GORDON COLLEGE

OLONGAPO CITY
S.Y. 2017-2018

GENERAL BANKING LAW OF 2000

R.A- 8791

SUBMITTED BY:

ANDRES, BETZAIDA JANE S.

CABIGTING, MYKEE AMYEL
DELA PENA, KATHERINE JONES
FABIAN, RICALYNNE MAE B.
MALLARI, JOVELYN
BSA 4- A

SUBMITTED TO:

ATTY. APRIL JOY M. AGUILA

November 20, 2017

 OUTLINE
GENERAL BANKING LAW
I. Introduction to GBL
II. Definition of Bank
III. Nature of Banking Business
IV. Classification of Banks
IV.A. Definition and Examples
a. Universal Banks
b. Commercial Banks
a) Investment House
b) Allied and Non- Allied Enterprise; and
c) Other Financial Enterprise
c. Thrift Banks, composed of:
a. Savings and Mortgage Banks
b. Stock Savings and Loan Associations
c. Private Development Banks
d. Rural Banks (R.A. 7353)
e. Cooperative Banks (R.A. 6938)
f. Islamic Banks (R.A. 6848)

IV.B. Classify According to:

1. Capital Investment
2. Purpose
3. Powers
4. Equity Investment
V. Supervisory powers of Bangko Sentral
VI. Policy Directions; Ratios, Ceilings, and Limitations
VII. Authority to Engage in Banking and Quasi- banking Functions
VII.A. Quasi- banks
VII.B. Quasi- banks Function
VIII. Examination by the Bangko Central
 GENERAL BANKING LAW
I. INTRODUCTION
In line with the government policy of providing a stable and efficient banking and financial
system, the General Banking Law of 200 was passed to replace the old General Banking Act of
1949 (R.A 337). The General Banking Law of 2000 is the law that generally governs the
regulation, organization and operation of banks, quasi-banks, and other quasi-entities.
R.A. No. 8791 is called a "law" rather and an "act". The purpose is to differentiate the
current law from its predecessor.
It primarily governs Universal Banks (Secs. 23-28, GBL) and Commercial Banks (Secs.
29-32, GBL), and has suppletory application to Thrift Banks (which is primarily governed by RA
7906, the Thrift Banks Act), Rural Banks (primarily governed by RA 7353, the Rural Banks Act),
and Cooperative Banks (primarily governed by RA 6938, the Cooperative Code).
The new law is a consolidation of Senate Bill No. 1519 and House Bill No. 6814 of the
Eleventh Congress. It was passed by the Senate and the House of Representatives on April 12,
2000, and subsequently approved by then President Joseph E. Estrada. It became effective on June
13, 2000.
II. BANK
a. Definition
- Entities engage in the lending of funds obtained in the form of deposits from the public.
This is usually referred to as “core-banking functions”.
“3.1 "Banks" shall refer to entities engaged in the lending of funds obtained in the form
of deposits.” - (RA 8791 or the General Banking Law of 2000, Section 3.1)
- It mobilizes savings through deposit-taking, and
- It allocates resources through lending.
- An investment company which loans out the money of its customers collects the
interest and charges the commission to both lender and borrowers is a bank.
- GBL requires that banks are stock corporations and its funds are obtained from the
public, i.e. deposits of twenty (20) or more persons.
III. NATURE OF BANKING BUSINESS
The State recognizes the vital role of banks in providing an environment conducive to the
sustained development of the national economy and the fiduciary nature of banking that requires
high standards of integrity and performance. In furtherance thereof, the State shall promote and
maintain a stable and efficient banking and financial system that is globally competitive,
dynamic and responsive to the demands of a developing economy. (n)” - (RA 8791 or the
General Banking Law of 2000, Sec.2) This consequently means that a bank shall be subject to
heavy and close supervision and/or regulation by the Bangko Sentral ng Pilipinas, and that it
must exercise utmost diligence in the handling of deposits.
To promote and maintain a stable and efficient banking and financial system, there are
special rules that govern banks. Because it is indispensable to the national interest, any strike or
lockout involving banks, if unsettled after seven (7) calendar days shall be reported by
the Bangko Sentral to the Secretary of Labor who has two options: (1) he may assume
jurisdiction over the dispute or decide it or (2) certify the same to the National Labor Relations
Commission for compulsory arbitration. The law allows the President of the Philippines, at any
time, to intervene and assume jurisdiction over such labor dispute in order to settle or terminate
the same.
It was explained that public confidence is the anchor of any banking system. The banking
business itself, therefore, is in the nature of a public trust. Banks by years of dealing, acquire the
confidence of the public and become the depositories of thousands who are not engaged in active
business, including those who may be considered wards of the State.

One of the consequences of the nature of the bank’s business is that it is required to exercise
utmost diligence in the handling of deposits. The Supreme Court explained in Simex International
(Manila) Incorporated v. Court of Appeals that:
 “The Banking System is an indispensable institution in the modern world and place a
vital role in the economic life of every civilized nation. Whether as mere passive entities for
the safekeeping and saving of man or as active instruments of business and commerce, banks
have become a ubiquitous presence among the people, who have come to regard them with
respect and even gratitude and, most of all, confidence. Thus, even the humble wage-earner
has not hesitated to entrust his life’s savings to the bank of his choice, knowing that they will
be safe in its custody and will even earn some interest for him. The ordinary person, with
equal faith usually maintains a modest checking account for security and convenience in the
settling of his monthly bills and the payment of ordinary expenses. As for business entities like
the petitioner, the bank is a trusted and active associate that can help in the running of their
affairs, not only in the form of loans when needed but more often in the conduct of their day-
to-day transaction like the issuance or encashment of checks.”

IV. CLASSIFICATION OF BANKS

IV.A. Definitions and Examples
1. Universal Banks (UB) – banks that have the authority to exercise, in addition
to the powers authorized for a commercial bank, the powers of an investment
house and the power to invest in non-allied enterprises. (Sec. 23)
Example:

2. Commercial Banks (CB) – banks that 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. (Sec. 29)
Example:

a. Investment House- An investment house is “any enterprise which

engages or purports to engage, whether regularly or on an isolated basis,
in underwriting of securities of another person or enterprise, including
securities of the Government and its instrumentalities.”.
Underwriting of securities is the act or process of guaranteeing
distribution and sale within the Philippines of securities of the
Government or its instrumentalities. The distribution and sale may be
on a public or private placement basis.
b. Allied Enterprise- Allied undertaking shall include:
- Banks, financial institutions and non-bank financial
intermediaries;
- Warehousing and other post-harvested facilities;
- Fertilizer and agricultural chemical and pesticides
distribution;
- Farm equipment distribution;
- Trucking an transportation of agricultural products;
- Marketing and agricultural products;
- Leasing; and Other undertakings as may be determined
by the Monetary Board.
 c. Non- Allied Enterprise- The broad category of non-allied undertakings
in which a universal bank may invest directly or through its subsidiary
shall require prior approval of the MB. Se. 1381.1 of the Manual of
Regulations for banks provides that no prior approval is necessary if
investment is to be made in any of the ff:

A. enterprise engaged in physically productive activities in

agriculture, mining and quarrying, manufacturing, public utilities,
construction, wholesale trade and community and social services
following the industrial groupings in the Philippine Standard
Industrial Classification;
B. Industrial park projects and/or industrial estate developments;

C. Financial and commercial complex projects including land

development and buildings constructed thereon arising from or in
connection with Government’s privatization program; and

D. Such other broad categories as the monetary board may declare

as appropriate.

d. Other Financial Enterprise-

3. Rural Banks (RB) – banks that are created to make needed credit available and
readily accessible in the rural areas for purposes of promoting comprehensive
rural development. (R.A. No. 7353)
Example:

4. Thrift Banks – banks that include:

• savings and mortgage banks,
• private development banks, and
• stock savings and loan associations.
Example:

5. Cooperative Banks – banks that primarily provide financial, banking and credit
services to cooperative organizations and their members. (Sec. 100, R.A. 6938
as amended by R.A. 9520)
Example:

6. Islamic Banks – Charter of Al Amanah Islamic Investment Bank of the

Philippines. (R.A. 6848)
Example:
 IV.B. Classification of Banks:

As to Capital requirement/ Stockholdings (In Million Pesos)

UNIVERSAL COMMERCIAL THRIFT RURAL COOPERATIVE ISLAMIC

BANK BANK BANK BANK BANK BANK

As to Purpose
UNIVERSAL COMMERCIAL THRIFT BANK RURAL COOPERATIVE ISLAMIC
BANK BANK BANK BANK BANK

Universal and Commercial banks a.) Recognize Rural banks Cooperative The primary
are financial institutions that the are banks are purpose of
provide services for bothsavers indispensable organized to organized an Islamic
and borrowers. Their role in the role of the promote primarily to Bank is to
financial system is critical to private sector, to comprehens provide financial promote and
keeping money available and encourage ive rural and credit services accelerate
liquid. private developmen to Cooperatives. the socio-
enterprise, and t with the economic
to provide end in view developmen
incentives to of attaining t of the
needed a more Autonomou
investments; equitable s Region by
(b) Promote distribution performing
economic banking,
development financing
pursuant to the and
socioeconomic investment
program of the operations
government and to
(c) Encourage establish
and assist the and
establishment of participate
thrift bank in
system; agricultural,
(d) Encourage commercial
industry, and
frugality and the industrial
accumulation of ventures
savings among based on
the public, and Islamic
the members and concept of
stockholders of banking.
thrift banks
 As to Power
UNIVERSAL COMMERCIAL THRIFT RURAL COOPERATIV ISLAMIC
BANK BANK BANK BANK E BANK BANK
The powers of
an investment
house
as provided in
existing laws;
and The power
to invest in
non-allied
enterprises as
provided in the
GBL. (Sec. 23)
The general powers incident to corporations,
Accept and issue drafts and letters of credit Accept and
issue drafts
and letters of
credit.
Accepting and creating demand
deposits.
Discounting and negotiating promissory notes, drafts, bills of exchange, and other
evidences of debt
To invest in
equities of
specified
allied
undertakings.
Receiving other types of deposits and deposit substitutes.
Invest in readily marketable bonds and other debt
securities, commercial papers and accounts
receivable, drafts, bills of exchange, acceptances
or notes arising out of commercial transactions.
Extend credit
facilities to
private and
government
employees.
Receive in custody funds, documents and valuable objects.
Purchase, hold and convey real estate.
a) Receive in custody funds, documents and valuable objects; Handle
b) Act as financial agent and buy and sell, by order of and for the account of storage
their customers, shares, evidences of indebtedness and all types of operations for
securities; goods or
c) Make collections and payments for the account of others and perform such commodity
other services for their customers as are not incompatible with banking financing
business; secured by
d) Upon prior approval of the Monetary Board, act as managing agent, warehouse
adviser, consultant or administrator of investment receipts
management/advisory/consultancy accounts; and presented to
e) Rent out safety deposit boxes. the bank
Engage in trust, quasi-banking functions and
money market operations.
 Grant loans,
whether
secured or
unsecured.
Extend credit against the security of jewelry,
precious stones and articles of similar nature,
subject to such rules and regulations as the
Monetary Board may prescribe.
Accept foreign currency deposits
They also offers checking account Open current Open current or checking Open current
services to their customers. or checking accounts provided that the net or checking
accounts assets is not less than 5M accounts.
provided that
the net assets
is not less
than 20M
Act as correspondent of other financial institutions.
It may also Act as collection agent for government Act as
collect taxes, entities, including but not limited to, the collection
custom duties Bureau of Internal Revenue (BIR), Social agent insofar
and other Security System (SSS) and the Bureau of as the
government Customs (BOC). payment
levies as a form orders, bills
of assistance to of exchange
Bureau of or other
Internal commercial
Revenue (BIR) documents
and Bureau of are exclusive
Customs (BOC). of riba or
interest
prohibitions.
Act as official depository of national agencies and of
municipal, city or provincial funds in the municipality, city or
province where it is located.
Issue
mortgage and
chattel
mortgage
certificates,
buy and sell
them for its
own account
or for the
account of
others, or
accept and
receive them
in payment or
as
amortization
of its loan
 Extend loans and advances
primarily for the purpose of
meeting the normal credit
needs of farmers, fishermen
or farm families as well as
cooperatives, merchants,
private and public employees.
Accept negotiable order of
withdrawal (NOW) accounts.
Sell domestic drafts
Invest in allied undertakings
Open savings
accounts for
safekeeping
or custody
with no
participation
in profit and
losses except
unless
otherwise
authorized by
the account
holders to be
invested
Accept
investment
account
placements
and invest the
same for a
term with the
IB’s funds in
Islamically
permissible
transactions
on
participation
basis
Buy and sell Foreign Exchange
Provide
financing
with or
without
collateral by
way of
leasing, sale
and
leaseback, or
cost plus
profit sales
arrangement
Issue shares
for the
account of
institutions
and
companies
assisted by
the bank in
meeting
subscription
calls or
augmenting
their capital
and/or fund
requirements
as may be
allowed by
law

Undertake
various
investments
in all
transactions
allowed by
the Islamic
Shari’a in
such a way
that shall not
permit the
haram
(forbidden),
nor forbid the
halal
(permissible)
Issue
investment
participation
certificates,
muquaradah
(non-interest
bearing
bonds),
debentures,
collaterals
and/ or the
renewal and
refinancing
of the same,
with the
approval of
the Monetary
Board to be
used by the
IB in its
financing
operations for
projects that
will promote
the economic
development
primarily of
the
Autonomous
Region
Carry out
financing and
joint
investment
operations by
way of
mudarabah
purchasing
for others on
a cost-plus
financing
arrangement,
and invest
funds directly
in various
projects or
through the
use of funds
whose
owners desire
to invest
jointly with
other
resources
available to
the IB on a
joint
mudarabah
basis;
 As to Equity Investments
UNIVERSAL COMMERCIAL THRIFT RURAL COOPERATIVE ISLAMIC
BANK BANK BANK BANK BANK BANK
A UB may invest A CB may Thrift banks, Rural banks and Islamic banks
in the equities of invest only in Cooperative Banks may invest in equities may invest in
allied (either the equities of of allied undertakings as hereinafter the equities
financial or non- allied enumerated: Provided, That: of allied
financial) and non- enterprises (a) the total investments in equities undertakings.
allied enterprises. (either financial shall not exceed twenty-five
Except as the MB or non- percent (25%) of the net worth of
may otherwise financial).(sec.3 the bank;
prescribe: 0) (b) the equity investment in any
the total investment Except as the single enterprise shall be limited
in equities of allied mb may to fifteen percent (15%) of the net
and non-allied otherwise worth of the bank;
enterprises shall Prescribe: (c) the equity investment in any
not exceed 50% of the total single enterprise shall remain a
the net worth; and investment in minority holding in that
the equity equities of allied enterprise; and
investment in any enterprises shall (d) the equity investment in other
one enterprise, not exceed 35% banks shall be subject to the same
whether allied or of the net worth provisions governing similar
non-allied, shall of the bank; and investments of commercial banks
not exceed 25% of the equity and shall be deducted from the
the net worth of the investment in investing bank's net worth for the
bank (sec. 24). any one purpose of computing of the
enterprise shall prescribed ratio as provided in
not exceed 25% Section 9 hereof: Provided,
of the net worth further, That equity investments
of the bank. shall not be permitted in non-
related activities. Where the allied
activity is a wholly- or majority-
owned subsidiary of the thrift
bank, the Bangko Sentral may
subject it to examination.

UNIVERSAL BANKS COMMERCIAL BANKS

Equity Investments in Financial Allied Enterprises
A UB can own up to 100% of the equity in… A CB may own up to 100% of the equity of a
thrift bank or a rural bank. (sec. 31)
A thrift bank,
Where the equity investment of a CB is in other
A rural bank or
financial allied enterprises, including another
A financial allied commercial bank, such investment shall remain
a minority holding in that enterprise. (sec. 31)
Enterprise. (sec. 25)

UNIVERSAL BANKS COMMERCIAL BANKS

Equity Investments in Non-Financial Allied Enterprises
A UB or CB may own up to one hundred A UB or CB may own up to one hundred
percent (100%) of the percent (100%) of the
Equity in a non-financial allied enterprise. (sec. Equity in a non-financial allied enterprise. (sec.
26 and 32) 26 and 32)

UNIVERSAL BANKS COMMERCIAL BANKS

Equity Investments in QBs
To promote competitive conditions in financial A UB or CB may own up to one hundred percent
markets, the MB may further limit to 40% equity (100%) of the
investments of UBs and Equity in a non-financial allied enterprise. (sec.
CBs in QBs. (sec. 28) 26 and 32)

V. SUPERVISORY POWERS
• The issuance of rules of conduct or the establishment of standards of operation for
uniform application to all institutions or function covered taking into consideration the
distinctive character of the operations of institutions and the substantive similarities of
specific functions to which such rules, modes or standards are to be applied.
• The conduct of examination to determine compliance with laws and regulations if
the circumstances so warrant as determined by the Monetary Board.
• Overseeing to ascertain that laws and regulations are complied with.
• The regular investigation which shall not be oftener than once a year from the last
date of examination to determine whether as institution is conducting its business on a safe
or sound basis; provided that the deficiencies of irregularities found by or discovered by
an audit shall be immediately addressed.
• Inquiring into the solvency and liquidity of the institution.
• Enforcing prompt corrective actions.
VI. POLICY DIRECTIONS, RATIOS, CEILINGS AND LIMITATIONS
The Bangko Sentral shall provide policy direction in the areas of money, banking
and credit.
For this purpose, the Monetary Board may prescribe ratios, ceilings, limitations, or
other forms of regulation on the different types of accounts and practices of banks and
quasi-banks which shall, to the extent feasible, conform to internationally accepted
standards, including those of the Bank for International Settlements (BIS).
VII. AUTHORITY TO ENGAGE IN BANKING AND QUASI- BANKING
FUNCTIONS
No person or entity shall engage in banking operations or quasi-banking functions
without authority from the Bangko Sentral: Provided, however, That an entity
authorized by the Bangko Sentral to perform universal or commercial banking
functions shall likewise have the authority to engage in quasi-banking functions.

VII.A. Definition of Quasi-Banks

- Entities engaged in the borrowing of funds through the issuance, endorsement

or assignment with recourse or acceptance of deposit substitutes for purposes
of purchasing of receivables and other obligations.
The main activity is the acceptance of deposit substitutes. Under RA No. 7653
or the New Central Bank Act
 VII.B. Function of Quasi-Bank

“(b) ‘Quasi-Banking Functions’ shall mean borrowing funds, for the

borrower’s own account, through the issuance, endorsement or acceptance of debt
instruments of any kind other than deposits, or through the issuance of
participation’s, certificates of assignment, or similar instruments with recourse,
trust certificates, or of repurchase agreements, from twenty or more lenders at any
one time, for purposes of relending or purchasing of receivables and other
obligations: Provided, however, That commercial, industrial, and other non-
financial companies, which borrow funds through any of these means for the limited
purpose of financing their own needs or the needs of their agents or dealers, shall
not be considered as performing quasi-banking functions;

According to Atty. Rafael Morales, in his book “The Philippine General Banking
Law (Annotated)” , He maintains that it is inappropriate to apply the term "quasi-banking"
to the alternative borrowing operations (i.e. borrowing from the public through means other
than deposits) of banks themselves. He suggests that such activity be simply termed
"deposit-substitute operation" since, to quote him, "there is nothing ‘quasi’ about it, when
it is performed by banks themselves." (Presidential Decree No. 71, Section 2-D b).

VIII. EXAMINATION BY THE BANGKO SENTRAL

The Bangko Sentral shall, when examining a bank, have the authority to examine
an enterprise which is wholly or majority-owned or controlled by the bank.