# the rules with res%e&t to board of dire&tors of a bank is not ,er! &o+%li&ated it &an be between I and 1I +a*i+u+ as a general rule but under se&tion 17 in &ases of +erger and &onsolidation of banks the nu+ber of dire&tors &an be u% to 21 in other words it sa!s here# shall not e*&eed 21.

!ou hear nothing# nawala.68stor! about Allied bank and Lu&io $an:

General r+le> I21I if !ou0re organi.ing a banking &or%. If !ou are +erging# to en&ourage +ergers !ou &an ha,e u% to 21 dire&tors. $his is to en&ourage +ergers and &onsolidation of banks. It see+s that we ha,e too +an! banks &o+%ared with our /outheast Asian neighbours. Eur banks are s+aller &a%itali.ation wise. ;ou got to ?ongkong al+ost e,er! &orner there is a bank# bank bran&h but their banks are better &a%itali.ed# bigger &a%itali.ation.

In other words the &or%oration holding &or%oration here does not ha,e enough share of sto&ks8;ou know r. $an has a ,er! %rolifi& fa+il!. $he! ha,e been &orded ownershi%s in different &or%s. $hat is one of the reasons that are dela!ing the &on&lusion of the +ergers.

$here is a belief the bigger the bank the +ore se&ure. $he +ore &a%ital sto&k# the +ore it engenders faith in the banking %ubli&. /o the!0re en&ouraging in the 4hili%%ines for banks to +erge. Ene of the %ro,isions b! whi&h +ergers is en&ourage# is this %ro,ision that !ou &an e,en ha,e board of dire&tors u% to 21 if 2 banks +erge. 'hat if a %roble+ in +ergers is the &onstituent banks in the +erger +ight be relu&tant to +erge be&ause the e*isting dire&tors will no longer be dire&tors. -a wagtang sila ba sa ilang na andan nga pwesto.

)entral bank a&ti,el! en&ouraging that. 'h!- $he +o+ent that B4I raises its &a%ital# the others will be for&ed to raise their &a%ital. $he bigger the &a%ital# the +ore there is finan&ial %owers su%%osed to be in the bank. Right now# its &onsidered reall! 3unior banks &o+%ared to the banks of /inga%ore# ?ongkong# Bangkok# or e,en Gakarta Indonesia or ala!sia. $heir banks are well founded. $hat is wh! there is no li+itations there as to nu+ber of bran&hes be&ause the! ha,e +ore than enough &a%ital 3ustif!ing that is wh! the! &an %ut u% bran&hes e,er! &orner that is wh! the!0re not afraid when other entities %ut u% A$ +a&hines. in ?ongkong and O/ !ou don0t ha,e to be a bank to %ut u% an A$ +a&hines e,en in gas stations there are A$ +a&hines. A$ +a&hines are 3ust &ash# sour&es of &ash. /o !ou &an a%%l! for a li&ense to %ut u% A$ +a&hines. Diri sa ato ang una. nato sa A,-, bang#o ray naay A,- not ne&essaril! so. ;ou ha,e a li&ense# a ser,i&e or &ards of &ards and the! &an bill the banks and the! s%e&iali.ed so# lowers down the &osts.

If !ou ha,e 9 dire&tors in bank A and 9 dire&tors in bank B and !ou &an a&&o++odate all of the+# 18 that eli+inates %ersonal ob3e&tions whi&h !ou &an ha,e e,en stronger fro+ an! other argu+ent against +erger. /o !ou &an ha,e the+ and agree to +erger.

$hat is i+%ortant to reali.e with res%e&t to board of dire&tors the nu+ber# the e*&e%tion as to the nu+ber. $here is a %ro,iso in /e&tion 1I>
Non-3ilipino citi"ens may become members of the board of directors of a bank to the e1tent of the foreign participation in the equity of said bank.

7or a while there was a talk of B4I a&1uiring 4(B and Allied Bank and there was alread! an order to sus%end trading of shares of sta&k of B4I# Allied Bank and 4(B be&ause the +erger is also being &on&luded. But suddenl!

/o# there is no %rohibition of non 27ili%inos of be&o+ing dire&tors of a bank onl! !ou &annot e*&eed !our %ro%ortion of sto&kholdings in relation to the outstanding balan&e. ;ou are &onfined to that. If !ou ha,e J0%er&ent of outstanding &a%ital sto&ks# whi&h is the +a*i+u+. ;ou &an onl! hold J0 %er&ent seats of the board of dire&tors of a bank and then there is this %ro,iso in se&tion 1I whi&h is the 1st e*%li&it %ro,iso for an! &or%.
!he meetings of the board of directors may be conducted through modern technologies such as but not limited to teleconferencing and videoconferencing.

Eb,iousl! the re1uisites that the /F) %uts out is a%%li&able here be&ause a banking &or%oration is also a &or%.

Qideo so +u&h better be&ause !ou &an see and !ou &an re&ogni.e if he is reall! the +e+ber of the board or his wife of the +e+ber of the board <2:# but still there are ,erifi&ation re1uire+ents8 Bow8<2: 6AE:

Ganuar! 1M# 201" Latest &ir&ular of BIR borrowers &lini&. of B/ on single

$here is no su&h %ro,ision in our &or%oration &ode although there is a &ir&ular fro+ /F) on +eetings of the board ,ia tele&onferen&ing and ,ideo2&onferen&ing# the! list down the re1uire+ents. ?ere for the 1 st ti+e there is s%e&ifi& &onfir+ation allowed b! law to hold tele&onferen&ing and ,ideo &onferen&ing +eetings of the board.

;ou will noti&e that )ir&ular 779 series 201" dated 9 Ganuar! 201"61L19L201": two big %aragra%hs# the onl! differen&e between these 2 %aragra%hs is the first one is for banks and the other one is for 1uasi2 banks. $he single borrower0s li+it is 2IH of net worth of the bank. It is the a+ount that the bank &an lend to an! single borrower. (ow the! &an in&rease it u% to I0H of net worth# %ro,ided that the in&rease of 2IHis a loan that is in &onne&tion with 444# the a%%ro,ed %ro3e&t of the 42no! ad+inistration on his %riorit! %ubli& works %ro3e&t. Air%orts# roads# hinges that ha,e been listed as %riorit! of 42 no!. /o that is the in&rease of 2I %er&ent. 'e will &o+e to that# 3ust gi,ing it to !ou. /o that !ou will ha,e a &o%! of the &ir&ular. (or+all! the net worth of a bank is its &a%ital. If it lends out +one! onl! e1ui,alent to the a+ount that the de%osits that +akes be&ause its &a%ital is su%%ose to be its net worth if !ou don0t ha,e bad loans# !ou will not take awa! !our &a%ital. As a rule of thu+b it is 2IH of !our &a%ital. If !ou are a &o++er&ial bankL uni,ersal bank the +ini+u+ &a%ital %aid u% is ".IBillion so 2IH of that is not e,en 1 Billion. $he! in&rease it b! another 2IH# so +ini+u+ &a%ital of uni,ersal bank ".I let0s sa! I0H of that # is about 1.7I Billion that !ou &an lend to single borrower# %ro,ided that is 444# the additional 2IH and that in no &ase would that its o,erall e*%osure8+ore than 2IH of the net worth the bank. ;ou ha,e the81 e*a+%le of a 444 %ro3e&t that is the ter+inal 2 of international air%ort of )ebu. ?ow +u&h is that %ro3e&t- It0s su%%osed to be 7 Billion. (or+all! %ro3e&ts like that is " ti+es I0H e1uit!# I0 H borrowings. Inde%endentl!# the

@hat is the )ifferencing of teleconferencing an) 'i)eo< conferencingA $ele&onferen&ing 2 audio ra. ;ou are +eeting b! ,oi&e. Qideo &on2!ou are +eeting audio and ,ideo. 68ta*i stor! sa G/I/:

;ou will ha,e to undergo &ertain re1uisites in tele&onferen&ing +eeting.P there is %ri+ar! identifi&ation. $here is ,erifi&ation as whether it &an be heard and understood b! ea&h one and b! ea&h one as to the other. $his is not a laughing +atter be&ause this da!s be&ause the %heno+enon in ha&king is not to be222. ?a&king is done b! %eo%le who are +oti,ated 3ust b! sheer fun and e,il +oti,es.

1 who bids of that who wins +ust ha,e at least 1L2 of the a+ount as e1uit!# that0s ".I Billion. -angita #ag consortium o+ ban#s in t e end because not one ban# can credit /0:his %ro3e&ts are reall! %aid ,er! big s%e&iall! the %ower %ro3e&ts. $he energ! %ro3e&ts are ,er! e*%ensi,e. )ebu air%ort ter+inal 2 is 7 +illion< the e*tension of R$ is 10 Billion# mga ma#abungog ug #warta. $he go,ern+ent &annot undertake it be&ause it doesn0t ha,e +one! so it0s gi,ing it to %ri,ate se&tor and the %ri,ate se&tor will re&o,er their +one! b! toll. If it is R$ the! will be &olle&ting the fare. If air%ort# the! will run the air%ort and &olle&t air%ort fee. If it is a road the! will %ut toll. 6/tor! about sk! wa! and its toll fee and 4aradise. haha: 'e ha,e taken u% dire&tors# board of dire&tors of banks that is on )ha%ter "# se&tion 1I and the %ro,ision with res%e&t to dire&tors of +erge and &onsolidated banks whi&h is an e*&e%tion of the se&tion 2J of the &or%oration &ode# +ainl! that banks that are +erge and &onsolidated &an ha,e as +an! as 21 dire&tors# the board of dire&tors is 21. $hen# we took u% this ,er! i+%ortant %assage with res%e&t of the dire&tors and the o,ersight %ower of B and that is section 17 the so &alled222fit an) (ro(er r+le.
!he &onetary Board shall prescribe pass upon and review the qualifications and disqualifications of individuals elected or appointed bank directors or officers and disqualify those found unfit. Section 16. Fit and roper Rule. 5 1 1 &onetary Board shall prescribe pass upon and review the qualifications and disqualifications of individuals elected or appointed bank directors or officers and disqualify those found unfit.

Ef &ourse it is the B who will inter%ret what that +eans. /u%%ose !ou ha,e a 4hd. in e&ono+i&s and !ou are ele&ted to the board. Let0s sa! of etro Bank or B5E. 5o !ou still ha,e to attend the se+inar- Ene who is a&&redited# usuall! the s%eaker is the retired offi&ial of the B/# who is the resour&e %erson of this a&&redited institution in B/4. $e&hni&all! s%eaking# !ou ha,e. (ow# what is the ai+ for this- $he ai+ is to kee% those s+all rural banks that ha,e the entire fa+il! of the board who ha,e no 1ualifi&ations to u%grade their edu&ation and their &o+%eten&e. an! of the+ be&ause the! are alread! si&k8the &hair+an# in the wheel&hair &annot attend the se+inar an!+ore so he is dis1ualified. $hat is how the! will base the dis1ualifi&ation. Rules as to the &o+%ensation and benefits of dire&tors and offi&ers /e&tion 18.
Section 18. Compensation and Other !enefits of "irectors and Officers. !o protect the finds of depositors and creditors the &onetary Board may regulate the payment by the bank to its directors and officers of compensation allowance fees bonuses stock options profit sharing and fringe benefits only in e1ceptional cases and when the circumstances warrant such as but not limited to the following:

)o+%trollershi% when the +anage+ent &or%oration22 and a +anage+ent &o++ittee is a%%ointed to o,ersee the o%erations of the bank that is distressed.
('.). 7hen a bank is found by the &onetary Board to be conducting business in an unsafe or unsound manneror ('... 7hen a bank is found by the &onetary Board to be in an unsatisfactory financial condition.

/o the! &an %res&ribe 1ualifi&ations. 1 of the %res&ri%tion of dire&tors of banks is that the! +ust attend a se+inar# not e,en run b! B/. It is run b! institutions that are a&&redited b! the Bangko /entral. $hat is 1 of their %res&ribed nor+s. $hen# the! will %ass u%on the 1ualifi&ations of those that are ele&ted and then the! will re,iew. ;ou ha,e alread! %assed and then !our &ontinuing to be a bad dire&tor but the! &an re,iew !ou and then if the! find !ou ob3e&tionable. 'hat does the B ha,e to do%fter due notice to the board of directors of the bank the &onetary Board may disqualify suspend or remove any bank director or officer who commits or omits an act which render him unfit for the position.

$hat is when the! look into and o,ersee the &o+%ensation of the dire&tors and offi&ers. 'hat is the reason- $o %rote&t the funds of the de%ositors and &reditors.
Section 19. rohi#ition on u#lic Officials. 01cept as otherwise provided in the 8ural Banks %ct no appointive or elective public official whether full-time or part-time shall at the same time serve as officer of any private bank save in cases where such service is incident to financial assistance provided by the government or a government owned or controlled corporation to the bank or unless otherwise provided under e1isting laws.

/o the! &an take !ou out. All the! need to do is infor+ the Board of dire&tors in writing. $hen# 6n determining whether an individual is fit and
proper to hold the position of a director or officer of a bank regard shall be given to his integrity e1perience education training and competence

/o+eti+es the land bank in,ests in a %arti&ular rural bank and as a &onse1uen&e of that in,est+ent the land bank offi&ial +a!

be a%%ointed as a offi&ial of that bank. But the general rule is# if !ou0re a +a!or or a ,i&e D%resident of the 4AG)ER or whate,er# !ou &annot be an offi&er of a %ri,ate bank. Ef &ourse this doesn0t in&lude offi&ials of B/4 that are a%%ointed as &onser,ators of a bank# in &ase a bank is under &onser,atorshi%. 'e0,e seen the " stages of distress banks in the new &entral bank a&t. )onser,ators are a%%ointed b! the B/. an! ti+es its one of their offi&ials but !ou know ,er! well that a re&ei,er &an onl! be the 4hili%%ine 5e%ositors Insuran&e )or%oration 645I):. 'hat are the rules with res%e&t to bank bran&hesSection 20. !ank !ranches. - 9niversal or commercial banks may open branches or other offices within or outside the Philippines upon prior approval of the Bangko Sentral. Branching by all other banks shall be governed by pertinent laws. % bank may sub#ect to prior approval of the &onetary Board use any or all of its branches as outlets for the presentation and:or sale of the financial products of its allied undertaking or of its investment house units.

bank# the se&retar! of Labor +a! assu+e 3urisdi&tion o,er the dis%ute or de&ide to &ertif! it to (ational Labor0s )o++ission. $he 4resident +a! also inter,ene and assu+e 3urisdi&tion o,er the labor dis%ute. It sa!s here#

$here is no %rohibition for B/ to re%ort to the se&retar! of labor earlier than that.
to the secretary of <abor who may assume #urisdiction over the dispute or decide it or certify the sane to the National <abor 8elations $ommission for compulsory arbitration. =owever the President of the Philippines may at any time intervene and assume #urisdiction over such labor dispute in order to settle or terminate the same.

Let us now go to o%erations of uni,ersal bank se&tion 2" to 6wa! su+%a!-haha: $here are " kinds of %owers that are e*er&ised b! the uni,ersal Banks> 1. 4owers of Oni,ersal bank 2. 4owers of in,est+ent house ". 4ower to in,est in so &alled non2 allied enter%rise 'hat are non2allied enter%rises- 'e will see later on that the e*a+%le is insuran&e business. $hat is non2allied. Gi,e an e*a+%le of an allied. A$ 2Allied but se%arate and distin&t fro+ the banking business be&ause what is the &o++er&ial banking business'hat are %ro%erl! &lassified as &o++er&ial banking- $hat is the first %ower s%elled out in se&tion 29.
Section 29. o$ers of a Commercial !ank. - % commercial bank shall have in addition to the general powers incident to corporations all such powers as may be necessary to carry on the business of commercial banking such as accepting drafts and issuing letters of credit- discounting and negotiating promissory notes drafts bills of e1change and other evidences of debtaccepting or creating demand deposits- receiving other types of deposits and deposit substitutes- buying and selling foreign e1change and gold or silver bullionacquiring marketable bonds and other debt securitiesand e1tending credit sub#ect to such rules as the &onetary Board may promulgate. !hese rules may include the determination of bonds and other debt securities eligible for investment the maturities and aggregate amount of such investment.

(ow the! are now allowed not bran&h but outlets. Last !ear the B/ re,oked their %oli&! in li+iting bank bran&hes. ;ou0re &a%itali.ation &an su%%ort it# !ou &an now readil! grant !our a%%li&ation to o%en banking bran&hes before the! are ,er! war! about o%ening as +an! bran&hes as !ou will wish. (ow se&tion 21 is about Banking 5a!s and ?ours. $he re1uire+ent is a +in of M hours a da!# working da! that is the re1uire+ent. /o !ou will noti&e# banking hours is 9a+2"%+. Although the! will allow !ou to o%en longer than that and e,en o%en on /aturda!s# /unda!s and holida!s for at least " hours a da!. $hat0s wh! B5E has a %oli&! of o%ening &ertain bran&hes during holida!s e,en /aturda!s for at least half da!. $his is the +eaning. $he banks that &hoose to o%en other than working da!s shall re%ort to B/ the additional da!s during whi&h the!L their bran&hes Loffi&es shall transa&t business. 'orking da!s in this law is understood to +ean onda!s to 7rida!s e*&e%t if su&h da!s are holida!s. /e&tion 22# here is the labor %ro,ision of General Banking Law.
Section 22. Strikes and %ockouts. - !he banking industry is hereby declared as indispensable to the national interest and notwithstanding the provisions of any law to the contrary any strike or lockout involving banks

As far as banks are &on&ern# the +o+ent the B/ re%orts to the se&retar! of Labor the o&&urren&e of strike or lo&kout in,ol,ing a
if unsettled after seven *;, calendar days shall be reported by the Bangko Sentral

$hose are the a&ti,ities that &onstitute &o++er&ial banking. ;ou want to be the traditional a&ti,it! of &o++er&ial banking is de+and de%osits# &he&king a&&ounts. Ether

banks +a! be allowed to a&&e%t de+and de%osits but it +ust be e*%li&it# se%arate and distin&t fro+ the li&ense that the! obtained to o%erate a thrift bank or a de,elo%+ent bank or a rural bank. $he! +ust se%aratel! a%%l! to obtain a li&ense to a&&e%t the %ri+ar! de%osits &he&king a&&ounts. an! rural banks ha,e &he&king a&&ounts but the! are not reall! %arti&i%ants of the &learing house of the B/4. $he! &lear their &he&ks through another &o++er&ial banks. $hat is nor+all! one of the &onditions of Bangko /entral will allow !ou in a&&e%tan&e of de+and de%osits. Another bread and butter a&ti,it! of &o++er&ial bank is reall! letters of cre)it. $hat is a s%e&ifi& &o++er&ial banking a&ti,it! that be&o+es ,er! i+%ortant when !ou tr! to i+%ort goods fro+ outside of &redit. ;ou ha,e to fa&ilitate that through letters of &redit. F1uit! in,est+ents of &o++er&ial banks . F1uit! in,est+ents of uni,ersal banks# se&tion 2J.
Section 24. &'uity In(estments of a )ni(ersal !ank. - % universal bank may sub#ect to the conditions stated in the succeeding paragraph invest in the equities of allied and non-allied enterprises as may be determined by the &onetary Board. %llied enterprises may either be financial or non-financial.

'hat ha%%ens to the bonds- $he bonding &o+%an! will %a! for the loss. $hat0s the %ur%ose of bonded warehouse. F1uit! in,est+ent of uni,ersal banks !ou +ust &o+%are it to e1uit! in,est+ents that are allowed to &o++er&ial banks in se&tion "0.
Section 30. &'uity In(estments of a Commercial !ank. % commercial bank may sub#ect to the conditions stated in the succeeding paragraphs invest only in the equities of allied enterprises as may be determined by the &onetary Board. %llied enterprises may either be financial or non-financial.

7inan&ial2allied enter%rise2 A$ or &redit &ard. (on2finan&ial# what is the e*a+%leAr+oured &ars= It0s a se%arate &o+%an!. $hat is allied to banking and that is non+2 finan&ial.
01cept as the &onetary Board may otherwise prescribe: .+.(. !he total investment in equities of allied enterprises shall not e1ceed thirty-five percent *.>4, of the net worth of the bank- and .+.). !he equity investment in any one enterprise shall not e1ceed twenty-five percent *)>4, of the net worth of the bank. !he acquisition of such equity or equities is sub#ect to the prior approval of the &onetary Board which shall promulgate appropriate guidelines to govern such investment.

F*a+%le of an allied that is finan&ial8 let0s sa! an A$ or &redit &ard. (on2finan&ial would be leasing &or%oration# warehousing &or%orations. Oni,ersal banks &an enter into warehouses that are bonded# bonded warehousing and sub3e&t to the Bureau of )usto+s su%er,ision that is non2finan&ial. /u%%ose !ou0re i+%orting &oal8asa man ibutang sa customs. Ang bar#o p mupar# mana. 1i import mana nila. $he! +ust ha,e a warehouse that is bonded to relie,e the+sel,es of duties of bonded warehouse# the bank handled it. And nor+all! it is the banks !ou fa&ilitates the letter of &redits. Eur &oal is of inferior 1ualit! it has to be +i*ed with high grade &oal so we i+%ort fro+ 'est Qirginia 6stor! sa &oal# and other ingredients of &e+ent8: $hat is re&ei,ed b! a bonded warehouse again and that is e+bra&ed on &ir&ulation of in,entor!. $he &usto+s %eo%le do not ha,e enough %eo%le to go their e,er! ti+e there is loading or unloading. Assures that nothing &o+es in or goes out that has not ins%e&ted or su%er,ised for the benefit of the Bureau of )usto+s. $he %roble+ of a bonded warehouse 6stor! of i+%orted fighting &o&ks0 ta*ed 100H gika+b!uhan ug bisa!a. haha:

;ou ha,e the %ower to in,est and !et the B/ wants !ou to ask their %er+ission first before !ou in,est. (ow uni,ersal banks /e&tion 2J>
01cept as the &onetary Board may otherwise prescribe: )/.(. !he total investment in equities of allied and nonallied enterprises shall not e1ceed fifty percent *>+4, of the net worth of the bank- and )/.). !he equity investment in any one enterprise whether allied or non-allied shall not e1ceed twenty-five percent *)>4, of the net worth of the bank. %s used in this %ct ?net worth? shall mean the total of the unimpaired paid-in capital including paid-in surplus retained earnings and undivided profit net of valuation reserves and other ad#ustments as may be required by the Bangko Sentral.

;ou know !ou ha,e to +ake %ro,isions if !ou ha,e non %erfor+ing loans so !ou take that fro+ &a%ital. (et of that those !ou ha,e to %ro,ide for that is the basis for deter+ination of I0H and 2IH. 22222222bowowow2 alfiefa! <2: >an+ar% 15- !"10 Cha(ter :- Article 11O(erations of the 2ni'ersal Banks and Article !1 O(erations of Co**ercial Banks. $he other %ro,isions here %ro,ide for li+itations on the e1uit! in,est+ents of uni,ersal banks

and e1uit! in,est+ents of banks. Oni,ersal banks and banks.

&o++er&ial &o++er&ial

It is good for !ou to know when a uni,ersal bank &an wholl! own a %arti&ular enter%rise# like a uni,ersal bank &an own 100H of a thrift bank. $hat is wh! !ou know that B4I has its own thrift bank# and that is the B4I 7a+il! /a,ings Bank. 'hen the! bought it the! did not +erge it &o+%letel!. $he! ke%t it a se%arate &or%oration. 'h! is that- As +an! of !ou know# the de%osit liabilit! re1uire+ents of the s+aller banks are s+aller than the de%osit liabilit! re1uire+ents of the bigger banks. $hat used to be the &ase until the +iddle of last !ear. (ow the de%osit liabilit! re1uire+ents of all banks are the sa+e b! ,irtue of the new &ir&ular issued b! the onetar! Board. /o it no longer %a!s to ha,e a thrift bank as a &hea%er sour&e of funds. ;ou know before thrift banks and rural banks# the de%osit liabilit!0s re1uired was JH of in,est+ents whereas the de%osit liabilit! re1uire+ent of the &o++er&ial bank used to 9210H. /o !ou a&tuall! ha,e lent out +ore +one! if !ou had a thrift bank than if !ou had a &o++er&ial bank# like J2I %er&entage %oints of the de%osit that !ou &an gather fro+ the %ubli&. But now that is no longer true be&ause +ost of the# all banks now ha,e the sa+e de%osit liabilit! re1uire+ents. I think it is now I2MH of all banks. /o# what is the thrift bank of etrobank- $he thrift bank of etrobank# wholl!2 owned 100H is 4hili%%ine /a,ings Bank. $hat is their thrift bank. B5E# it0s not &lear what its thrift bank. It owns so+e rural banks in Lu.on but the! do not ha,e a &lear national thrift bank. B4I 7a+il! /a,ings Bank used to be owned b! the Gutianun0s. $he one who owns 7ilin,est. $he Gutiauns towards the later %art of artial Law# during ar&oses0 ti+e# +ga198"2198J# the! de&ided to in,est all of their +one! in )anada. $he onl! thing that the! did not di,est was 7ilin,est. $heir biggest enter%rise was 7a+il! /a,ings Bank. 7a+il! /a,ings Bank was sold at a good %ri&e to B4I. $hen the! found out after about J or I !ears in )anada# that the returns of the in,est+ent in )anada were not as good as in the 4hili%%ines so the! &a+e ba&k in the 4hili%%ines. $he! in,ested into agri&ulture.

$he! %ut u% 65A/ORF)E: 5a,ao /ugar Refiner! )or%oration. $he! also %ut the /ugar )entral of atala+. And now I heard# the! ha,e +a3orit! of the Bukidnon /ugar )o+%an!. /o all of the three sugar &entral in the /outh are all &ontrolled b! the Gutnianon. $he! ha,e also in,ested in real %ro%ert! de,elo%+ent. (ow the! are looking for a bank be&ause the! want to du%li&ate what was started before. $he first generation has alread! gone old# the! are a%%roa&hing their 800s. It is alread! the 2nd or "rd generations who are a&ti,e in the business.

CCA$TE4 #E$OSITS. LOANS O$E4ATIONS

AN#

ID OTCE4

Article O(erations Of 2ni'ersal Banks

Section !0. Powers o+ a 2niversal "an# 2 A uni,ersal bank shall ha,e the authorit! to e*er&ise# in addition to the %owers authori.ed for a &o++er&ial bank in /e&tion 29# the %owers of an in,est+ent house as %ro,ided in e*isting laws and the %ower to in,est in non2allied enter%rises as %ro,ided in this A&t. 6212B: Section !:. !quity *nvestments o+ a 2niversal "an#. 2 A uni,ersal bank +a!# sub3e&t to the &onditions stated in the su&&eeding %aragra%h# in,est in the e1uities of allied and non2allied enter%rises as +a! be deter+ined b! the onetar! Board. Allied enter%rises +a! either be finan&ial or non2 finan&ial. F*&e%t as the onetar! Board +a! otherwise %res&ribe> 2J.1. $he total in,est+ent in e1uities of allied and non2allied enter%rises shall not e*&eed fift! %er&ent 6I0H: of the net worth of the bank< and 2J.2. $he e1uit! in,est+ent in an! one enter%rise# whether allied or non2allied# shall not e*&eed twent!2fi,e %er&ent 62IH: of the net worth of the bank. As used in this A&t# Knet worthK shall +ean the total of the uni+%aired %aid2in &a%ital in&luding %aid2in sur%lus# retained earnings and undi,ided %rofit# net of ,aluation reser,es and other ad3ust+ents as +a! be re1uired b! the Bangko /entral. $he a&1uisition of su&h e1uit! or e1uities is sub3e&t to the %rior a%%ro,al of the onetar! Board whi&h shall %ro+ulgate a%%ro%riate

guidelines to go,ern su&h in,est+ents. 6212 Ba:

(ow# if a uni,ersal bank had owned 100H in a thrift bank# as it is so %ro,ided in Sec. !8# so also &an a &o++er&ial bank. A &o++er&ial bank &an also own u% to 100H of a thrift bank or a rural bank. $hat is b! ,irtue of Section !8. Section !8. !quity *nvestments o+ a 2niversal "an# in &inancial Allied !nterprises. 2 A uni,ersal bank &an own u% to one hundred %er&ent 6100H: of the e1uit! in a thrift bank# a rural bank or a finan&ial allied enter%rise. A %ubli&l!2listed uni,ersal or &o++er&ial bank +a! own u% to one hundred %er&ent 6100H: of the ,oting sto&k of onl! one other uni,ersal or &o++er&ial bank. 6212B< 212)a:

/o go through the %ro,isions there and !ou will see what %er&entage a uni,ersal bank &an be allowed to own if it is ali,e or non2 ali,e finan&ial and non2finan&ial &or%orations. (ow let us go to Article 0<$ro'isions a((licable to all banks- ,+asi<banks an) tr+st entities. Let +e re+ind !ou that these " se%arate entities are under the su%er,ision of the Bangko /entral but the t!%es of business are not essentiall! the sa+e. Banks> business is to get de%osits of the %ubli&. B! definition on&e !ou get a de%osit fro+ the %ubli&# +ore than 90 %eo%le# !ou are alread! engaged in banking. But if it is 1uasi2banks# !ou are re&ei,ing not de%osits but de%osit substitutes. ;ou dis&ount re&ei,ables< !ou a&&e%t %la&e+ents. $he e1ui,alent of de%osits in 1uasi2banks are so &alled %la&e+ents. 4eo%le with &ash %ut +one! with !ou and in turn around !ou lend it to those with &ash b! a single note and that note &ould either be with re&ourse or without re&ourse. $hose t!%es of transa&tions are at a +aturit! within a !ear. $he! are not se&ured a&&ounts in the sa+e wa! as the lending of the banks are se&ured b! +ost often real %ro%ert! +ortgage. $he transa&tions of the 1uasi2 banks are unse&ured. $he! ha,e then short2 ter+ +aturit! %eriods# +ostl! less than a !ear. 'hen !ou &o+e to a trust entit!# !ou ha,e basi&all!# a trust entit! is a trustee. It +anages a &ertain &or%us of assets. It &ould be +one!# it &ould be a grou% of in,est+ents and that setu% is a se+i2%erson# a se+i2 %ersonalit!.

'h! is it a se+i2%erson- Be&ause it has a li+ited life# usuall! +easured as to its fulfil+ent of its s%e&ifi& %ur%ose. If it is a retire+ent fund and a trust entit! +anages it# it has &ertain ta* obligations to +eet a&&ording to the (IR). It has its own ta* nu+ber and !et it +ust answer to a &ertain board and there are arti&les of trust that are drawn u% to go,ern how the retire+ent fund is to be +anaged and the trustee +ust res%e&t the &ontrols that are in the arti&les of trust. - (or+all!# a retire+ent fund should not be s%e&ulati,e be&ause its %ri+ar! res%onsibilit! is the %rote&tion of the %rin&i%al of the trust assets. $he safet! of the trust assets is the nu+ber one &on&ern. - (ow# so nor+all!# the big bulk of the trust funds# if it is funds# the! are in,ested in so2&alled fi*ed2in&o+e so,ereign funds like the bonds of the Re%ubli& of the 4hili%%ines. $hose are so,ereign &onditions and the! are su%%osed to be &lose to 0 if not 0 risk be&ause it is go,ern+ent. And the return is stead!# it is alread! fi*ed. $he return is not handso+e but the &or%us is safe. - (ow# on&e !ou ha,e a ,er! big retire+ent fund like G/I/# it is not gi,en to a trust entit!. $he G/I/ itself +anages but then it &an %artition the funds and its res%onsibilit! su&h that it will hire a trustee for a &ertain %ortion of the funds. 'h! would it do that when it has su%%osed to be its +anage+ent to do the work of +anaging the funds- /o+eti+es# b! ne&essit! it has to do that be&ause a fund su&h as the G/I/ is so big that it &annot afford to re+ain under one &urren&!. It risks destru&tion b! inflation. It is su%%osed to answer for the retire+ent needs of the whole %ubli& offi&ials in the 4hili%%ines# both lo&al and national go,ern+ent. And then !our +one! is 3ust in %eso. 'hat ha%%ens when the %eso de,aluates# de,alues- $he whole fund goes with it. $hat is wh! +ost retire+ent funds of go,ern+ent e+%lo!ees in +ost 3urisdi&tions# the! are +ulti2&urren&!# so+e are in O/ dollars# so+e are in euros# so+e are in %ounds# and so+e are e,en in !uan# so as to s%read the risk. ;ou do not %ut all !our eggs in one basket be&ause !ou &annot afford

to lose it. Ene ,er! big fund for instan&e is )AL4FR/. 'hat is )AL4FR/2 )alifornia 4ubli& F+%lo!ees Retire+ent 7und. ?ow big is it- It is o,er I00 +illion O/ 5ollars. $hat is big= Again the! sa! it is underfunded. A good %art of it is s%read out outside the 3urisdi&tion of the Onited /tates and so sin&e the! are in )alifornia and the! ha,e no knowledge of Asia and so on# the! hire trust entities to +anage a %ortion of the funds that are in,ested in Asia. It +akes sense isn0t not- If it will slow down in the O/# it will balan&e out b! the e*traordinar! %erfor+an&e of the 4hili%%ine e&ono+!. If there is a slow2down in Furo%e# it will be balan&ed out. $his is a new field now# Risk anage+ent. And that is what regulations of banks are now e,ol,ing to. $he! are tr!ing to li+it the risks that banks &an go into. Be&ause the banks in 2008 went into ,er! risk! transa&tions as in the O/ and whi&h al+ost brought the whole world finan&ial industr! down. /o the! are thinking about how to# not +anage risk# but how to %re,ent banks and finan&ial institutions fro+ taking risks that &ould %ro,e fatal not onl! to itself but to the &ountries. /o# !ou ha,e trust entities. ;ou ha,e 1uasi2banks. And !ou ha,e banks itself. (ow# Arti&le " gi,es !ou %ro,isions that are a%%li&able to all ". (ow# Section 00 sa!s a&&e%tan&e of de+and de%osits. $his is the rule> A bank other than a uni,ersal or &o++er&ial bank &annot a&&e%t or &reate de+and de%osits. But then right awa! it sa!s> e*&e%t u%on %rior a%%ro,al of and sub3e&t to su&h &onditions and rules as +ainl! %res&ribed b! the onetar! Board. /o !ou end u% with the onetar! Board granting &ertain de,elo%+ent banks# e,en rural banks# the li&ense# se%arate fro+ the rural bank li&ense# of a&&e%ting de+and de%osits. Re+e+ber de+and de%osits are &he&king a&&ounts. $hat is wh! !ou ha,e Ene (etwork Bank# a rural bank# !ou &an o%en a &he&king a&&ount. 4hili%%ine /a,ings Bank is a thrift bank# !ou &an o%en a &he&king a&&ount. $he! ha,e a s%e&ial a%%ro,al of the Bangko /entral. It is not %art of their li&ense# it is a s%e&ial a%%ro,al. It &an be withdrawn b! the Bangko /entral. Section 00. Acceptance o+ Demand Deposits. 2 A bank other than a uni,ersal or &o++er&ial bank &annot a&&e%t or &reate de+and de%osits e*&e%t u%on %rior a%%ro,al of# and sub3e&t to su&h &onditions and rules as +a! be %res&ribed b! the onetar! Board. 6722Aa:

Alright# Section 0:. $here is this new ter+inolog! now &alled @Risk2based )a%italA. RRead said se&tionS> Section 0:. Risk-Based Capital. < $he onetar! Board shall %res&ribe the +ini+u+ ratio whi&h the net worth of a bank +ust bear to its total risk assets whi&h +a! in&lude &ontingent a&&ounts. 7or %ur%oses of this /e&tion# the onetar! Board +a! re1uire su&h ratio be deter+ined on the basis of the net worth and risk assets of a bank and its subsidiaries# finan&ial or otherwise# as well as %res&ribe the &o+%osition and the +anner of deter+ining the net worth and total risk assets of banks and their subsidiaries> 4ro,ided# $hat in the e*er&ise of this authorit!# the onetar! Board shall# to the e*tent feasible &onfor+ to internationall! a&&e%ted standards# in&luding those of the Bank for International /ettle+ents6BI/:# relating to risk2based &a%ital re1uire+ents> $he Bank for International /ettle+ents is in Basel# /wit.erland. It has +et " ti+es. $here are " basi& %roto&ols of Basel# /wit.erland. 7irst +eeting was how to ad+inister the obligations of Ger+an! at the end of the 1 st 'orld 'ar. Ger+an! was found to be the bad bo! of the 'orld 'ar 1 and all the destru&tion was &harged on Ger+an! so that Ger+an! had to %a! for all the destru&tion of 'orld 'ar 1. $he one who ad+inistered it was the Basel )ourt. All the &entral bankers +et and the! said this is how Ger+an! will be +ade to %a!. And Ger+an! of &ourse was alwa!s gi,en# on %a%er# a right to re&onsideration. But histori&all! now# on hindsight# the! found that the &onditions gi,en to Ger+an! was reall! harsh. /o it laid the foundation for the 2nd +eeting. $hat0s how ?itler rose to %ower. ?itler %la!ed on the %ride of the Ger+ans. 67ather talked about Adolf ?itler: (ow# before# the a&&e%ted %rin&i%le was no &entral bank &ould %rint +ore +one! than there was gold held in reser,e. /o that was the Gold /tandard. $he! &a+e to an agree+ent to un%eg it# to deta&h it fro+ the Gold /tandard. $hat was in 19"00s. And then the latest one is alread! around the 900s. $he Basle +eeting# that0s when the! established the +easure+ent of banks. 'hi&h is su++ari.ed in the word @)A FL/A. ) stands for )a%ital Ade1ua&!. A stands for the assets of the bank. 5on0t be +islead be&ause for the banks the loans are assets. /o that the 1ualit! of the loans refle&t the 1ualit! of the assets. stands for the reliabilit! of +anage+ent. $he &o+%eten&e of +anage+ent. F stands for earnings. Is

there reliable# foreseeable earnings. L is for li1uidit!. 7inall!# / is for the stabilit! of the bank. $hat was the %rodu&t of the " rd Basle 4roto&ol. /o# there is referen&e here of the Bank of International /ettle+ents that the &a%ital ratios of the bank should be in &onfor+it! with the Basle agree+ents relating to risk2 based &a%ital re1uire+ents. It +a!# the Bangko /entral# alter or sus%end &o+%lian&e with su&h ratio whene,er ne&essar! for a +a*i+u+ %eriod of 1 !ear. But %ro,ided# that su&h ratio should be a%%lied unifor+l! to banks of the sa+e &ategor!. (ow# what ha%%ens if the banks do not &o+%l! with the %res&ribed +ini+u+ ratio2 $he onetar! Board +a! li+it or %rohibit the distribution of net %rofits b! su&h bank and +a! re1uire that %art or all of the net %rofits be used to in&rease the &a%ital a&&ounts of the bank until the +ini+u+ re1uire+ent has been +et. /o there !ou see the fun&tion of &a%ital. It is basi&all!# as a short2fall re&ourse. If there is a failure of the assets# be&ause the loans are falling %ast due# the loans are no longer %erfor+ing# then the &a%ital there +ust be %ro,isioning of the &a%ital. R&ontinuation of /e&tion "JS> 4ro,ided further# $hat it +a! alter or sus%end &o+%lian&e with su&h ratio whene,er ne&essar! for a +a*i+u+ %eriod of one 61: !ear> 4ro,ided# finall!# $hat su&h ratio shall be a%%lied unifor+l! to banks of the sa+e &ategor!. In &ase a bank does not &o+%l! with the %res&ribed +ini+u+ ratio# the onetar! Board +a! li+it or %rohibit the distribution of net %rofits b! su&h bank and +a! re1uire that %art or all of the net %rofits be used to in&rease the &a%ital a&&ounts of the bank until the +ini+u+ re1uire+ent has been +et $he onetar! Board +a!# further+ore# restri&t or %rohibit the a&1uisition of +a3or assets and the +aking of new in,est+ents b! the bank# with the e*&e%tion of %ur&hases of readil! +arketable e,iden&es of indebtedness of the Re%ubli& of the 4hili%%ines and of the Bangko /entral and an! other e,iden&es of indebtedness or obligations the ser,i&ing and re%a!+ent of whi&h are full! guaranteed b! the Re%ubli& of the 4hili%%ines# until the +ini+u+ re1uired &a%ital ratio has been restored. In &ase of a bank +erger or &onsolidation# or when a bank is under rehabilitation under a %rogra+ a%%ro,ed b! the Bangko /entral# onetar! Board +a! te+%oraril! relie,e the sur,i,ing bank# &onsolidated bank# or &onstituent bank

or &or%orations under rehabilitation fro+ full &o+%lian&e with the re1uired &a%ital ratio under su&h &onditions as it +a! %res&ribe. Before the effe&ti,it! of rules whi&h the onetar! Board is authori.ed to %res&ribe under this %ro,ision# /e&tion 22 of the General Banking A&t# as a+ended# /e&tion 9 of the $hrift Banks A&t# and all %ertinent rules issued %ursuant thereto# shall &ontinue to be in for&e. 622a: Alright# Section 08. The Li*its on loanscre)it acco**o)ationsan) g+arantees. 'hat are the li+itations on loans- RRead /e&tion "IS> Section 08. Limit on Loans, Accommodations and 1uarantees Credit

"I.1 F*&e%t as the onetar! Board +a! otherwise %res&ribe for reasons of national interest# the total a+ount of loans# &redit a&&o++odations and guarantees as +a! be defined b! the onetar! Board that +a! be e*tended b! a bank to an! %erson# %artnershi%# asso&iation# &or%oration or other entit! shall at no ti+e e*&eed twent! %er&ent 620H: of the net worth of su&h bank. $he basis for deter+ining &o+%lian&e with single borrower li+it is the total &redit &o++it+ent of the bank to the borrower. /o this is the red letter of the law. ust not e*&eed 20H of the net worth of the bank. /ingle borrowers li+it= (ow# that has sin&e been in&reased to 2IH b! the )entral Bank. (ow that 2IH new li+it has been further in&reased to I0H b! that )ir&ular we ga,e !ou !esterda!. 4ro,ided that the additional 2IH to that single borrower is for hi+ to %arti&i%ate in a 444. $his %riorit! of %eo%le0s %ro3e&ts that are a%%ro,ed b! the 4resident and whi&h are big2ti&ket ite+s whi&h the go,ern+ent &annot afford# has no +one!# and whi&h the go,ern+ent has asked the %ri,ate se&tor to undertake. /o the single borrower0s li+it +a! be e*&eeded but in no &ase abo,e I0H# if the last 2IH is for %ur%oses of the 444. $his &o,ers banks and 1uasi2banks. 5oes not &o,er trust entities. (ow 08.! is in res%e&t to 1uasi2banks. RRead /e&tion "I.2S "I.2. Onless the onetar! Board %res&ribes otherwise# the total a+ount of loans# &redit a&&o++odations and guarantees %res&ribed in the %re&eding %aragra%h +a! be in&reased b! an additional ten %er&ent 610H: of the net worth of su&h bank %ro,ided the additional liabilities of an! borrower are ade1uatel! se&ured b! trust re&ei%ts# shi%%ing do&u+ents# warehouse re&ei%ts or

other si+ilar do&u+ents transferring or se&uring title &o,ering readil! +arketable# non2%erishable goods whi&h +ust be full! &o,ered b! insuran&e. /o# this is what +akes the %ro,ision geo+etri& be&ause the +o+ent the! %ut a li+it then the! sa! there will be another li+it %ro,ided these other &onditions are %resent. /o# this is the wa! there is fle*ibilit! gi,en to the +onetar! institutions. Alright# let us go to restri&tions on bank e*%osure to dire&tors# offi&ers# and sto&kholders and their related interests. $his is the 5E/RI whi&h we talked about in the (ew )entral Bank A&t. ?ere there are +ore &onditions that are outlined in /e&tion "M. RRead /e&tion "MS> Section 07. Restriction on "an# !'posure to Directors, (++icers, Stoc# olders and , eir Related *nterests. 2 (o dire&tor or offi&er of an! bank shall# dire&tl! or indire&tl!# for hi+self or as the re%resentati,e or agent of others# borrow fro+ su&h bank nor shall he be&o+e a guarantor# endorser or suret! for loans fro+ su&h bank to others# or in an! +anner be an obligor or in&ur an! &ontra&tual liabilit! to the bank e*&e%t with the written a%%ro,al of the +a3orit! of all the dire&tors of the bank# e*&luding the dire&tor &on&erned> 'hen the Board of 5ire&tors ,otes u%on a 5E/RI loan# it +ust be in writing. F,er!bod! signs. It is 3ust not an ordinar! resolution that is %assed and then the /e&retar! notes that the resolution was %assed b! the +a3orit! of the Board of 5ire&tors. If it is a 5E/RI loan then all those who ,ote for it +ust sign and it +ust be the +a3orit! of all dire&tors of the bank that +eans absolute +a3orit! and not 3ust the +a3orit! of the 1uoru+. R&ontinued readingS 4ro,ided# $hat su&h written a%%ro,al shall not be re1uired for loans# other &redit a&&o++odations and ad,an&es granted to offi&ers under a fringe benefit %lan a%%ro,ed b! the Bangko /entral. $hat is e+%lo!ee benefits. $hat is not a 5E/RI loan. If that %arti&ular %ri,ilege has been granted as a fringe benefit %re2 a%%ro,ed b! the Bangko /entral. 7or instan&e# housing loan to offi&ers. anagers# ,i&e2%residents# the! are gi,en housing loans at %ri+e rate. $hat is not &onsidered a 5E/RI loan. But let +e gi,e !ou an e*a+%le. ?ere is a +anager. ?e has been hiding a loss in the bank transa&tion. ;ou

know in A&&ounting# the! &reate a &ertain a&&ount that is to be li1uidated# books are still balan&ed# until it gets bigger and bigger until finall! it is dis&o,ered b! auditors. $hen he sa!s I will 3ust sign a loan. And then i++ediatel! the to% %eo%le sa!s Ek. 'e will a%%ro,e !our loan to answer for that. $he Bangko /entral sa!s that is a 5E/RI loan. But a fringe benefit is not a 5E/RI loan. Re+e+ber what +akes it a fringe benefit2 It is in the %ersonal %oli&! and it is %re2 a%%ro,ed b! the Bangko /entral. Alright# the se&ond &ondition is> the re1uired a%%ro,al shall be entered u%on the re&ords of the bank. $he third &ondition is> a &o%! of su&h entr! shall be trans+itted forthwith to the a%%ro%riate su%er,ising and e*a+ining de%art+ent of the Bangko /entral. (ow what is the signifi&an&e of that- $he signifi&an&e of that is that now there is a s%e&ial +onitoring of the %erfor+an&e of this %arti&ular loan. Is this loan being %aid- Is it +o,ing- Be&ause now it is in the re&ords of the bank and it is trans+itted to the Bangko /entral. And then the fourth &ondition is this> 5ealings of a bank with an! of its dire&tors# offi&ers or sto&kholders and their related interests shall be u%on ter+s not less fa,orable to the bank than those offered to others. /o !ou +ight get the sa+e interest as the blue &hi% &lients of the bank but !ou &annot get interest of this 5E/RI loan lower than what !our %ri+e &lients are granted be&ause if !ou do that is a ,iolation of this %ro,ision. /o the! are the safeguards on the so2&alled 5E/RI loans. /o that the bank will not be used as a %ri,ate sour&e of funds of the +a3orit! owners of the bank. $his whole rule of 5E/RI loans is to %re,ent !ou# 3ust in &ase !ou are thinking now of @tukod ko bangkoA that is not su%%osed to ha%%en be&ause of the 5E/RI loan.6F(5:
January 23, 2013 Banking Law Sec. .2. 8estriction on Bank 01posure to @irectors Afficers Stockholders and !heir 8elated 6nterests. - No director or officer of any bank shall directly or indirectly for himself or as the representative or agent of others borrow from such bank nor shall he become a 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 e1cept with the written approval of the ma#ority of all the directors of the bank e1cluding the director concerned: Provided !hat such written approval shall not be required for loans other credit accommodations and advances granted to officers under a fringe benefit plan approved by the Bangko Sentral. !he required approval shall be entered upon the records of the bank and a copy of such entry shall be transmitted forthwith to the appropriate supervising and e1amining department of the Bangko Sentral.

@ealings of a bank with any of its directors officers or stockholders and their related interests shall be upon terms not less favorable to the bank than those offered to others. %fter due notice to the board of directors of the bank the office of any bank director or officer who violates the provisions of this Section may be declared vacant and the director or officer shall be sub#ect to the penal provisions of the New $entral Bank %ct. !he &onetary Board may regulate the amount of loans credit accommodations and guarantees that may be e1tended directly or indirectly by a bank to its directors officers stockholders and their related interests as well as investments of such bank in enterprises owned or controlled by said directors officers stockholders and their related interests. =owever the outstanding loans credit accommodations and guarantees which a bank may e1tend to each of its stockholders directors or officers and their related interests shall be limited to an amount equivalent to their respective unencumbered deposits and book value of their paid-in capital contribution in the bank: Provided however !hat loans credit accommodations and guarantees secured by assets considered as non-risk by the &onetary Board shall be e1cluded from such limit: Provided further !hat loans credit accommodations and advances to officers in the form of fringe benefits granted in accordance with rules as may be prescribed by the &onetary Board shall not be sub#ect to the individual limit. !he &onetary Board shall define the term Brelated interests.C !he limit on loans credit accommodations and guarantees prescribed herein shall not apply to loans credit accommodations and guarantees e1tended by a cooperative bank to its cooperative shareholders. 7e have seen the procedural conditions for the specific kind of loan known as the @AS86 loan. !he 3ive preconditions: (, 7ritten approval from the ma#ority of all the directors of the bank. So for if is a loan it is #ust approved by the ma#ority of a quorum of a board. !he @AS86 loan must be approved of the absolute ma#ority of all the board of directors. ), bank. !he is @AS86 loan is entered upon the records of the

*2:(>, aggregate value of their capital paid in contribution as a stock holder.

>, So then it says ?!he &onetary Board shall define the term Brelated interests.C %nd the board has done that as define what related interest means. it has issued a particular circular BSP $ircular (;+. !his circular defines what related intererest means.

BSP $68$9<%8 NA. (;+ Series of (FF' /. 3or purposes of Section )2 of 8epublic %ct No. ;2>. the term ?related interest? shall include the following: (. Spouse or relative within the first degree of consanguinity or affinity or relative by legal adoption of a director officer or stockholder of the bank). Partnership of which a director officer or stockholder or his spouse or relative within the first degree of consanguinity or affinity or relative by legal adoption is a general partner.. $o-owner with the director officer stockholder or his spouse or relative within the first degree of consanguinity or affinity or relative by legal adoption of the property or interest or right mortgaged pledged or assigned to secure the loans or credit accommodations e1cept when the mortgage pledge or assignment covers only said co-ownerDs undivided interest/. $orporation association or firm of which a director or officer of the bank or his spouse is also director or officer of such corporation association or firm e1cept *a, where the securities of such corporation association of firm are listed and traded in the big board or commercial and industrial board of domestic stock e1changes and less than fifty percent *>+4, of the voting stock thereof is owned by any one person or by persons related to each other within the third degree of consanguinity or affinity- or *b, where the director officer or stockholder of the lending bank sits as a representative of the bank in the board of directors of such corporation: Provided !hat the bank representative shall not have any equity interest in the borrower corporation e1cept for the minimum shares required by law rules and regulations or by the by-laws of the corporation: Provided further !hat the borrowing corporation under *a, or *b, is not among those mentioned in items *>, and *2, hereof. >. $orporation association or firm of which any or a group of directors officers stockholders of the lending bank and:or their spouses or relatives within the first degree of consanguinity or affinity or relative by legal adoption hold:own more than twenty percent *)+4, of the subscribed capital of such corporation or of the equity of such association or firm2. $orporation association or firm wholly or ma#orityowned or controlled by any related entity or a group of related entities mentioned in items *), */, and *>, hereof.

., %nd a copy of such entry is then transmitted to the e1amining department of the Banko Sentral. !he appropriate supervising department with really does not have the records for the loan when they come to audit they make a random sampling of the loans once the encoder of the loans take a look as to whether or not the required procedure is followed. !hat there is a resolution of the bank of directors approving it. 7hether there is a submission of collateral etc. But in the case of @AS86 loan it is really submitted purposely to the e1amining department of the Banko Sentral. !here are different e1amining department of each kind of bank. !here is an e1amining and supervising e1aminer for the thrift bank there is also for rural banks for commercial banks. @onDt think that this is only one *localE, department looking and e1amining banks. !here are separate departments. /, !he loans to @AS86 shall be upon terms not less favorable to the bank than those offered to others. 6t cannot be possible that the @AS86 loan will not have any collateral. the requirements of the Bangko Sentral but we shall see later on that there are e1emptions. that is the general rule and finally if the amount of the loan to @AS86 shall be limited to the amount equivalent to the respective and convert*:, deposits and the value of their paid in capital contribution. So other than single borrowerDs value limit to the amount loan. !here is this additional limit. !hey cannot borrow more than the

Sec. .;. <oans and Ather $redit %ccommodations %gainst 8eal 0state. G 01cept as the &onetary Board may otherwise prescribe loans and other credit accommodations against real estate shall not e1ceed seventy-five percent *;>4, of the appraised value of the respective real estate security plus si1ty percent *2+4, of the appraised value of the insured improvements and such loans may be made to the owner of the real estate or to his assignees. <imitation as to how much credit accommodations of loans against real estate can be made. *;>4, of the appraised value of the respective real estate security plus si1ty percent *2+4, of the appraised value of the insured improvements and such loans may be made to the owner of the real estate or to his assignees. ;>4 as to the real estate and 2+4 as to the improvemements. 7hy less as to its improvementE Because

the improvements of real estate can be depreciated. !he resl estate cannot be depreciated. 01ception where a real estate can be depreciatedE !he real estates in the Peoples 8epublic of $hina where real property is owned by the State. 7here your interest is up to FF years only so therefore you depreciate it. Now ;>4 of the value of the estate that is the ma1imum amount of the loan that can be granted to you. Now when you say ;>4 of the appraised value appraised value is lower than market value. Because there can be countervailing evidences to the value of the real estate. Sec. .'. <oans %nd Ather $redit %ccommodations on Security of $hattels and 6ntangible Properties. - 01cept as the &onetary Board may otherwise prescribe loans and other credit accommodations on security of chattels and intangible properties such as but not limited to patents trademarks trade names and copyrights shall not e1ceed seventy-five percent *;>4, of the appraised value of the security an such loans and other credit accommodation may be made to the title-holder of the chattels and intangible properties or his assignees. Now Sec. .' limitations as to the amount where the security is chattel and intangible property. 7hat is thatE Sec. .' says shall not e1ceed seventy-five percent *;>4, of the appraised value of the security an such loans and other credit accommodation may be made to the title-holder of the chattels and intangible properties or his assignees. By title-holders of chattels if there is a title holder for chattel like car there is registration but but if you have #ewelry what right do you haveE Hewelry can be bought and sold #ust like any other personal property. 6f you have a pink diamond which has () carat. what is the appraised value to thatE and what is you title to itE 6f it reaches a certain amount mosty owners they will want to insure #ewelry they will procure an appraisal. *3atherDs stories about diamonds tel aviv appraisals.., does the bank recieve the appraisal notes as securityE 6t has the power to do so under the general banking law. but you might not hear anybody giving her diamond as security for the loan. 7hyE Because the bank may value the diamond so low. So it is not worth it. Patents trademarks trade names and copyrights shall not e1ceed seventy-five percent *;>4, of the appraised value of the security. Sec. .F. Irant and Purpose of <oans and Ather $redit %ccommodations. - % bank shall grant loans and other credit accommodations only in amounts and for the periods of time essential for the effective completion of the operations to be financed. Such grant of loans and other credit accommodations shall be consistent with safe and sound banking practices. !he purpose of all loans and other credit accommodations shall be stated in the application and in the contract between the bank and the borrower. 6f the bank finds that the proceeds of the loan or other credit accommodation have been employed without its approval for purposes other than those agreed upon with the bank it shall have the right to terminate the loan or other credit accommodation and demand immediate repayment of the obligation. . !he bank is supposed to grant loans only in amounts and for a period of time essential for the effective completion of the operations to be financed. !echnically speaking if you have no need for the loan and there if there is no actual application for the loan. Jou cannot borrow technically speaking. But if you talk to investors you talk to those who are very e1perienced to the financial market they will say that the time to borrow is when you have no need of funds. Because you will have the best rates. Now to make sure that the loan is granted only for a purpose and for duration the loan is needed. !he purpose of all loans and other credit accommodations shall be stated in the application and the contract between the bank and the borrower. 6f the bank finds that the proceeds of the loan and credit accommodations have been employed without its approval for the purposes other than those agreed

upon. 6t has the right to terminate the loan and other credit accommodation and demand immediate repayment of the loan. !he bank has a right and it is an essential violations of the agreement. Sec. /+. 8equirement for Irant Af <oans or +ther $redit %ccommodations. - Before granting a loan or other credit accommodation a bank must ascertain that the debtor is capable of fulfilling his commitments to the bank. !oward this end a bank may demand from its credit applicants a statement of their assets and liabilities and of their income and e1penditures and such information as may be prescribed by law or by rules and regulations of the &onetary Board to enable the bank to properly evaluate the credit application which includes the corresponding financial statements submitted for ta1ation purposes to the Bureau of 6nternal 8evenue. Should such statements prove to be false or incorrect in any material detail the bank may terminate any loan or other credit accommodation granted on the basis of said statements and shall have the right to demand immediate repayment or liquidation of the obligation. 6n formulating rules and regulations under this Section the &onetary Board shall recogni"e the peculiar characteristics of micro financing such as cash flow-based lending to the basic sectors that are not covered by traditional collateral. Now here is the rule to grant a loan according to Sec. /+ the bank may demand from its credit applicants statements of their assets and liabilities and their income and e1penditures and other information as may be prescribed by law and by the rules and regulations of the monetary board. 6n formulating rules and regulations under this section the &onetary Board shall recogni"e the characteristics of micro financing such as cash flow-based lending to the basic sectors that are not covered by traditional collateral. !his is still very formalistic if you are indeed in micro-financing you cannot demand financial statements. thsi is an e1ception from the rule of Bangko Sentral that it must demand financial statements. 6t does not say here that it should be audited but normally it is audited. 6n fact the bank will require financial statements which is the e1act copy of what you filed in the Bureau of 6nternal 8evenue. 7hyE Because those financial statements are covered by oath and you could be pinned down with per#ury. So those basic financial statements that you submit to the B68 are covered by regulation and you can be sub#ected to criminal prosecution for falsification. %s to other supporting documents 6t is covered by the *stretchE )>:/(, you must prove unless you submit it to the B68. !hat is not strictly covered by our *#ury )>:>(E,.

Sec. /(. 9nsecured <oans or Ather $redit %ccommodations. G !he &onetary Board is hereby authori"ed to issue such regulations as it may deem necessary with respect to unsecured loans or other credit accommodations that may be granted by banks. Now how about unsecured loans and other credit accomodations. Sec. /( forbids this. Af course microfinancing is the e1ception here. *3ather shared about the social structure of micro-financing., Sec. /). Ather Security 8equirements for Bank $redits. - !he &onetary Board may by regulation prescribe further security requirements to which the various types of bank credits shall be sub#ect and in accordance with the authority granted to it in Section (+2 of the New $entral Bank %ct the Board may by regulation reduce the ma1imum ratios established in Sections .2 and .; of this %ct or in special cases increase the ma1imum ratios established therein. !he Bangko Sentral may prescribe further security requirements. !he &onetary Board may by regulation reduce the ma1imum ratio established in Sec. .2 and .;. <oans secured by real estate and loans secured by chattel mortgage.

6t says the Bangko Sentral may reduce the ma1imum ratio not increase but reduce. Ar in special cases increase the ma1imum ratios established therein

Now how about with respect to prepaymentE !his is where the principle is enunciated in Sec. /> Sec. />. Prepayment of <oans and Ather $redit %ccommodations. G % borrower may at any time prior to the agreed maturity date prepay in whole or in part the unpaid balance of any bank loan and other credit accommodation sub#ect to such reasonable terms and conditions as may be agreed upon between the bank and its borrower. !he S$ has said that these reasonable terms and conditions is a reasonable penalty for prepaying your loan. 6f the loan is five year term but then you have already have money and pay at the end of ) years. 6f you did not agree the penalty at the time of the release of the loan then the amount that should be paid should be within the realm of reason determined at the time you are going to pay. 6t is a reasonable penalty but you cannot deny the prepayment of loan. !he borrower can always prepaid the loan at any time prior to the agreed day of payment. Sec. /2. @evelopment %ssistance 6ncentives. - !he Bangko Sentral shall provide incentives to banks which without government guarantee e1tend loans to finance educational institutions cooperatives hospitals and other medical services sociali"ed or low-cost housing local government units and other activities with social content.

Sec. /.. %uthority to Prescribe !erms and $onditions of <oans and Ather $redit %ccommodations. - !he &onetary Board may similarly in accordance with the authority granted to it in Section (+2 of the New $entral Bank %ct and taking into account the requirements of the economy for the effective utili"ation of long-term funds prescribe the maturities as well as related terms and conditions for various types of bank loans and other credit accommodations. %ny change by the Board in the ma1imum maturities as well as related terms and conditions for various types of bank loans and other credit accommodations. %ny change by the Board in the ma1imum maturities shall apply only to loans and other credit accommodations made after the date of such action. !he &onetary Board shall regulate the interest imposed on micro finance borrowers by lending investors and similar lenders such as but not limited to the unconscionable rates of interest collected on salary loans and similar credit accommodations.

So &onetary Board may prescribe maturities as well as related terms and conditions for various types of bank loans and other credit accommodations. %ny change by the Board in the ma1imum maturities shall apply only to loans and other credit accommodations made after the date of such action. Sec. //. %morti"ation on <oans and Ather $redit %ccommodations. - !he amorti"ation schedule of bank loans and other credit accommodations shall be adapted to the nature of the operations to be financed. 6n case of loans and other credit accommodations with maturities of more than five *>, years provisions must be made for periodic amorti"ation payments but such payments must be made at least annually: Provided however !hat when the borrowed funds are to be used for purposes which do not initially produce revenues adequate for regular amorti"ation payments therefrom the bank may permit the initial amorti"ation payment to be deferred until such time as said revenues are sufficient for such purpose but in no case shall the initial amorti"ation date be later than five *>, years from the date on which the loan or other credit accommodation is granted. 6n case of loans and other credit accommodations to micro finance sectors the schedule of loan amorti"ation shall take into consideration the pro#ected cash flow of the borrower and adopt this into the terms and conditions formulated by banks. 8ules with respect to amorti"ation. %morti"ation according to Sec. // !he amorti"ation schedule of bank loans and other credit accommodations shall be adapted to the nature of the operations to be financed. But in case of loans and other credit accommodations with maturities of more than five *>, years provisions must be made for periodic amorti"ation payments but such payments must be made at least annually. !hat is the general rule. !his annually there must be an amorti"ation made if the maturity of the loan is five years or more. !here can be e1ceptions-- when the borrowed funds are to be used for purposes which do not initially produce revenues adequate for regular amorti"ation payments therefrom the bank may permit the initial amorti"ation payment to be deferred until such time as said revenues are sufficient for such purpose but in no case shall the initial amorti"ation date be later than five *>, years from the date on which the loan or other credit accommodation is granted. So the longest where there is a grace period for amorti"ation is five years. K6 cannot imagine micro-financing more than one year. !here is only small amount.L

Sec. /;. 3oreclosure of 8eal 0state &ortgage. - 6n the event of foreclosure whether #udicially or e1tra-#udicially of any mortgage on real estate which is security for any loan or other credit accommodation granted the mortgagor or debtor whose real property has been sold for the full or partial payment of his obligation shall have the right within one year after the sale of the real estate to redeem the property by paying the amount due under the mortgage deed with interest thereon at rate specified in the mortgage and all the costs and e1penses incurred by the bank or institution from the sale and custody of said property less the income derived therefrom. =owever the purchaser at the auction sale concerned whether in a #udicial or e1tra-#udicial foreclosure shall have the right to enter upon and take possession of such property immediately after the date of the confirmation of the auction sale and administer the same in accordance with law. %ny petition in court to en#oin or restrain the conduct of foreclosure proceedings instituted pursuant to this provision shall be given due course only upon the filing by the petitioner of a bond in an amount fi1ed by the court conditioned that he will pay all the damages which the bank may suffer by the en#oining or the restraint of the foreclosure proceeding. Notwithstanding %ct .(.> #uridical persons whose property is being sold pursuant to an e1tra#udicial foreclosure shall have the right to redeem the property in accordance with this provision until but not after the registration of the certificate of foreclosure sale with the applicable 8egister of @eeds which in no case shall be more than three *., months after foreclosure whichever is earlier. Awners of property that has been sold in a foreclosure sale prior to the effectivity of this %ct shall retain their redemption rights until their e1piration. Now you are taking up the basic foreclosure of mortgages. !here is recent rules in foreclosure whether #udicial or e1tra#udicial in connection with banks is found in section /;. !he borrower whose collateral is foreclosed and his real property has the right within one year after the sale of the real estate to redeem the property by paying the amount due under the mortgage deed with interest thereon at rate specified in the mortgage and all the costs and e1penses incurred by the bank or institution from the sale and custody of said property less the income derived therefrom. Now so one year only. !he borrower has one year to redeem. =owever the purchaser at the auction sale concerned whether in a #udicial or e1tra#udicial foreclosure shall have the right to enter upon and take possession of such property immediately after the date of the

confirmation of the auction sale and administer the same in accordance with law. Sub#ect to the right of redemption of the borrower. Provided he*borrower, puts up a bond in the amount fi1ed by the court conditioned that he will pay all the damages which the bank may suffer by the en#oining or the restraint of the foreclosure proceeding. !he borrower has the burden of proving that the foreclosure is unlawful. !hat is why he needs to put up a bond. Now what is the e1ception to the one year redemption periodE the e1ception is that the borrower is a corporation a #uridical person. 6f the borrower is a #uridical person then he loses his right for redemption to the property as soon as the bank registers the certificate of foreclosure sale with the applicable 8A@ and placed a notice more than three months after the foreclosure. So if you are a natural person then he could not pay after foreclosure then he will still have one year to redeem. But if you are a corporation you are borrower that was foreclosed the moment the purchaser of the foreclosure sale registers it with the 8A@ then you can no longer redeem it or of the passage of three months. !hose are the new rules with respect to the right of redemption. !here is difference between equity redemption and right redemption.

general public you cannot detect that when the banks publish their financial statement every quarter. !hat is why there is a need to prescribe the conditions and limitations under which a bank may grant e1tensions or renewals of its loans and other credit accommodations. Sec. /F. Provisions for <osses and 7rite-Affs. - %ll debts due to any bank on which interest is past due and unpaid for such period as may be determined by the &onetary Board unless the same are welt-secured and in the process of collection shall be considered bad debts within the meaning of this Section. !he &onetary Board may fi1 by regulation or by order in a specific case the amount of reserves for bad debts or doubtful accounts or other contingencies. 7riting off of loans other credit accommodations advances and other assets shall be sub#ect to regulations issued by the &onetary Board. 7here do you get these reserves you take it from the paid-up capital of the banks. !hat is why it is essential that the loans the aggregate loans of the bank should not e1ceed its aggregate deposits because that capital of the bank is supposed to answer for these write offs and to these contingencies. 7riting off of loans other credit accommodations advances and other assets shall be sub#ect to regulations issued by the &onetary Board. !hat requires a specific resolution approved by the board that an independent director must make. 6t is commenced of removal of write-offs and reserves of bad loans. 0N@. @$

0quity redemption-- you could not pay the bank tells you a notice to the point of foreclosing your property. the bank from the foreclosure of the property. !here is always within that you can redeem provided you pay the balance penalties interest and cost of the foreclosure and sale. %nytime even the day of the day of foreclosure sale itself. !he moment there is a sale already then you have one year if you are a natural person. =ow much will you payE !he principal unpaid balance penalties and charges cost of sale on-going interest. 6f you are a corporation the moment the purchaser consolidates the ownership with the 8A@ you have three months. !hat is the rule with respect to foreclosure. 01ample: nangutang sila ug (+ & three pieces of property they have paid already .&. Sige sila ug sulat sa bangko ?buhi-i ning among mortgage sa usa para mabaligya namo makakwarta mi ibayad namo impas ang utang.? @ili mubuhi ang bangko whyE !hey have a perfect right because the loan is a indivisible contract those three properties cover the entire amount of the loan. So it is considered as only one. %ng nagdawat sa sulat kay legal department man. 7ala man naga-hunahuna sa bank business kay legal point of view man. !he bank business wants to clear its books. !hese properties na naforeclosed kay magdeteriorate. !hat is the problem they thought of it as e1clusively a legal problem. Sec. /'. 8enewal or 01tension of <oans and Ather $redit %ccommodations. G !he &onetary Board may by regulation prescribe the conditions and limitations under which a bank may grant e1tensions or renewals of its loans and other credit accommodations. Now how about of renewal or e1tensions of <oans and Ather $redit %ccomodations. !his is how banks cure otherwise already *graveE, financial statement. @ili na kabayad ug isa ka loan ang usa ka borrower mag ingun na sial mag bayad nalang ka ug this much. %run ma active na pud imo loan ug ato nang iroll over di matangtang nato gikan sa bad loan column unya mabutang nato sa on-going mahimo nang assets. &atangtang to sa imo bad loan ug mudako imo column sa good loan. !hat is why the $entral Bank &onetary Board has to prescribe conditions and limitations under which with respect to grant of e1tensions or renewals because you can fi1 your financial statements in order to make it look good. 7e call that window dressing. K3ather e1plained window dressing using the analogy of a department store fi1ing and changing the clothes of their mannequins although they really have no new stocks.L % financial analyst can easily see that there is window dressing by looking at the history of the financial statements but to the

BANK N! LA" January 24, 2013 7e are almost through we need another e1am. Sec. >( provides for $eiling on 6nvestments in $ertain %ssets most specifically on real assets. Section >(. $eiling on 6nvestments in $ertain %ssets. - %ny bank may acquire real estate as shall be necessary for its own use in the conduct of its business: Provided however !hat the total investment in such real estate and improvements thereof including bank equipment shall not e1ceed fifty percent *>+4, of combined capital accounts: Provided further !hat the equity investment of a bank in another corporation engaged primarily in real estate shall be considered as part of the bankDs total investment in real estate unless otherwise provided by the &onetary Board. *)>a, $ombined capital accounts which means paid up capital *common stockE, plus unrestricted earnings supplied and surplus profits. So >+ 4 is the limit. Now the equity investment of the bank in another corporation engaged in primarily real estate shall be considered as part of the bankDs total investment in the real estate unless provided by the monetary board. So that is a restriction of banks. 6nvestments in real estate. %nother restriction of real estate if you acquire real estate the bank acquires. how does it acquireE Because of mortgages in good faith. they are provided with securities or because it is real estate that is paid to the bank as satisfaction for debts. Ar in any other legitimate way the bank is nonetheless provide to within a period of five years from its acquisition as prescribed by the monetary board to dispose of such real estate provided that the bank may after said period of five years continue to hold the property for its own use sub#ect to the limitations of *proceedingsE,. 6f it does not own more than >+4 of the combined capital accounts it may hold on to it provided it is really using it. Now let me tell you a practical e1emption in which the monetary board readily grants. Sometimes a bank forecloses on a real property that had already receded because it is in

region where people are afraid to go there. NP%s or places where it is in the hands of rebels. People do not go there much more you could dispose of the property. So when the bank e1aminer comes around. 7hy is it still when the acquisition is more than five years agoE !hen you e1plain to the e1aminer you have not seen property. 7hyE Because it is there in the mountain. Naa pay mudawat ani ihatag na namo pero walay mutultul dinhi. %nd that is where the e1aminer will take note and allow it to stay in the books because there is an ec1ception. Now sec. >. enumerates the so-called the other banking services in addition to the operations specifically authori"ed to the bank. Section >.. Ather Banking Services. - 6n addition to the operations specifically authori"ed in this %ct a bank may perform the following services: >..(. 8eceive in custody funds documents and valuable ob#ects>..). %ct as financial agent and buy and sell by order of and for the account of their customers shares evidences of indebtedness and all types of securities>.... &ake collections and payments for the account of others and perform such other services for their customers as are not incompatible with banking business01ample of this K>...L is the collection for payments in @avao <ight tuition fees of the %teneo. !hose are services other services which the bank is allowed to offer to the general public. Now these services are not granted out of the goodness of the heart of the bank. !he bank always asks fees. >../ 9pon prior approval of the &onetary Board act as managing agent adviser consultant or administrator of investment management:advisory:consultancy accounts- and >..>. 8ent out safety deposit bo1es. Safety bo1es of the bank are cerfified as fireproof. K3ather talked about safes not being fireproof.L !his is where the bank is a depositary. % service of deposit bo1 is a contract of deposit under the civil code. Butangan nimo ug things of value #ust like your certificate of stock. !he bank shall perform the services permitted under Subsections >..( >..) >... and >../ as depositary or as an agent. %ccordingly it shall keep the funds securities and other effects which it receives duly separate from the bankDs own assets and liabilities: !he &onetary Board may regulate the operations authori"ed by this Section in order to ensure that such operations do not endanger the interests of the depositors and other creditors of the bank. 6n case a bank or quasi-bark notifies the Bangko Sentral or publicly announces a bank holiday or in any manner suspends the payment of its deposit liabilities continuously for more than thirty *.+, days the &onetary Board may summarily and without need for prior hearing close such banking institution and place it under receivership of the Philippine @eposit 6nsurance $orporation. *;)a, So declaring a bank holiday is one of the grounds for receivership. 8emember we had taken receivership in the three instances *E, of distressed banks (, conservatorship ), receivership and ., liquidatorship. !he difference between conservatorship and receivership is that the bank in receivership ceases to operate in conservatorship *E,. <iquidatorship it is placed in the hands of the court because it is already selling off its assets to satisfy its debts.

Section >/. Prohibition to %ct as 6nsurer. - % bank shall not directly engage in insurance business as the insurer. *;., But we have seen that a universal bank is allowed to make investments in non-alike businesses. So a universal bank can buy equity in insurance companies. !hat is when banks will allow insurance companies to sell to its own bank and the bank itself for its insurance needs will use its own insurance company. 7hen does the bank needs insuranceE 0very time you have a mortgage of a house and lot. !he bank will not approve mortgage unless you buy insurance of the security of the house and lot. %nd for the lenght of the loan that insurance is active and should the house burn down the creditor bank is subrogated to the shoes owner of the house because it has the right to such amount of the proceeds of the insurance of the unpaid balance of the loan. Now you will ask why is a bank prohibited from taking a direct insurerE Because it is in traditional banking *as distinguished from enlightened banking--the one-stop banking made for the convenience of the banking public---kumpleto may insurer loan deposit., why it is not done beforeE Because in traditional banking-- it is seem to be a conflict of interest. Jou received a collateral a house-and-lot you wanted to be safeguarded as to the loan so that when you foreclose this house you can sell the house to recover the loan. Now if you are the insurer are you going to go for the ma1imum insurable amount or the lower insurable amount. @apat mas gamay para mas gamay ang bayrunon na insurable amount #ust in case of loss. Mung ikaw ang Bangko unsay gusto nimo ipa insure higher or lower insurable interest. &as dako kay ikaw gud ang nagpahiram sa kwarta. So there is a conflict of interest. Minsay imo padag-on if you are both the lender and insurer. 7ill you win for the insurer or for the lenderE !here is a conflict of interest. !hat is why the bank is prohibited to be a direct insurer. &ind you with the clearings now being conducted the direction is the banks are going back to a cut and dry business of banking. Section >>. Prohibited !ransactions. >>.(. No director officer employee or agent of any bank shall *a, &ake false entries in any bank report or statement or participate in any fraudulent transaction thereby affecting the financial interest of or causing damage to the bank or any personJou a layman reading this you will ask why you need to put thisE guinadili man gani ang pamakak whyE !hat is where it is covered by regulation. K3ather shared that 0uropeans are standard based while %mericans are rules based.L *b, 7ithout order of a court of competent #urisdiction disclose to any unauthori"ed person any information relative to the funds or properties in the custody of the bank belonging to private individuals corporations or any other entity: Provided !hat with respect to bank deposits the provisions of e1isting laws shall prevailSecrecy of Bank @eposits %ct is really with respect to bank deposit. !his qualification of disclosure is with respect to any other matter other than bank deposits. Jou are not supposed to say or to disclose any information relative to the funds or property in the custody of the bank belonging to private individuals. Supposed you are a bank employee and you say that so-and-so has a deposit bo1. 6s that falling under this provisionE No. 6t is merely observatory. 6t can be seen by the people of the bank. 7hen you get something from the deposit bo1 you need to sign a logbook and everybody could see it. Since everyone could see it it is very hard to prove that you got this information from an employee or officer of the bank. *c, %ccept gifts fees or commissions or any other form of remuneration in connection with the approval of a loan or other credit accommodation from said bank-

Sec. >/ is the e1plicit prohibition for the bank to engage in insurance business as insurer.

Na-approve imong loan then nagpadala ka ug lechon it is supposed to be prohibited #ust like the graft and corrupt practices act. K3ather talked about 0nrile disbursing funds.L *d, Avervalue or aid in overvaluing any security for the purpose of influencing in any way the actions of the bank or any bankor *e, Autsource inherent banking functions. Now there is a circular that a bunchof the functions of the bank cannot be outsource because they are considered as the heart of banking. Ather functions they can be outsource. 7hat is an e1ample that cannot be outsourcedE !he teller because it accepts money for the bank and disburse money for the bank. !ellering cannot be outsource. &essengerial service can be outsource. 6! that can be outsource. Security can be outsource >>.). No borrower of a bank shall *a, 3raudulently overvalue property offered as security for a loan or other credit accommodation from the bank*b, 3urnish false or make misrepresentation or suppression of material facts for the purpose of obtaining renewing or increasing a loan or other credit accommodation or e1tending the period thereof*c, %ttempt to defraud the said bank in the event of a court action to recover a loan or other credit accommodation- or *d, Affer any director officer employee or agent of a bank any gift fee commission or any other form of compensation in order to influence such persons into approving a loan or other credit accommodation application.

>2.( !he act or omission has resulted or may result in material loss or damage or abnormal risk or danger to the safety stability liquidity or solvency of the institution>2.) !he act or omission has resulted or may result in material loss or damage or abnormal risk to the institutionDs depositors creditors investors stockholders or to the Bangko Sentral or to the public in general>2.. !he act or omission has caused any undue in#ury or has given any unwarranted benefits advantage or preference to the bank or any party in the discharge by the director or officer of his duties and responsibilities through manifest partiality evident bad faith or gross ine1cusable negligence- or >2./ !he act or omission involves entering into any contract or transaction manifestly and grossly disadvantageous to the bank quasi-bank or trust entity whether or not the director or officer profited or will profit thereby. 7henever a bank quasi-bank or trust entity persists in conducting its business in an unsafe or unsound manner the &onetary Board may without pre#udice to the administrative sanctions provided in Section .; of the New $entral Bank %ct take action under Section .+ of the same %ct and:or immediately e1clude the erring bank from clearing the provisions of law to the contrary notwithstanding. *n,

!here are certain instances when you do succeed then nothing *bad, happens you are rewarded but if something goes wrong. 01ample: a bank officer accommodated a representative of the mayor to encashed a check. 6f it is true then the bank officer accommodated a big client. 6f it is not true it is not the mayor then the officer is liable for gross negligence. $8ASS-803080N$0 !A S0$. .; 8% ;2>. !=0 N07 $0N!8%< B%NM %$!

>>.. No e1aminer officer or employee of the Bangko Sentral or of any department bureau office branch or agency of the Iovernment that is assigned to supervise e1amine assist or render technical assistance to any bank shall commit any of the acts enumerated in this Section or aid in the commission of the same. *';-%a, !he making of false reports or misrepresentation or suppression of material facts by personnel of the Bangko Sental ng Pilipinas shall be sub#ect to the administrative and criminal sanctions provided under the New $entral Bank %ct. Suppose a bank manager attempts to borrow money from a big depositor of the bank. %nd the depositor lends money. %re they violating anything hereE Jou cannot it is in the ethics of banking. Because the bank manager is taking advantage of the depositor. 3irst how does he know that there is much money that depositor asks that can be lendout. !hey take advantage of the information. So it is more in the ethics of banking. K3ather talked about employees being fired when caught in their wrong-doing and then reported to the Bangko Sentral.L An >>./. $onsistent with the provisions of 8epublic %ct No. (/+> otherwise known as the Banks Secrecy <aw no bank shall employ casual or non regular personnel or too lengthy probationary personnel in the conduct of its business involving bank deposits.

Section .;. %dministrative Sanctions on Banks and Nuasibanks. - 7ithout pre#udice to the criminal sanctions against the culpable persons provided in Sections ./ .> and .2 of this %ct the &onetary Board may at its discretion impose upon any bank or quasi-bank their directors and:or officers for any willful violation of its charter or by-laws willful delay in the submission of reports or publications thereof as required by law rules and regulations- any refusal to permit e1amination into the affairs of the institution- any willful making of a false or misleading statement to the Board or the appropriate supervising and e1amining department or its e1aminers- any willful failure or refusal to comply with or violation of any banking law or any order instruction or regulation issued by the &onetary Board or any order instruction or ruling by the Iovernor- or any commission of irregularities and:or conducting business in an unsafe or unsound manner as may be determined by the &onetary Board the following administrative sanctions whenever applicable: *a, fines in amounts as may be determined by the &onetary Board to be appropriate but in no case to e1ceed !hirty thousand pesos *P.+ +++, a day for each violation taking into consideration the attendant circumstances such as the nature and gravity of the violation or irregularity and the si"e of the bank or quasi-bank*b, suspension of rediscounting privileges or access to Bangko Sentral credit facilities*c, suspension of lending or foreign e1change operations or authority to accept new deposits or make new investments*d, *e, suspension of interbank clearing privileges- and:or revocation of quasi-banking license.

Section >2. $onducting Business in an 9nsafe or 9nsound &anner - 6n determining whether a particular act or omission which is not otherwise prohibited by any law rule or regulation affecting banks quasi-banks or trust entities may be deemed as conducting business in an unsafe or unsound manner for purposes of this Section the &onetary Board shall consider any of the following circumstances:

8esignation or termination from office shall not e1empt such director or officer from administrative or criminal sanctions.

!he &onetary Board may whenever warranted by circumstances preventively suspend any director or officer of a bank or quasi-bank pending an investigation: Provided !hat should the case be not finally decided by the Bangko Sentral within a period of one hundred twenty *()+, days after the date of suspension said director or officer shall be reinstated in his position: Provided further !hat when the delay in the disposition of the case is due to the fault negligence or petition of the director or officer the period of delay shall not be counted in computing the period of suspension herein provided.

any other entity: Provided !hat with respect to bank deposits the provisions of e1isting laws shall prevail-

Ef &ourse there is still the %ro,isions of the se&re&! of bank de%osits a&t that %enali.es dis&losure of bank de%osits that %rohibits not onl! the dire&tor# or an! e+%lo!ee of the bank but also an! go,t offi&ial.
*c, %ccept gifts fees or commissions or any other form of remuneration in connection with the approval of a loan or other credit accommodation from said bank-

!he above administrative sanctions need not be applied in the order of their severity. 7hether or not there is an administrative proceeding if the institution and:or the directors and:or officers concerned continue with or otherwise persist in the commission of the indicated practice or violation the &onetary Board may issue an order requiring the institution and:or the directors and:or officers concerned to cease and desist from the indicated practice or violation and may further order that immediate action be taken to correct the conditions resulting from such practice or violation. !he cease and desist order shall be immediately effective upon service on the respondents. !he respondents shall be afforded an opportunity to defend their action in a hearing before the &onetary Board or any committee chaired by any &onetary Board member created for the purpose upon request made by the respondents within five *>, days from their receipt of the order. 6f no such hearing is requested within said period the order shall be final. 6f a hearing is conducted all issues shall be determined on the basis of records after which the &onetary Board may either reconsider or make final its order. !he Iovernor is hereby authori"ed at his discretion to impose upon banking institutions for any failure to comply with the requirements of law &onetary Board regulations and policies and:or instructions issued by the &onetary Board or by the Iovernor fines not in e1cess of !en thousand pesos *P(+ +++, a day for each violation the imposition of which shall be final and e1ecutory until reversed modified or lifted by the &onetary Board on appeal.

/o !ou0re so ha%%! that !our loan is a%%ro,ed and !ou sent one le&hon to the bran&h +anager that is te&hni&all! a 2226-: in &onne&tion of an! loan. Onless !ou will sa! that the bank +anager is !our relati,e and it0s his birthda! and !ou0re together in a fa+il! &elebration. ;ou loan is a%%ro,ed and !our ha%%! and !ou sent a le&hon that this a loan in &onne&tion with the a%%ro,al loan or other &redit a&&o++odation.
*c, %ttempt to defraud the said bank in the event of a court action to recover a loan or other credit accommodation- or

*d, Avervalue or aid in overvaluing any security for the purpose of s not influencing in any way the actions of the bank or any bank- or

>an+ar% 0"- !"10


Section ##. rohi#ited Transactions. >>.(. No director officer employee or agent of any bank shall G

$o under,alue a se&urit! is not %rohibited. ;ou under,alue se&urit!< !ou %resent a %ie&e of %ro%ert! to se&ure a loan and !ou0re willing to a&&e%t the ,aluation of the bank is the assessed ,alue of the assessorPthe &it! assessor. (or+all!# it is lower than the +arket ,alue# lower than .onal ,aluation of BIR. $hat is no har+ done there but if !ou o,er ,alue# then that is an offense. And then#
*e, Autsource inherent banking functions.

*a, &ake false entries in any bank report or statement or participate in any fraudulent transaction thereby affecting the financial interest of or causing damage to the bank or any person-

F,en without this# if the do&u+ent where !ou write a false entr! is de+anded b! B/ be&o+es %art of the bank re&ords then that is falsifi&ation. /o !ou &an be still be held &ul%able but an!wa! there is this %rohibition against +aking false entries in an! bank re%ort or state+ent.

*b, 7ithout order of a court of competent #urisdiction disclose to any unauthori"ed person any information relative to the funds or properties in the custody of the bank belonging to private individuals corporations or

$here is a /B )ir&ular as to what is &onsidered as inherent fun&tions whi&h &annot be outsour&e. Ene of the+ is the teller be&ause he a&&e%ts and disburses +one! for and in behalf of the bank. ;ou &an outsour&e I$# +essengerial ser,i&es# se&urit! guards# !ou &an e,en outsour&e ar+oured &ar ser,i&es but !ou &annot outsour&e tellering# the offi&ers of the bank. $he bank bran&h +anager# the bank o%erations offi&er# the bran&h a&&ountant and the bran&h &ashier# those are nor+all!the four offi&ers of the bran&h and as a &he&k +an! do&u+ents of a bank re1uire the signature of

at least two62: offi&ers. @h% not E+st one .1/A Ene &he&ks the other. Alwa!s like that. /o# at an! one ti+e there are alwa!s 2 offi&ers in the bank. $he ne*t set of %rohibitions a%%lied to a borrower of the bank. 'hat are the %rohibitions>>.). No borrower of a bank shall *a, 3raudulently overvalue property offered as security for a loan or other credit accommodation from the bank-

Both bank offi&er and borrower will be %enali.ed in &ases of o,er,aluing.

*b, 3urnish $a%&e or 'ake 'i&re(re&entation or &u((re&&ion o$ 'ateria% $act& for the purpose of obtaining renewing or increasing a loan or other credit accommodation or e1tending the period thereof-

'hat ha%%en if !ou sa! !ou want to go to )a+iguin for a ,a&ation- $hat is out alread! of the territorial li+its of !our %ro+ise in the &hattel +ortgage. ;ou ask for a wai,er on the %art of the 4/ bank on the %ro+ise not to re+o,e the wai,er. If !ou do so without that wai,er on the %art of the bank# that lends !ou the +one! to %ur&hase it# that is defrauding re+o,ing the &hattel +ortgage fro+ the %la&e !ou %ro+ised that is &onfined to for reasons of the li+itations of the &hattel +ortgage. )hattel +ortgage# &ar# gi2&arna% nawala na. (o %roble+ if &arna% be&ause there is an insuran&e for that. $he bank that lends !ou +one! will ne,er allow a &ar loan without an insuran&e that &o,ers &arna%%ing. 6d: Effer an! dire&tor# offi&er# e+%lo!ee or agent of a bank an! gift# fee# &o++ission# or an! other for+ of &o+%ensation in order to influen&e su&h %ersons into a%%ro,ing a loan or other &redit a&&o++odation a%%li&ation.

;ou are a s&hool tea&her and !ou a%%l! for a salar! loan with a bank# !ou signed and agreed to the ter+ of the loan. But at the ti+e !ou sign it !ou alread! ha,e a QI/A for %er+anent residen&! in Australia. 'hat is that- 4a2ingon naka sa Australia , gisagad pa 3ud nimo ug salary loan. /alar! loan is largel! unse&ured. (or+all! it is institutional grant to a %arti&ular s&hool being offered salar! loans with regular e+%lo!ees of an edu&ational institution# high s&hool +ostl! %ubli& high s&hools# %ubli& ele+entar! s&hool8 +aking false re%resentation. ;ou 3ust atte+%t to defraud# how do !ou do that- ;ou re+o,e the se&urit!# +o,ing so+ewhere. ;ou know when !our &ar is a &hattel +ortgage of a &ar loan nor+all! !ou &annot tra,el outside of the &it!L%ro,in&e where the &hattel +ortgage is &onstituted. If !ou borrow in 4hili%%ine /a,ings Bank# nor+all! it is the thrift bank that does# &ar loan. -agcar loan pa ba diay nag ubang uni ban# maglisud na #ay dag#o na #ayo nang ilang loans. )ar loans are with so +u&h %a%er works with so little8 /o# nor+all! the thrift banks that go after su&h &ar loans# B4I fa+ilies bank the biggest bank for etro bank. $he! lend !ou the +one! the &ar is bought b! the +one! !ou borrowed but then !ou e*e&ute a &hattel +ortgage on the ,ehi&le and !ou ha,e a %ro+ise there that !ou will use it onl! within the &onfines of the &it! or the %ro,in&e.

;ou know here# a little defe&ti,e. It should not offering gift in order to influen&e hi+ in a%%ro,ing a loan be&ause he has no authorit! in authorit! in a%%ro,ing the loan. @ho has the a+thorit% in a((ro'ing the loanA It is the Board of the bank relies to the re&o++endation of its offi&ers. $he! should be influen&ed su&h %erson into %ositi,el! endorsing a loan or other &redit a&&o++odation. /o we0,e seen as far as an offi&er# dire&tor# e+%lo!ee of the bank# the &ri+e is to re&ei,e a gift. As far as the borrower is &on&erned what is the %rohibited transa&tion it is to +ake an offer. F,en the offering of a gift is %rohibited. 4ung ang bang#o nag%o++er nagpadungog na sila. 5 apit ng Pas#o, apit na ang C ristmas party sa branc o++ice mas#ing gamay na lec on6. /o !ou offer a bigger le&hon6haha:. Re+e+ber that the offi&er is not !et &ul%able if it soli&its an offer. It is when he re&ei,es but for a borrower it is the offering. ?e is alread! &ul%able when he +akes an offer a&&ording to /e&tion II.2 6b:. $hen# se&tion II." %rohibited transa&tions of an e*a+iner# offi&er or e+%lo!ee of the Bangko /entral or of an! de%art+ent# bureau# offi&e# bran&h or agen&! of the Go,ern+ent that is assigned to su%er,ise# e*a+ine# assist or render te&hni&al assistan&e to an! bank.
>>.. No e1aminer officer or employee of the Bangko Sentral or of any department bureau office branch or agency of the Iovernment that is assigned to supervise e1amine assist or render technical assistance to any

bank &)a%% co''it any o$ t)e act& enu'erate* in t)i& Section or ai* in t)e co''i&&ion o$ t)e &a'e.

It0s +ore stri&t for the e*a+iner# offi&er# or e+%lo!ee if he 3ust aids in the &o++ission or an! of those +entioned that are %rohibited to a borrower# offi&er or e+%lo!ee of the bank. ?e is &ul%able. 'e said before that one of the grounds for %utting a bank for re&ei,ershi% is &ondu&ting banking business in an unsafe or unsound +anner. @hen can it be consi)ere) that a bank is con)+cting b+siness in an +nsafe an) +nso+n) *annerA $he &riteria are listed in se&tion IM.
Section #6. Conducting !usiness in an )nsafe or )nsound *anner - 6n determining whether a particular act or omission which is not otherwise prohibited by any law rule or regulation affecting banks quasi-banks or trust entities may be deemed as conducting business in an unsafe or unsound manner for purposes of this Section the &onetary Board shall consider any of the following circumstances: >2.( !he act or omission has resulted or may result in material loss or damage or abnormal risk or danger to the safety stability liquidity or solvency of the institution>2.) !he act or omission has resulted or may result in material loss or damage or abnormal risk to the institutionDs depositors creditors investors stockholders or to the Bangko Sentral or to the public in general>2.. !he act or omission has caused any undue in#ury or has given any unwarranted benefits advantage or preference to the bank or any party in the discharge by the director or officer of his duties and responsibilities through manifest partiality evident bad faith or gross ine1cusable negligence- or

believe me. , ey said t ey will still as# t e "SP. , ey said wait +or our order t ey9re still operating in t e paper era. Pag%issue nila ug order . days later, na urot ng #warta. Dag an na ug nanu#to# sa branc nagdala pa ug c e#e. (ow the )B issues a show &ost order6-: wh! the )b is not %enali.ed in the a&t or o+ission has resulted in +aterial loss or da+age or abnor+al risk to the institutionNs de%ositors# &reditors# in,estors. 7ourth#
>2./ !he act or omission involves entering into any contract or transaction manifestly and grossly disadvantageous to the bank quasi-bank or trust entity whether or not the director or officer profited or will profit thereby. ss

$he bank is like a go,ern+ent. If !ou enter into a bank transa&tion that is +anifestl! disad,antageous to the go,ern+ent then that is one of the a&ts %enali.ed in the anti2graft and &orru%t %ra&ti&es a&t. ;ou &annot a%%ro,e a 5E/RI loan at range of interest that is not gi,en to an! debtor or &lient of the bank. If !ou gi,e a loan to an offi&er or dire&tor of the bank# an interest rates lower than !ou ha,e gi,en to an!bod! that is +anifestl! disad,antageous to the bank and the onl! reason of gi,ing it is be&ause he is a 5E/RI. /e&tion I7 is 4rohibition on 5i,idend 5e&laration. Re+e+ber this is assuring that the bank has unrestri&ted 22226--28+in:that if it were an ordinar! &or%oration it will be well within its +eans to gi,e out di,idends# to de&lare di,idends but e,en if the bank has unrestri&ted22-. /e&tion I7 sa!s (o bank or 1uasi2bank shall de&lare di,idends# greater than its a&&u+ulated net %rofits then on hand# dedu&ting there fro+ its losses and budgets and then it sa!s a&tuall! that is a sur%lusage be&ause that is %rohibited b! the &or%oration &ode. $he se&ond senten&e is# neither shall bank nor 1uasi bank de&lare di,idends if at the ti+e of de&laration an!one of these &onditions is %resent.
Section #+. rohi#ition on "i(idend "eclaration. - No bank or quasi-bank shall declare dividends if at the time of declaration: >;.( 6ts clearing account with the Bangko Sentral is overdrawn- or

$hose are the &riteria. $he bran&h suddenl! a%%roa&hed b! the de%ositor who o%ens an a&&ount and brings in +one! three 6": ti+es or four 6J: ti+es the ,olu+e of the big de%osits of the bank and it is followed b! withdrawals the ,olu+e of whi&h is " or J ti+es the nor+al ,olu+e of the bran&h. 'hat is that- Is that the transa&tion that will result or +a! result in the loss or da+age or abnor+al risks to the institution0s &reditors# de%ositors# in,estors# sto&kholders be&ause that kind of business whi&h is out of nor+al is a&tuall! a %!ra+iding s&he+e. $hat is a %!ra+iding s&he+e. $hat is what is ha%%ening to 5i%olog. Abnormal7 1ideposit money. , eir c ec#s are also issued, di++erent people cas ing c ec#s. 8 en t at was reported * said t at is a pyramiding sc eme stop it. , ey didn9t

'hi&h +eans that the banks a&&ount with the B/# it owes +ore than what it has de%osited in the B/. E,erdrawn=

>;.) 6t is deficient in the required liquidity floor for government deposits for five *>, or more consecutive days or >;.. 6t does not comply with the liquidity standards:ratios prescribed by the Bangko Sentral for purposes of determining funds available for dividend declaration- or >;./ 6t has committed a ma#or violation as may be determined by the Bangko Sentral

settle+ent of the state# %robate# the law222 general &ir&ulation. (ow the %rin&i%al# that is &o++er&ial bank that has bran&hes in 4hili%%ines# it should be a national %a%er. )an B/ na+e a %arti&ular news%a%er- $he law sa!s so.

But the B/ +a! still e,en if !ou did not done an! of this# it +a! still not gi,e a &learan&e for !ou to issue a &ash or sto&k di,idends the bank &an do that# B/ &an do that 3ust b! not gi,ing its %rior a%%ro,al but de%ending to the auditor# that is &o++on sense. ust be a )4A deter+ined b! the auditor &hosen b! the bank. /e&tion I9 e*%li&it Authorit! of B/ to Regulate Fle&troni& $ransa&tions. /e&tion M0. Rules with regards to 7inan&ial /tate+ents of a bank# 1uasi2bank or trust entit!. 7irst# shall sub+it to the a%%ro%riate su%er,ising and e*a+ining de%art+ent of the Bangko /entral finan&ial state+ents in su&h for+ and fre1uen&! as +a! be %res&ribed b! the Bangko /entral. 'hat is the fre1uen&!$he ,er! least# at least 1uarterl!. $hat is o,er and abo,e the re1uire+ent of B/ to +ake &ertain finan&ial for+s# +onthl! and there are e,en &ases of dail! re%orts like de%osit liabilities that is a dail! re%ort on the %art of the bank. /e&tion M1 Publication o+ &inancial Statements. ow o+ten is a ban# require to ave its +inancial statements publis ed0 $he re1uire+ent for %ubli&ation is e,er! 1uarter. En&e e,er! 1uarter and B/ &an re1uire the news%a%er where it should ha,e to be %ublished. 2nd %ar.of se&tion M1# @$he Bangko /entral +a! b! regulation %res&ribe the news%a%er where the state+ents %res&ribed herein shall be %ublished.A $he! +ight be getting &o++ission fro+ anila bulletin. h+++. I don0t know. 6&hika2 galore: $he B/ &an %res&ribe e,en the news%a%er. I don0t know what %arti&ular reason behind that. If !ou ha,e the legal do&u+ent that re1uires %ubli&ation it0s 3ust the fre1uen&! that is re1uired and the kind of news%a%er. $hen usuall! news%a%er of general &ir&ulation is.. !ou ha,e the

Section 61. 1 1 1 6n periods of national and:or local emergency or of imminent panic which directly threaten monetary and banking stability the &onetary Board by a vote of at least five *>, of its members in special cases and upon application of the bank quasi-bank or trust entity may allow such bank quasi-bank or trust entity to defer for a stated period of time the publication of the statement of financial condition required herein .

In %eriods of national# lo&al e+ergen&!. $he law sa!s 1uarterl!# the %ubli&ation. ?ere is one 1uarter and there is no %ubli&ation. Is not that e1uate a sure sign that we are in e+ergen&!- Instead of +itigating %ani& is that not a sure sign that %eo%le should now starts to %ani& be&ause there is no +ore %ubli&ation of finan&ial state+ent and therefore this %arti&ular %ro,ision /e&tion M1 is now signalling an e+ergen&!# national or otherwise. $he! should ha,e said that the B/ has the dis&retion to defer stated %eriod of ti+e of %ubli&ation but the! do not trust the B/. 'e ha,e to %ush# %ush the ground here that it is national or lo&al e+ergen&! or i++inent %ani&. /o it will defer. $hat0s the onl! instan&e here that bank &an defer. /o it0s like telling the banking %ubli& that @(ow is the ti+e to %ani&.A It0s &reating that whi&h it seeks to a,oid. $hen# the %ubli&ation of &a%ital sto&k8 4lease bear attention to +e >2:

Section 62. u#lication of Capital Stock. - % bank quasi-bank or trust entity incorporated under the laws of the Philippines shall not publish the amount of its authori"ed or subscribed capital stock without indicating at the same time and with equal prominence the amount of its capital actually paid up. 5 1 1

;ou &annot sa!# @$his is +! authori.ed &a%ital.A /u%%ose !ou gi,e a %ress release but the news%a%er 3ust %ut @authori.ed andsubs&ribedA and forgot the %aid u%. ;ou %ress release it0s there. Binsa +anang sala$hat is re1uired b! se&tion M2.
5 1 1 No branch of any foreign bank doing business in the Philippines shall in any way announce the amount of the capital and surplus of its head office or of the bank in its entirety without indicating at the same time and with equal prominence the amount of the capital if any definitely assigned to such branch such fact shall be stated in and shall form part of the publication.

/ettle+ent of 5is%utes8 6/e&tion M":

director or officer. 6f the violation is committed by a corporation such corporation may be dissolved by quo warranto proceedings instituted by the Solicitor Ieneral.

Section 63. Settlement of "isputes. - !he provisions of any law to the contrary notwithstanding the Bangko Sentral shall be consulted by other government agencies or instrumentalities in actions or proceedings initiated by or brought before them involving controversies in banks quasi-banks or trust entities arising out of and involving relations between and among their directors officers or stockholders as well as disputes between any or all of them and the bank quasi-bank or trust entity of which they are directors officers or stockholders.

'e are al+ost through. 6 BowEwEw. Alfie T:

>AN2A4F 01- !"10 F,er!thing is 3ust dr! but we ha,e to go through this. ;ou know )ha%ter 7# /e&tion 71 3ust +entions the %arti&ular laws that &o,ers the %arti&ular kinds of banks. @$hrift BanksA are &o,ered b! the %ro,isions of the $hrift Banks A&t. @Rural BanksA are &o,ered b! the Rural Banks A&t and the )oo%erati,e )ode. But the last senten&e of /e&. 71 sa!s that for %ur%oses of %res&ribing +ini+u+ ratio whi&h the net worth of a thrift bank +ust bear to its total risk assets# the %ro,isions of /e&. "" of this A&t shall go,ern. Section 51. (t er "an#ing Laws. 2 $he organi.ation# the ownershi% and &a%ital re1uire+ents# %owers# su%er,ision and general &ondu&t of business of thrift banks# rural banks and &oo%erati,e banks shall be go,erned b! the %ro,isions of the $hrift Banks A&t# the Rural Banks A&t# and the )oo%erati,e )ode# res%e&ti,el!. $he organi.ation# ownershi% and &a%ital re1uire+ents# %owers# su%er,ision and general &ondu&t of business of Isla+i& banks shall be go,erned b! s%e&ial laws. $he %ro,isions of this A&t# howe,er# insofar as the! are not in &onfli&t with the %ro,isions of the $hrift Banks A&t# the Rural Banks A&t# and the )oo%erati,e )ode shall likewise a%%l! to thrift banks# rural banks# and &oo%erati,e banks# res%e&ti,el!. ?owe,er# for %ur%oses of %res&ribing the +ini+u+ ratio whi&h the net worth of a thrift bank +ust bear to its total risk assets# the %ro,isions of /e&tion "" of this A&t shall go,ern.

Go,ern+ent agen&ies +ust infor+ the B/ if there are an! dis%utes in,ol,ing dire&tors# offi&ers# sto&kholders a+ong the+sel,es. As well as dis%utes between an! or all of the+ and the bank# 1uasi2bank or trust entit! of whi&h the! are dire&tors# offi&ers or sto&kholders. Onauthori.ed Ad,ertise+ent Business Re%resentation is /e&tion MJ. or

If !ou do not ha,e a banking business and !ou hold !ourself out as &ondu&ting a banking business or !ou use the words /e&tion MJ. Onauthori.ed Ad,ertise+ent or Business Re%resentation. * * * KbankK# KbankingK# KbankerK# K1uasi2bankK# K1uasi2 bankingK# K1uasi2bankerK# Ksa,ings and loan asso&iationK# Ktrust &or%orationK# Ktrust &o+%an!K or words of si+ilar i+%ort. 'hen !ou used those na+es !ou are engaged in unauthori.ed ad,ertise+ent of business re%resentation. /o before !ou &an set !ourself out as a bank !ou +ust ha,e banking li&ense. If !ou don0t ha,e then !ou that will be %rohibited a&ti,it! and !ou be %enali.ed. Section 78. /er,i&e 7ees. B/ has the %ower to &harge e1uitable rates# &o++issions or fees.

Section 6#. Ser(ice Fees. - !he Bangko Sentral may charge equitable rates commissions or fees as may be prescribed by the &onetary Board for supervision e1amination and other services which it renders under this %ct.

$hen !ou ha,e the %enal %ro,ision .Section 77/.


Section 66. enalty for +iolation of this Act. - 9nless otherwise herein provided the violation of any of the provisions of this %ct shall be sub#ect to Sections ./ .> .2 and .; of the New $entral Bank %ct. 6f the offender is a director or officer of a bank quasi-bank or trust entity the &onetary Board may also suspend or remove such

7oreign BanksPforeign banks are authori.ed now under /e&. 7" to a&1uire 100H of the ,oting sto&k of one bank organi.ed under the laws of the 4hili%%ines. But if it wants that bank to own real %ro%ert!# then it will own onl! J0H so than M0H will be 7ili%ino owned# so that the! &an own real %ro%erties. But if the! 3ust want to %ut an offi&e# the! do not ha,e to own real %ro%ert!# then the! &an own the bank 100H and bu! %ro%ert!Pa building that is a &ondo+iniu+ offi&e building# and bu! a unit or se,eral units in that &ondo+iniu+ &or%oration.

Section 50. Acquisition o+ :oting Stoc# in a Domestic "an#. 2 'ithin se,en 67: !ears fro+ the effe&ti,it! of this a&t and sub3e&t to guidelines issued %ursuant to the 7oreign Banks Liberali.ation A&t# the onetar! Board +a! authori.e a foreign bank to a&1uire u% to one hundred %er&ent 6100H: of the ,oting sto&k of onl! one 61: bank organi.ed under the laws of the Re%ubli& of the 4hili%%ines. 'ithin the sa+e %eriod# the onetar! Board +a! authori.e an! foreign bank# whi&h %rior to the effe&ti,it! of this A&t a,ailed itself of the %ri,ilege to a&1uire u% to si*t! %er&ent 6M0H: of the ,oting sto&k of a bank under the 7oreign Banks Liberali.ation A&t and the $hrift Banks A&t# to further a&1uire ,oting shares su&h bank to the e*tent ne&essar! for it to own one hundred %er&ent 6100H: of the ,oting sto&k thereof. In the e*er&ise of the authorit!# the onetar! Board shall ado%t +easures as +a! be ne&essar! to ensure that at all ti+es the &ontrol of se,ent! %er&ent 670H: of the resour&es or assets of the entire banking s!ste+ is held b! banks whi&h are at least +a3orit!2owned b! 7ili%inos. An! right# %ri,ilege or in&enti,e granted to a foreign bank under this /e&tion shall be e1uall! en3o!ed b! and e*tended under the sa+e &onditns to banks organi.ed under the laws of the Re%ubli& of the 4hili%%ines. 6/e&s. 2 and "# RA 7721:

interests of the de%ositors and other &reditors of 4hili%%ine bran&hes of a foreign bank# the head offi&e of su&h bran&hes shall full! guarantee the %ro+%t %a!+ent of all liabilities of its 4hili%%ine bran&h. 6M9: Residents and &iti.ens of the 4hili%%ines who are &reditors of a bran&h in the 4hili%%ines of a foreign bank shall ha,e %referential rights to the assets of su&h bran&h in a&&ordan&e with the e*isting laws.

$hen there is the e+%lo!+ent of an agent with res%e&t to su++ons and legal %ro&esses. In the absen&e of an agent# a&&ording to /e&. 7M6":# @should there be no %erson authori.ed b! the bank u%on who+ ser,i&e of su++ons# %ro&esses# and all legal noti&es +a! be +ade# ser,i&e of su++ons +a! be +ade u%on the Bangko /entral 5e%ut! Go,ernor in &harge of the su%er,ision and e*a+ining de%art+ents. /er,i&e u%on hi+ will be &onsidered under the law e1ui,alent to ser,i&e of the foreign bank. Section 57. Summons and Legal Process. 2 /u++ons and legal %ro&ess ser,ed u%on the 4hili%%ine agent or head of an! foreign bank designated to a&&e%t ser,i&e thereof shall gi,e 3urisdi&tion to the &ourts o,er su&h bank# and ser,i&e of noti&es on su&h agent or head shall be as binding u%on the bank whi&h he re%resents as if +ade u%on the bank itself. /hould the authorit! of su&h agent or head to a&&e%t ser,i&e of su++ons and legal %ro&esses for the bank or noti&e to it be re,oked# or should su&h agent or head be&o+e +entall! in&o+%etent or otherwise unable to a&&e%t ser,i&e while e*er&ising su&h authorit!# it shall be the dut! of the bank to na+e and designate %ro+%tl! another agent or head u%on who+ ser,i&e of su++ons and %ro&esses in legal %ro&eedings against the bank and of noti&es affe&ting the bank +a! be +ade# and to file with the /e&urities and F*&hange )o++ission a dul! authenti&ated no+ination of su&h agent. In the absen&e of the agent or head or should there be no %erson authori.ed b! the bank u%on who+ ser,i&e of su++ons# %ro&esses and all legal noti&es +a! be +ade# ser,i&e of su++ons# %ro&esses and legal noti&es +a! be +ade u%on the Bangko /entral 5e%ut! Go,ernor In2)harge of the su%er,ising and e*a+ining de%art+ents and su&h ser,i&e shall be as effe&ti,e as if +ade u%on the bank or its dul! authori.ed agent or head. In &ase of ser,i&e for the bank u%on the Bangko /entral 5e%ut! Go,ernor In2&harge of the su%er,ising and e*a+ining de%art+ents# the said de%ut! Go,ernor shill register and

(ow# /e&. 7I is the so &alled @?ead Effi&e GuaranteeA. $his is a re1uire+ent of a foreign bank whi&h is not asked of a lo&al bank. In order to %ro,ide effe&ti,e %rote&tion of the interests of the de%ositors and other &reditors of 4hili%%ine bran&hes of a foreign bank# the head offi&e of su&h bran&hes shall full! guarantee the %ro+%t %a!+ent of all liabilities of the 4hili%%ine Bran&h. Residents and &iti.ens of the 4hili%%ines who are &reditors of a bank in the 4hili%%ines of a foreign bank# shall ha,e %referential rights in the assets of su&h bran&h# in a&&ordan&e with e*isting laws be&ause that is %art of being a foreign bank. If the foreign bank that let us sa! is based in the /tates# is dissol,ed and is li1uidated# it has its own &reditors. $he law sa!s that the 4hili%%ine &reditors are %referred o,er other &reditors as to the assets of that foreign bank here within the territorial 3urisdi&tion of the 4hili%%ines. $hat %referen&e is &reated b! 4hili%%ine law affe&ting assets of the foreign bank lo&ated within the territorial 3urisdi&tion of the 4hili%%ines. $hat is for the %rote&tion of 7ili%inos. Section 58. ;ead (++ice 1uarantee. 2 In order to %ro,ide effe&ti,e %rote&tion of the

trans+it b! +ail to the %resident or the se&retar! of the bank at its head or %rin&i%al offi&e a &o%!# dul! &ertified b! hi+# of the su++ons# %ro&ess# or noti&e. $he sending of su&h &o%! of the su++ons# %ro&ess# or noti&e shall be a ne&essar! %art of the ser,i&es and shall &o+%lete the ser,i&e. $he registr! re&ei%t of +ailing shall be %ri+a fa&ie e,iden&e of the trans+ission of the su++ons# %ro&ess or noti&e. All &osts ne&essaril! in&urred b! the said 5e%ut! Go,ernor for the +aking and +ailing and sending of a &o%! of the su++ons# %ro&ess# or noti&e to the %resident or the se&retar! of the bank at its head or %rin&i%al offi&e shall be %aid in ad,an&e b! the %art! at whose instan&e the ser,i&e is +ade.

this A&t# su&h a &or%oration shall be referred to as a trust entit!.

'ho +akes use of trustees- Er trust entities- Retire+ent 7unds# utual 7unds# and %ri,ate trusts for the benefit of disabled or in&a%a&itated %eo%le. /o+ebod! is a ,er! ri&h %arent and he has a son who is affli&ted with 5own /!ndro+e. /o before he dies he +akes a trust fund to look after the son who is si&k. /o he0s &aring for his son &an still be done e,en if he is no longer around. 'ho will be entrusted to %ro,ide for his son- It is this trust entit!. ,ua sa bu#id, ang imong ana#, Down Syndrome, magdadaro #a, mamatay #a na, unsa man imong bu aton0 *%entrust nimo imong ana#, ignon nimo imong igsoon, 5"antayi ni a#ong ana#.6 Is he %erfor+ing trust fun&tion- 5oes the law %rohibit that;ou are the trustor# he is the trustee who will look after !our son who has 5own /!ndro+e be&ause !ou are d!ing. 'hat0s the differen&e between that and the bank- $he differen&e is the corpus of %ro%ert! that is set aside. $here is a corpus of %ro%ert! that is +ade to ser,e a benefi&iar! that &ontinues to e*ist inde%endent fro+ the trustor and the trustee. $he trustee# in his own life# he has his own %ro%erties# but he has to ad+inister a set of %ro%erties that do not belong to hi+. It is a %erson# it earns in&o+e# it %a!s ta*es. 'ho looks after the %a!ing of the ta*es of the trust fund or the trust corpus- It is the trust entit! that looks after that. (ow# to do that in an organi.ed and for+al fashion that in,ol,es %ro%ert!# !ou need authorit! and li&ense fro+ the onetar! Board. $hat is wh! !ou ha,e )hina Bank A(5 $RO/$ )E 4A(;. ?e has a banking li&ense and he has also a li&ense to a&t as a trust &o+%an!. Ateneo has a Retire+ent 7und of its e+%lo!ees# the (ational Internal Re,enue )ode %rohibits Ateneo fro+ ad+inistering its own retire+ent fund. It +ust be se%aratel! +anaged# it +ust be entrusted to a trustee. 'h! is Ateneo# that &reates the trust fund for retire+ent of its e+%lo!ees# %rohibited fro+ a&ting to ad+inister the trust fund- Be&ause it has &on&erns of its own. -ag#alisod ning Ateneo, walaon nalang to niya ang retirement +und #ay gamiton niya ang #warta. 2nsa may ma itabo sa employees7or e,er! !ear that the! ser,e the Ateneo# the! are entitled to the retire+ent benefit that is %ro,ided b! law# at least one2half +onth %a! for e,er! !ear of ser,i&e. ?ow do !ou %ro,ide for that if Ateneo also uses u% the retire+ent fund- $hat is wh! the

(ow# /e&t. 78 gi,es !ou the &onditions and %ro&ess for re,o&ation of a foreign banking li&ense. Section 59. Revocation o+ License o+ a &oreign "an# 2 $he onetar! Board +a! re,oke the li&ense to transa&t business in the 4hili%%ines of# an! foreign bank# if it finds that the foreign bank is insol,ent or in i++inent danger thereof or that its &ontinuan&e in business will in,ol,e %robable loss to those transa&ting business with it. After the re,o&ation of its li&ense# it shall be unlawful for an! su&h foreign banks to transa&t business in the 4hili%%ines unless its li&ense is renewed or reissued. After the re,o&ation of su&h li&ense# the Bangko /entral shall take the ne&essar! a&tion to %rote&t the &reditors of su&h foreign bank and the %ubli&. $he %ro,isions of the (ew )entral Bank A&t on san&tions and %enalties shall likewise be a%%li&able.

(ow let us go to trust o%erations. /e&. 70# )ha%ter 9# it is e*%li&it that !ou &annot engage in a trust o%eration unless !ou ha,e a li&ense fro+ the onetar! Board. Enl! a sto&k &or%oration or a %erson dul! authori.ed b! the onetar! Board to engage in trust business shall a&t as a trustee# or ad+inister an! trust# or hold %ro%ert! in trust or on de%osit for the useLbenefit on behalf of others. 7or %ur%oses of this A&t# su&h &or%oration shall be referred to as a @$rust Fntit!A. Section 56. Aut ority to !ngage in ,rust "usiness. 2 Enl! a sto&k &or%oration or a %erson dul! authori.ed b! the onetar! Board to engage in trust business shall a&t as a trustee or ad+inister an! trust or hold %ro%ert! in trust or on de%osit for the use# benefit# or behoof of others. 7or %ur%oses of

retire+ent fund is se%arated and it is entrusted to a trustee. (ow su%%ose the Ateneo will tell the trustee# @I will %ut it with !ou# I will not %ut it with B5E# I will %ut it with !ou )hina Bank# be&ause !ou will also lend that to +e for +! use.A Is that allowed$hat is when /e&. 80 &o+es into %la!# the &ondu&t of trust business# first of all# the +easure of the &are that the trust entit! +ust a%%l! in the funds and %ro%ert! under its &ustod! is the diligen&e that a %rudent +an will e*er&ise in the &ondu&t of an enter%rise of a like +anner and with si+ilar &ase. /o# that is s!non!+ous to @good father of a fa+il!A +easuring sti&k. Good father is the +easuring sti&k for &ontinental law# &i,il law. 4rudent +an# the diligen&e of a %ruden&e +an is the !ardsti&k in &o++on law# that is the due diligen&e that should be a%%lied b! the trustee. $hen here &o+es the %ro,ision# @(o trust entit! shall# for the a&&ount of the trustor or the benefi&iar! of the trust# %ur&hase or a&1uire %ro%ert! fro+# or sell# transfer# assign# or lend +one! or %ro%ert! to# or %ur&hase debt instru+ents of an! of the de%art+ents# dire&tors# offi&ers# sto&kholders# or e+%lo!ees of the trust entit!.A /u%%ose Ateneo# in its trust a&&ount for its retire+ent fund# it is +andated that it +ust %ut a se%arate go,erning board for its retire+ent fund# otherwise it will not be ta* e*e+%t under the (ational Internal Re,enue )ode. /o it has its own Arti&les of $rust. In the Arti&les of $rust# there are +e+bers of the uni,ersit! ad+inistrator# and there are re%resentati,es for the e+%lo!ees# that are also re%resentati,e for the union# su%%ose the! &o+e to the &on&lusion# @Let us a%%oint )hina Bank and $rust )o+%an! to be the trustee.A /o all the +onies of this retire+ent fund are transferred to )hina Bank. /u%%ose )hina Bank sa!s# @Salamat, dia nimo gi atag nimo, #ami ang inyong trustee. A (ow# re+e+ber the trustee does not do his 3ob out of the goodness of his heart# he is %aid fro+ the trust funds to do the trust fun&tion. (ow# su%%ose the trust entit!# )hina Bank# will sa!# @Aahhh# in gratitude to Ateneo# sin&e Ateneo is floating a bond be&ause it0s going to ere&t these buildings# we will use this trust +one! to bu! the bonds of the Ateneo.A )an the trust entit! do that- ;ou read /e&. 80 whether the! &an do that. (o trust entit! shall# for the a&&ount of the trustor or the benefi&iar! of the trust# %ur&hase or a&1uire %ro%ert! fro+# or sell# transfer# assign# or lend +one! or %ro%ert! to# or %ur&hase debt instru+ents of an! of the de%art+ents# dire&tors# offi&ers# sto&kholders# or e+%lo!ees of the trust entit!# relati,es within the first degree of &onsanguinit! or affinit! of the related interest of su&h dire&tors#

offi&ers# and sto&kholders# unless the transa&tion is s%e&ifi&all! authori.ed b! the trustor and the relationshi% of the trustee and other %arties in,ol,ed in the transa&tion is full! dis&losed to the trustor or benefi&iar! of the trust %rior to the transa&tion. $hat is the re1uire+ent# full dis&losure# and it +ust be ar+s2length. 7ull dis&losure and ar+s2 length transa&tion. (ow# /e&. 81PRegistration of the Arti&les of In&or%oration and B!2Laws of the $rust Fntit!. It +ust be re&o++ended b! the Bangko /entral. ini+u+ &a%itali.ation5eter+ined b! the onetar! Board. 'hat are the %owers of a trust entit!1.: 8".1> A&t as trustee on an! +ortgage or bond issued b! an! +uni&i%alit!# &or%oration# or an! bod! %oliti& to a&&e%t and e*e&ute an! trust &onsistent with law.

/o# if !ou are the trustee of a %arti&ular bond issue# !ou hold the &ollateral# the +ortgage# and under the order of or a%%oint+ent of an! &ourt as guardian# re&ei,er# trustee# or de%ositar! of the estate of an! +inor or other in&o+%etent %erson. 2.: 8".2 A&t under the order or a%%oint+ent of an! &ourt as guardian# re&ei,er# trustee# or de%ositar! of the estate of an! +inor or other in&o+%etent %erson# and as re&ei,er and de%ositar! of an! +one!s %aid into &ourt b! %arties to an! legal %ro&eedings and of %ro%ert! of an! kind whi&h +a! be brought under the 3urisdi&tion of the &ourt<

".: 8"."> A&t as e*e&utor. J.: 8".J> A&t as ad+inistrator. I.: 8".I> A&&e%t# and e*e&ute an! trust for the holding# +anage+ent# and ad+inistration of an! estate# real or %ersonal# and the rents# issues# and %rofits thereof.

M.: 8".M> Fstablish and +anage &o++on trust funds# sub3e&t to su&h rules and regulations as +a! be %res&ribed b! the onetar! Board.

;ou know# the arti&les of trust that &ontrol a &ertain fund that the trust entit! is su%%osed to ad+inister# de+ar&ates 3ust what t!%e of in,est+ents &an be entered into b! the trust entit! for and in behalf of the trust a&&ount.

)an the trustee delegate his trust fun&tionsIf the law allows hi+ to delegate< if the arti&les of trust allows hi+ to delegate# look at the ///# it is basi&all! a trustee of the funds of the benefi&iaries who are the +e+bers of the ///. $he! ad+inister the fund. (ow# wh! is it that the /// &an segregate so+e of the funds and %ut it in (ew ;ork and in,est it there and designate a trustee for that %arti&ular corpus of fundsIt0s a&tuall! delegating its fun&tions to another trust entit!. $hat is the sound %ra&ti&e# be&ause so+e trust fun&tions are 3ust so &o+%li&ated that !ou ha,e no &hoi&e but to delegate. ;ou &annot but delegate be&ause the funds that !ou are ad+inistering are so huge that !ou &annot %ossibl! %erfor+. It is re&kless# it is not the a&tions of a %rudent +an to ad+inister all of it b! !ourself. In other words !ou will fail in the +easure of degree of diligen&e and due &are of a %rudent +an if !ou &ontinue to ad+inister it 3ust b! !our own trust entit! self. ;ou ha,e so+ething like )AL4FR/P )alifornia 4ubli& F+%lo!ees Retire+ent 7unds. $hat is# the! sa! it0s o,er U"00B. (ow# !ou &annot afford to %ut it all in the O./.# be&ause if so+ething ha%%ens in the O./.# it0s deno+inated in dollars# it will 3ust risk su&h loss. It is not %rudent to 3ust %ut it there# so !ou ha,e to di,ide all o,er the world. (ow# if !ou are based in the O./.# !ou are like ///# !ou are there# wala na dili na#a matulog ana. <gano man0 Pagsira sa stoc# mar#et gyud ana sa America, andar na ang !urope, pag#a uman, Asia na sad. -agsige #a ug tanaw ana #ay +ab!aan +an ka. A , wa na, di na #a matulog. It0s not %rudent to do that. /o# that is the go,erning %rin&i%le. /e&ond %aragra%h of /e&. 82> 5e%osit for the 7aithful 4erfor+an&e of $rust 5uties. $ake a look at the first %art# @Before transa&ting trust business# e,er! trust entit! shall de%osit with the Bangko /entral# as se&urit! for the faithful %erfor+an&e of its trust duties# &ash or se&urities a%%ro,ed b! the onetar! Board in an a+ount e1ual to not less than 4h%I00#000.00 or su&h higher a+ount as +a! be fi*ed b! the onetar! Board> 4ro,ided# howe,er# that the onetar! Board shall re1uire e,er! trust to in&rease the a+ount of its &ash or se&urities or de%osit with the Bangko /entral# whene,er in its 3udg+ent su&h in&rease is ne&essar! b! reason of the trust business of su&h entit!.A /o he has an o,erall se&urit! bond. 'ho kee%s it- $he Bangko /entral. Gust like an! re&ei,er who is &harged of %ro%ert!# he %uts u% a bond. 'hat0s the %ur%ose of a bond if !ou are a re&ei,er# it is the legal &ertitude that !ou will not run awa! with the corpus.

*dagan unya na nimo7 <aa #ay bond di a ibutang, unya pagdagan nimo, iputol=ibuton na to7 $he! will e*e&ute on the bond. /o# take note# that this +ini+u+ 4I00B se&urit! %la&ed with the Bangko /entral is not &onditioned that the trust entit! has at least one fund o,er whi&h it is a trustee. If it has no trust business# naa lang giha%on na ang 4I00B with the Bangko /entral. $hat &o+es with the obligation as a li&ensed trust entit!. Og wa! +usalig ni+o# wa! +uduol ni+o na +agbutang sila ug retire+ent fund# naa lang giha%on na. $hat is %art of !our obligation as a trust entit! i+%osed b! the law. Read!# arun #anunay #a andam mudawat ug trust obligations. $his is the differen&e between a trust entit! and an ordinar! re&ei,er. Ang receiver, ordinaryong tao #a, bu aton #ang receiver in ban#ruptcy, magbutang #a ug bond, #ay mao man nay quali+ying act nimo. Pagdawat nimo sa appointment, butang #a ug bond. 4ini /re+erring to trust operations> wala pa gani #ay gidawat, mobutang #a na ug 4I00B. And the onetar! Board +a! in&rease the a+ount if in its %er&e%tion there is a ne&essit!. (ow# take a look at /e&. 8IPBond of )ertain 4ersons for the 7aithful 4erfor+an&e of 5uties. @Before an e*e&utor# ad+inistrator# guardian# trustee# re&ei,er# or de%ositor! a%%ointed b! the &ourt# enters u%on the e*e&ution of his duties# he shall# u%on order of the &ourt# file a bond in su&h su+ as the &ourt +a! dire&t.A $hat is an ordinar! %erson. ;ou are taking s%e&ial %ro&eedings. Ene of the s%e&ial %ro&eedings is settle+ent of estate# settle+ent of estate of the de&eased. Let us sa! it is testate# there is a will. Let us sa! that will sa!s# @$his %erson should be the ad+inistrator# or if this %erson &annot# then this other %erson# or of he &annot# this three %ersons.A )an the will sa!# @An! of these &an ser,e and without need of bond.A )an it %ro,ide that and is that ,alid)an the &ourt o,errule that and sa!# @Regardless of what is there# !ou +ust %ut u% a bondA- ;ou did not take that u%- $hat is %art of the will being ser,ed> @without a bondA. It is abuse of dis&retion on the %art of the &ourt if it &ontra,enes be&ause its %ur%ose is to look at the inherent %ro,isions of the will and gi,e it effe&t. (ow# if the testator said he Rthe ad+inistratorS will ser,e without a bond# then he will ser,e without a bond. It +eans that the testator is willing to a&&e%t the risk that none of these %ro,isions will be &arried out if this ad+inistrator will turn out to be a s&all!wag# and run awa! with all the +one!. Be&ause he has all the authorit!# he &an sign the &he&ks# et&.# he &an issue &he&ks for the e*%enses of the

ad+inistration of the %ro%ert! and so on. ?e0s the one who will %a! the ta*es. Onsa +an lang dia! ginabuhat sa &ourtaghuwat lang sa re%ort na gibuhat sa ad+inistrator# +aghuwat lang %ud sa %lano sa %agbahin. And the &ourt has the 3urisdi&tion to a%%ro,e. Section 98. "ond o+ Certain Persons +or t e &ait +ul Per+ormance o+ Duties. 2 Before an e*e&utor# ad+inistrator# guardian# trustee# re&ei,er or de%ositar! a%%ointed b! the &ourt enters u%on the e*e&ution of his duties# he shall# u%on order of the &ourt# file a bond in su&h su+ as the &ourt +a! dire&t. O%on the a%%li&ation of an! e*e&utor# ad+inistrator# guardian# trustee# re&ei,er# de%ositar! or an! other %erson in interest# the &ourt +a!# after noti&e and hearing# order that the sub3e&t +atter of the trust or an! %art# thereof be de%osited with a trust entit!. O%on %resentation of %roof to the &ourt that the sub3e&t +atter of the trust has been de%osited with a trust entit!. O%on %resentation of %roof to the &ourt that the sub3e&t +atter of the trust has been de%osited with a trust entit!# the &ourt +a! order that the bond gi,en b! su&h %ersons for the faithful %erfor+an&e of their duties be redu&ed to su&h su+s as it +a! dee+ %ro%er> 4ro,ided# howe,er# $hat the redu&ed bond shall be suffi&ient to se&ure ade1uatel! the %ro%er ad+inistration and &are of an! %ro%ert! re+aining under the &ontrol of su&h %ersons and the %ro%er a&&ounting for su&h %ro%ert!. 4ro%ert! de%osited with an! trust entit! in &onfor+it! with this /e&tion shall be held b! su&h entit! under the orders and dire&tion of the &ourt.

u%on %ro%er s%e&ial &ause entit! to %ost the %rote&tion to su&h entit!

a%%li&ation with it showing therefore# re1uire the trust a bond or other se&urit! for of funds or %ro%ert! &onfided

$his is a trust entit! e*e+%t fro+ %utting u% a bond# wh!- Be&ause he has alread! %ut u% 4I00B with the Bangko /entral. 7inal %ro,isions# so this is the end. ;ou all know about trusts# so !ou should be able to draw u% Arti&les of $rust. 6F(5: G/

(ow# if the will is silent# then that is when the &ourt &an sa!# @4ut u% a bond.A ?ow +u&h is the bond- $he &ourt will deter+ine# nor+all!# 10H of the esti+ated ,alue of the estate. $hat is where there will be dis&retion. 'h!- Be&ause the general rule is> these %eo%le who are entrusted with trust duties +ust be bonded. In other words# the! are a&tuall! sa!ing the! ha,e nothing to gain b! these duties# be&ause we will lose +ore b! %utting u% our +one! if the law will find us negle&tful in our duties. Alright# /e&. 8MPF*&e%tion of $rust Fntit! fro+ Bond Re1uire+ent. Section 97. !'emption o+ ,rust !ntity +rom "ond Requirement. 2 (o bond or other se&urit! shall be re1uired b! the &ourt fro+ a trust entr! for the faithful %erfor+an&e of its duties as &ourt2a%%ointed trustee# e*e&utor# ad+inistrator# guardian# re&ei,er# or de%ositar!. ?owe,er# the &ourt +a!#