BANKING LAW (R.A.
8791) Reason: Vital to industry
General Banking Law:
Sec. 3 of the General Banking Law provides
that: "Banks" shall refer to entities engaged in
the lending of funds obtained in the form of
deposits.”
Sec. 8 of the General Banking Law provides
that: “The Monetary Board may authorize the
organization of a bank or quasi-bank subject
to the following conditions:
8.1 That the entity is a stock corporation;
8.2 That its funds are obtained from the
public, which shall mean twenty (20) or more
persons; and
8.3 That the minimum capital requirements
prescribed by the Monetary Board for each
category of banks are satisfied.
No new commercial bank shall be established
within three (3) years from the effectivity of
this Act. In the exercise of the authority
granted herein, the Monetary Board shall take
into consideration their capability in terms of
their financial resources and technical
expertise and integrity. The bank licensing
process shall incorporate an assessment of
the bank’s ownership structure, directors and
senior management, its operating plan and
internal controls as well as its projected
financial condition and capital base.”
*To be registered as bank, it must be a stock
corporation.
*Banks must obtain funds from the public.
Minimum number of depositor is 20 persons.
Nature of Business:
Sec. 2 of the General Banking Law states
that: “The State recognizes the vital role of
banks 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.”
Consequences:
1. Sec. 9 of the General Banking Law
provides that: “The Monetary 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; Provided, That banks shall
issue par value stocks only.”
2. Bank must be an open corporation
3. The word “bank” cannot be used if such
person or entity is not engaged in
banking business.
4. It is subject to heavy and close
supervision and/or regulation by the
Bangko Sentral ng Pilipinas.
5. Banks must observe highest degree of
diligence.
6. Sec. 22 of the General Banking Law
states that: “The 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, if unsettled after seven (7)
calendar days shall be reported by the
Bangko Sentral to the Secretary of
Labor who may assume jurisdiction
over the dispute or decide it or certify
the same to the National Labor
Relations Commission for compulsory
arbitration. However, the President of
the Philippines may at any time
intervene and assume jurisdiction over
such labor dispute in order to settle or
terminate the same.”
*In DBP v CA, the SC held that while an
innocent mortgagee is not expected to
conduct an exhaustive investigation on the
history of the mortgagor’s title, in case of a
banking institution, it must exercise due
diligence before entering into said contract,
and cannot rely upon on what is or is not
annotated on the title.
Cases: China Banking v Lagon; Citibank
v Cabangongan
Authority to incorporate and operate:
Sec. 14 of the General Banking Law states
that: “The Securities and Exchange
Commission shall not register the articles of
incorporation of any bank, or any amendment
thereto, unless accompanied by a certificate of
authority issued by the Monetary Board,
under its seal. Such certificate shall not be
issued unless the Monetary Board is satisfied
from the evidence submitted to it:
14.1. That all requirements of existing laws
and regulations to engage in the business for
which the applicant is proposed to be
incorporated have been complied with;
14.2. That the public interest and economic
conditions, both general and local, justify the
authorization; and
14.3. That the amount of capital, the
financing, organization, direction and
administration, as well as the integrity and
responsibility of the organizers and
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administrators reasonably assure the safety of
deposits and the public interest.
The Securities and Exchange Commission
shall not register the by-laws of any bank, or
any amendment thereto, unless accompanied
by a certificate of authority from the Bangko
Sentral.”
*The articles of incorporation must be
accompanied by the favorable
recommendation of the BSP.
Sec. 6 of the General Banking Law provides
that: “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.
The determination of whether a person or
entity is performing banking or quasi-banking
functions without Bangko Sentral authority
shall be decided by the Monetary Board. To
resolve such issue, the Monetary Board may;
through the appropriate supervising and
examining department of the Bangko Sentral,
examine, inspect or investigate the books and
records of such person or entity. Upon
issuance of this authority, such person or
entity may commence to engage in banking
operations or quasi-banking function and
shall continue to do so unless such authority
is sooner surrendered, revoked, suspended or
annulled by the Bangko Sentral in accordance
with this Act or other special laws.
The department head and the examiners of
the appropriate supervising and examining
department are hereby authorized to
administer oaths to any such person,
employee, officer, or director of any such
entity and to compel the presentation or
production of such books, documents, papers
or records that are reasonably necessary to
ascertain the facts relative to the true
functions and operations of such person or
entity. Failure or refusal to comply with the
required presentation or production of such
books, documents, papers or records within a
reasonable time shall subject the persons
responsible therefore to the penal sanctions
provided under the New Central Bank Act.
Persons or entities found to be performing
banking or quasi-banking functions without
authority from the Bangko Sentral shall be
subject to appropriate sanctions under the
New Central Bank Act and other applicable
laws.”
Classification of banks:
Sec. 3.2 of the General Banking Law
provides that: “Banks shall be classified into:
(a) Universal banks;
(b) Commercial banks;
(c) Thrift banks, composed of:
(i) Savings and mortgage banks;
(ii) Stock savings and loan associations;
and
(iii) Private development banks, as
defined in the Republic Act No. 7906
(hereafter the “Thrift Banks Act”);
(d) Rural banks, as defined in Republic
Act No. 73S3 (hereafter the "Rural Banks
Act");
(e) Cooperative banks, as defined in
Republic Act No 6938 (hereafter the
"Cooperative Code");
(f) Islamic banks as defined in Republic
Act No. 6848, otherwise known as the
“Charter of Al Amanah Islamic Investment
Bank of the Philippines”; and
(g) Other classifications of banks as
determined by the Monetary Board of the
Bangko Sentral ng Pilipinas.”
Distinctions between different kinds of
banks:
a. As to Capitalization: They have
different minimum capitalization
requirements.
b. As to Purpose: Some of the banks have
specific purposes and social functions.
c. As to Powers or Functions: There are
functions and powers that are not
exercised by one that are exercised by
others. Some banks may exercise
certain powers only upon prior approval
of the Monetary Board.
*Universal banks can engage into non-
allied enterprises. It can also act as an
investment house, thus, it can enter
into underwriting commitments and do
underwriting securities.
d. As to who can be directors: Public
officers can be directors of Rural
Banks while such officers are
prohibited from being directors or
officers of other types of banks.
e. As to Incorporators: General Rule:
Incorporators must be natural persons.
Exception: In rural banks, it can be
organized or established by
cooperatives and corporations primarily
organized to hold equities in rural
banks.
f. As to Foreign Equity: A rural bank
must be wholly owned by Filipinos
while other banks require only 40%
Filipino ownership of their voting
stocks.
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 *In RA 6938, majority of the shares
must be owned by cooperatives.
g. As to necessity of public offering:
Public offering of shares is necessary
for domestic banks seeking authority to
act as universal bank while there is no
such requirement for other banks.
Functions of the bank:
1. Deposit Functions
2. Loan Functions
Deposit Function:
*The relationship created is one of creditor-
debtor relation.
*There is passing of ownership to the bank.
*The bank can appropriate the deposits
without the consent of the depositor.
*Legal compensation can take place because
they are mutually creditor-debtor of each
other.
*Prior to incorporation, the deposits can be
named to corporate treasurer. He will held it
in trust for the corporation.
Depositors:
1. Minors:
- They can open bank accounts in their
own right provided that they are at
least 7 years of age; they are able to
read and write and have sufficient
discretion; they are not otherwise
disqualified by any other incapacity;
and it should only be savings or time
deposits.
* They cannot open checking account
nor demand deposits.
2. Married Women:
- They are allowed to open bank
accounts without the assistance of
their husbands.
Reason: equality in capacity
*Bank account may be opened by one
individual or two or more persons. Whenever
two or more persons open an account, the
same may be an “and/or account” or an “and
account”.
General Rule: Fictitious accounts
anonymous accounts are prohibited.
Exception: Foreign currency deposits which
may be a numbered account.
*The law requires that necessary measures are
undertaken by the bank to record and
establish the true identity of the depositor.
*Joint accounts may be the subject of
survivorship agreement whereby the co-
depositors agree to permit either of them to
withdraw the whole deposit during their
lifetime and transferring the balance to the
survivor upon the death of one of them.
Basis: Trust and Confidence
*What is prohibited under the Family Code is
donation inter vivos and not donation mortis
causa.
Secrecy of Bank Deposits:
Peso deposits:
General Rule: Sec. 2 of Republic Act No.
1405 provides that: “All deposits of whatever
nature with banks or banking institutions in
the Philippines including investments in
bonds issued by the Government of the
Philippines, its political subdivisions and its
instrumentalities, are hereby considered as of
an absolutely confidential nature and may not
be examined, inquired or looked into by any
person, governmental official, bureau or
office.”
Exceptions:
1. When there is written permission of the
depositor or investor;
2. Impeachment cases;
3. Upon the order of a competent court in
cases of bribery or dereliction of duty of
public officials;
4. Upon the order of a competent court in
cases where the money deposited or
invested is the subject of litigation;
5. Upon order of the competent court or
tribunal in cases involving unexplained
wealth under Sec. 8 of the Anti-Graft
and Corrupt Practices Act (R.A. 3019);
6. Upon inquiry by the Commissioner of
Internal Revenue for the purpose of
determining the net estate of a
deceased depositor;
*In case the taxpayer compromised his
tax liability by reason of financial
incapacity.
7. General Rule: Upon the order of a
competent court or in proper cases by
the Anti-Money Laundering Council
where there is probable cause of money
laundering.
Exception: In some instances even
without court order.
8. Disclosure of the Treasurer of the
Philippines for dormant deposits for at
least 10 years under the Unclaimed
or Balances Act (R.A. 3936)
*Escheat proceedings
Foreign Currency deposits:
*Subsequent to secrecy law.
Under the Foreign Currency Deposit Act, there
is only one exception and that is: When there
is a written consent of depositor.
Secrecy of Deposits under the Anti-Money
Laundering Law:
General Rule: The Anti-Money Laundering
Council may inquire into deposits upon order
of the court when there is probable cause that
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the deposits are related to the crime of
unlawful activities defined in Sec. 3(1) and
Sec. 4 of R.A. 9160 as amended by R.A. 9194.
Exception: A court order is not even
necessary when the offense or unlawful
activity involved is any of the following: 1.
Kidnapping for ransom under Article 267 of
the Revised Penal Code; 2. Sections 4, 5, 7, 8,
9, 10, 12, 13, 14, 15, and 16 of the
Comprehensive Dangerous Drugs Act of 2002;
and Hi-jacking and other violations under R.A.
6235; destructive arson and murder, as
defined under the Revised Penal Code, as
amended, including those perpetrated by
terrorists against non-combatant persons and
similar targets.
Garnishment:
General Rule: Bank accounts may be
garnished by the creditors of the depositor.
Reason: Not deposits for investment, thus,
law on secrecy is not applicable.
Exceptions:
1. Foreign Currency Deposits
*In Salvacion v Central Bank of the
Philippines, the SC held that foreign
currency deposits of an American
tourist who was found guilty of
repeatedly raping a twelve years old
child is subject to garnishment.
2. Those exempt under the Rules of Civil
Procedure like provision for the family
for four months
Deposit Insurance:
*All deposits of any bank are insured with the
PDIC.
*Obligation to pay the premium lies on the
bank.
Risk insured against: closure of banks due to
liquidity problems.
*Insured deposit under the law means the net
amount due to any depositor for deposits in
an insured bank but should not exceed
P250,000. If the depositor has two or more
accounts with the same bank, the maximum
coverage of P250,000 pertains to the sum of
all such accounts maintained in the same
right and capacity.
*A joint account shall be insured separately
from any individual-owned account.
*A joint account held by a juridical person or
entity jointly with natural person/s shall be
presumed to belong to the juridical person.
*The aggregate share in all joint accounts is
subject to P250,000 threshold.
Loan Function of the Banks:
*A 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.
Single Borrower’s Limit:
Sec. 35.1 of the General Banking Law
provides that: “Except as the Monetary
Board may otherwise prescribe for reasons
of national interest, the total amount of
loans, credit accommodations and guarantees
as may be defined by the Monetary Board
that may be extended by a bank to any
person, partnership, association, corporation
or other entity shall at no time exceed twenty-
five percent (25%) of the net worth of
such bank. The basis for determining
compliance with single borrower limit is
the total credit commitment of the bank to
the borrower.
Sec. 35.2 of the General Banking Law states
that: “Unless the Monetary Board
prescribes otherwise, the total amount of
loans, credit accommodations and guarantees
prescribed in the preceding paragraph may
be increased by an additional ten percent
(10%) of the net worth of such bank provided
the additional liabilities of any borrower are
adequately secured by trust receipts,
shipping documents, warehouse receipts or
other similar documents transferring or
securing title covering readily marketable,
non-perishable goods which must be fully
covered by insurance.”
DOSRI ACCOUNTS:
Sec. 36 of the General Banking Law states
that: “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 except with the written approval of the
majority of all the directors of the bank,
excluding the director concerned: Provided,
That 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. The 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 examining department of the
Bangko Sentral.
Dealings 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.
After due notice to the board of directors of
the bank, the office of any bank director or
officer who violates the provisions of this
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Section may be declared vacant and the
director or officer shall be
subject to the penal provisions of the New
Central Bank Act.
The Monetary Board may regulate the amount
of loans, credit accommodations and
guarantees that may be extended, 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. However, the outstanding
loans, credit accommodations and guarantees
which a bank may extend 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, That loans, credit
accommodations and guarantees secured
by assets considered as non-risk by the
Monetary Board shall be excluded from
such limit: Provided, further, That loans,
credit accommodations and advances to
officers in the form of fringe benefits
granted in accordance with rules as may
be prescribed by the Monetary Board shall
not be subject to the individual limit.
The Monetary Board shall define the term
“related interests.”
The limit on loans, credit accommodations
and guarantees prescribed herein shall not
apply to loans, credit accommodations and
guarantees extended by a cooperative bank
to its cooperative shareholders.”
Purpose: To protect the general public from
the abuse of the directors, officers,
stockholders and related interests of the bank.
Requisites:
1. The borrower is a director, officer or
any stockholder of a bank;
2. He contract a loan or any form of
financial accommodation;
3. The loan or financial accommodation is
from: a. his bank, or b. a bank that is a
subsidiary of a bank holding company
of which both his bank and lending
bank are subsidiaries, c. a bank in
which a controlling proportion of the
shares is owned by the same interest
that owns a controlling proportion of
the shares of his bank; and
4. The loan or financial accommodation of
the director, officer or stockholder,
singly or with that of his related
interest, is in excess of 5% of the
capital and surplus of the lending bank
or in the maximum amount permitted
by law, whichever is lower.
Examples:
1. If there is interlocking directors –
subject to DOSRI restrictions
2. General partner is either a director,
officer, stockholder or related interest of
a lending bank – subject to DOSRI
restrictions
3. Stranger applied for a loan and a
property was collateral: a. if the
property is owned by stranger alone –
not subject to DOSRI restrictions; b. if
the property is co-owned by a director,
officer, stockholder or related interest of
the bank – subject to DOSRI
restrictions
4. A director, officer, stockholder, or
related interests owned more than 20%
share in a corporation (borrower) –
subject to DOSRI restriction.
Restrictions:
1. Procedural requirement: The account
should be upon written approval of all
the director of the lending bank
excluding the director concerned.
2. Arms Length Rule: The account
should be upon terms not less favorable
to the bank than those offered to
others.
3. Reportorial requirement: The
resolution approving the loan shall be
entered in the records of the bank and
a copy of the entry shall be transmitted
forthwith to the Supervising and
Examination Sector of the BSP.
Foreclosure of Mortgage
Sec. 47 of the General Banking Law
provides that: “In the event of foreclosure,
whether judicially or extra-judicially, 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 expenses
incurred by the bank or institution from
the sale and custody of said property less the
income derived there from. However, the
purchaser at the auction sale concerned
whether in a judicial or extra-judicial
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. Any petition in court to enjoin 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
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in an amount fixed by the court conditioned
that he will pay all the damages which
the bank may suffer by the enjoining or the
restraint of the foreclosure proceeding.
Notwithstanding Act 3135,juridical persons
whose property is being sold pursuant to
an extra judicial 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 Register of
Deeds which in no case shall be more than
three (3) months after foreclosure,
whichever is earlier. Owners of property
that has been sold in a foreclosure sale prior
to the effectivity of this Act shall retain
their redemption rights until their
expiration.”
Prohibited acts of Borrowers:
Sec. 55.2 of the General Banking Law states
that: “No borrower of a bank shall -
(a) Fraudulently overvalue property offered
as security for a loan or other credit
accommodation from the bank;
(b) Furnish false or make misrepresentation
or suppression of material facts for the
purpose of obtaining, renewing, or increasing
a loan or other credit accommodation or
extending the period thereof;
(c) Attempt to defraud the said bank in the
event of a court action to recover a loan or
other credit accommodation; or
(d) Offer 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.”
Ownership of Banks:
Sec. 11 of the General Banking Law
provides that: “Foreign individuals and non-
bank corporations may own or control up to
forty percent (40%) of the voting stock of a
domestic bank. This rule shall apply to
Filipinos and domestic non-bank
corporations.
The percentage of foreign-owned voting stocks
in a bank shall be determined by the
citizenship of the individual stockholders in
that bank. The citizenship of the corporation
which is a stockholder in a bank shall follow
the citizenship of the controlling stockholders
of the corporation, irrespective of the place of
incorporation.”
General Rule: Banks are partly nationalized
*The 60% minimum threshold must be
satisfied by the bank.
*Filipino ownership – voting stocks owned by
Filipinos
Examples:
X bank has 1M voting stocks: 600,000 owned
by Filipinos and 400,000 owned by foreigners.
The bank complied with the 60% requirement.
X bank has 1M voting shares: 400,000 owned
by Filipinos; 400,000 owned by foreigners and
200,000 owned by Y Corporation.
Q: Does the 60% requirement satisfied?
A: IT DEPENDS. Depending on the citizenship
of Y Corporation. If the majority controlling
stockholders are Filipino thus Y Corporation is
a Filipino citizen hence the 60% is complied
with. If Y corporation is controlled by a
foreigners there is non-compliance of the 60%
requirement.
*The 40% requirement is applicable not only
to foreigners but also to individual Filipino
shareholders and domestic non-bank
corporation.
*If the corporation acquiring is a bank the
40% threshold is not applicable.
Examples:
600,000 owned by Filipinos; 400,000 owned
by foreigners
A – owned 500,000 shares
*A single Filipino stockholders can only own
upto 40% of the voting stock of the bank.
A Corporation which is not a banking
institution – 500,000 shares
*A domestic non-bank corporation can only
own upto 40% of the voting stock of the bank.
800,000 owned by Filipinos; 200,000 owned
by foreigners
In the 800,000 owned by Filipinos; 400,000 of
which is owned by A and the 200,000 is
owned by A Corporation
In A Corporation, A is a stockholder owning
50% of the controlling stock of A Corporation.
Q: Is this allowed?
A: NO. 50% of 200,000 is indirectly owned by
a Filipino individual, the 40% threshold is
violated.
*The 40% threshold includes both direct and
indirect ownership of shares of the bank.
Act Liberalizing Entry of Foreign Banks:
Sec. 2 of Republic Act No. 7721 provides
that: “The Monetary Board may authorize
foreign banks to operate in the Philippine
banking system through any of the following
modes of entry: (i) by acquiring, purchasing or
owning up to sixty percent (60%) of the voting
stock of an existing bank; (ii) by investing in
up to sixty percent (60%) of the voting stock of
a new banking subsidiary incorporated under
the laws of the Philippines; or (iii) by
establishing branches with full banking
authority: Provided, That a foreign bank may
avail itself of only one (1) mode of entry:
Provided, further, That a foreign bank or a
Philippine corporation may own up to a sixty
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percent (60%) of the voting stock of only one
(1) domestic bank or new banking subsidiary.”
Sec. 3 of Republic Act No. 7721 states that:
“In approving entry applications of foreign
banks, the Monetary Board shall: (i) ensure
geographic representation and
complementation; (ii) consider strategic trade
and investment relationships between the
Philippines and the country of incorporation of
the foreign bank; (iii) study the demonstrated
capacity, global reputation for financial
innovations and stability in a competitive
environment of the applicant; (iv) see to it that
reciprocity rights are enjoyed by Philippine
banks in the applicant's country; and (v)
consider willingness to fully share their
technology.
Only those among the top one hundred fifty
(150) foreign banks in the world or the top five
(5) banks in their country of origin as of the
date of application shall be allowed entry in
accordance with Section 2 (ii) and (iii) hereof.
In the exercise of this authority, the Monetary
Board shall adopt such measures as may be
necessary to: (i) ensure that at all times the
control of seventy percent (70%) of the
resources or assets of the entire banking
system is held by domestic banks which are at
least majority-owned by Filipinos; (ii) prevent
a dominant market position by one bank or
the concentration of economic power in one or
more financial institutions, or in corporations,
participations, partnerships, groups or
individuals with related interests; and (iii)
secure the listing in the Philippine Stock
Exchange of the shares of stocks of banking
corporations established under Section 2(i)
and (ii) of this Act: Provided, That said
banking corporations shall establish stock
option plans for their officers and employees
as the resources or assets of these
corporations may allow in the best business
judgment of their respective boards of
directors, pursuant to the Corporation Code of
the Philippines.
To qualify to establish a branch or a
subsidiary, the foreign bank applicant must
be widely-owned and publicly-listed in its
country of origin, unless the foreign bank
applicant is owned by the government of its
country of origin.”
General Rule: Foreigners must own only upto
40% of the voting shares of a bank.
Exception: Foreign bank can own upto 60%
of the voting shares of a bank.
Directors and Officers:
Composition:
Sec. 15 of the General Banking Law states
that: “The provisions of the Corporation Code
to the contrary notwithstanding, there shall be
at least five (5), and a maximum of fifteen (15)
members of the board or directors of a bank,
two (2) of whom shall be independent
directors. An "independent director" shall
mean a person other than an officer or
employee of the bank, its subsidiaries or
affiliates or related interests.
Non-Filipino citizens may become members
of the board of directors of a bank to the
extent of the foreign participation in the
equity of said bank.
The meetings of the board of directors may be
conducted through modern technologies such
as, but not limited to, teleconferencing and
video-conferencing.”
Sec. 19 of the General Banking Law states
that: “Except as otherwise provided in the
Rural Banks Act, 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 existing laws.”
General Rule: The Board of Directors is
composed of 5 to 15 members only.
Exception: In case of merger
Sec. 16 of the General Banking Law
provides that: “To maintain the quality of
bank management and afford better protection
to depositors and the public in general the
Monetary 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.
After due notice to the board of directors
of the bank, the Monetary Board may
disqualify, suspend or remove any bank
director or officer who commits or omits an act
which render him unfit for the position.
In 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, experience, education, training, and
competence.”
Justification: Police power
Reason: Banking institution is imbued with
public interest.
Regulations to maintain liquidity and
security:
1. Sec. 34 of the General Banking Law
provides that: “The Monetary Board
shall prescribe the minimum ratio
which the net worth of a bank must
bear to its total risk assets which may
include contingent accounts.
7
For purposes of this Section, the
Monetary Board may require such ratio
be determined on the basis of the net
worth and risk assets of a bank and
its subsidiaries, financial or
otherwise, as well as prescribe the
composition and the manner of
determining the net worth and total
risk assets of banks and their
subsidiaries: Provided, That in the
exercise of this authority, the Monetary
Board shall, to the extent feasible
conform to internationally accepted
standards, including those of the
Bank for International Settlements
(BIS), relating to risk-based capital
requirements: Provided further, That
it may alter or suspend compliance
with such ratio whenever necessary for
a maximum period of one (1) year:
Provided, finally, That such ratio
shall be applied uniformly to banks of
the same category. In case a bank does
not comply with the prescribed
minimum ratio, the Monetary Board
may limit or prohibit the distribution of
net profits by such bank and may
require that part or all of the net profits
be used to increase the capital
accounts of the bank until the
minimum requirement has been met
The Monetary Board may,
furthermore, restrict or prohibit the
acquisition of major assets and the
making of new investments by the
bank, with the exception of
purchases of readily marketable
evidences of indebtedness of the
Republic of the Philippines and of the
Bangko Sentral and any other
evidences of indebtedness or
obligations the servicing and
repayment of which are fully
guaranteed by the Republic of the
Philippines, until the minimum
required capital ratio has been
restored. In case of a bank merger
or consolidation, or when a bank is
under rehabilitation under a program
approved by the Bangko Sentral,
Monetary Board may temporarily relieve
the surviving bank, consolidated bank,
or constituent bank or corporations
under rehabilitation from full
compliance with the required capital
ratio under such conditions as it may
prescribe. Before the effectivity of
rules which the Monetary Board is
authorized to prescribe under this
provision, Section 22 of the General
Banking Act, as amended, Section 9 of
the Thrift Banks Act, and all pertinent
rules issued pursuant thereto, shall
continue to be in force.”
2. The law imposes limits on loans, credit
accommodations and guarantees that
may be extended by banks.
3. Sec. 36 of the General Banking Law
states that: “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
except with the written approval of the
majority of all the directors of the
bank, excluding the director
concerned: Provided, That 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. The 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 examining
department of the Bangko Sentral.
Dealings 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.
After 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 subject to the penal
provisions of the New Central Bank Act.
The Monetary Board may regulate the
amount of loans, credit
accommodations and guarantees that
may be extended, 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. However, the
outstanding loans, credit
accommodations and guarantees which
a bank may extend 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, That loans,
credit accommodations and
guarantees secured by assets
considered as non-risk by the
Monetary Board shall be excluded
8
 from such limit: Provided, further,
That loans, credit accommodations and
advances to officers in the form of
fringe benefits granted in accordance
with rules as may be prescribed by
the Monetary Board shall not be
subject to the individual limit.
The Monetary Board shall define the
term “related interests.”
The limit on loans, credit
accommodations and guarantees
prescribed herein shall not apply to
loans, credit accommodations and
guarantees extended by a cooperative
bank to its cooperative shareholders.”
4. The law imposes restrictions on the
value of collaterals on loans.
5. Sec. 41 of the General Banking Law
provides that: “The Monetary Board is
hereby authorized to issue such
regulations as it may deem necessary
with respect to unsecured loans or
other credit accommodations that may
be granted by banks.”
6. Sec. 43 of the General Banking Law
provides that: “The Monetary Board,
may, similarly in accordance with the
authority granted to it in Section 106 of
the New Central Bank Act, and
taking into account the requirements
of the economy for the effective
utilization of long-term funds,
prescribe the maturities, as well as
related terms and conditions for
various types of bank loans and
other credit accommodations. Any
change by the Board in the
maximum maturities, as well as related
terms and conditions for various types
of bank loans and other credit
accommodations. Any change by the
Board in the maximum maturities shall
apply only to loans and other credit
accommodations made after the date of
such action. The Monetary 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.”
7. Sec. 57 of the General Banking Law
states that: “No bank or quasi-bank
shall declare dividends, if at the time of
declaration:
57.1 Its clearing account with the
Bangko Sentral is overdrawn; or
57.2 It is deficient in the required
liquidity floor for government deposits
for five (5) or more consecutive days, or
57.3 It does not comply with the
liquidity standards/ratios prescribed by
the Bangko Sentral for purposes of
determining funds available for
dividend declaration; or
57.4 It has committed a major violation
as may be determined by the Bangko
Sentral.”
Other functions of the Bangko
Sentral:
A. Emergency Loan
Sec. 84 of the New Central Bank
Act states that: “In periods of
national and/or local emergency or
of imminent financial panic which
directly threaten monetary and
banking stability, the Monetary
Board may, by a vote of at least five
(5) of its members, authorize the
Bangko Sentral to grant
extraordinary loans or advances to
banking institutions secured by
assets as defined hereunder:
Provided, That while such loans or
advances are outstanding, the
debtor institution shall not, except
upon prior authorization by the
Monetary Board, expand the total
volume of its loans or investments.
The Monetary Board may, at its
discretion, likewise authorize the
Bangko Sentral to grant emergency
loans or advances to banking
institutions, even during normal
periods, for the purpose of assisting
a bank in a precarious financial
condition or under serious financial
pressures brought by unforeseen
events, or events which, though
foreseeable, could not be prevented
by the bank concerned: Provided,
however, That the Monetary Board
has ascertained that the bank is not
insolvent and has the assets defined
hereunder to secure the advances:
Provided, further, That a concurrent
vote of at least five (5) members of
the Monetary Board is obtained.
The amount of any emergency loan
or advance shall not exceed the sum
of fifty percent (50%) of total
deposits and deposit substitutes of
the banking institution and shall be
disbursed in two (2) or more
tranches. The amount of the first
tranche shall be limited to twenty-
five percent (25%) of the total
deposit and deposit substitutes of
the institution and shall be secured
by government securities to the
extent of their applicable loan values
and other unencumbered first class
collaterals which the Monetary
Board may approve: Provided, That
if as determined by the Monetary
9
Board, the circumstances
surrounding the emergency warrant
a loan or advance greater than the
amount provided hereinabove, the
amount of the first tranche may
exceed twenty-five percent (25%) of
the bank's total deposit and deposit
substitutes if the same is adequately
secured by applicable loan values of
government securities and
unencumbered first class collaterals
approved by the Monetary Board,
and the principal stockholders of
the institution furnish an acceptable
undertaking to indemnify and hold
harmless from suit a conservator
whose appointment the Monetary
Board may find necessary at any
time.
Prior to the release of the first
tranche, the banking institution
shall submit to the Bangko Sentral
a resolution of its board of directors
authorizing the Bangko Sentral to
evaluate other assets of the banking
institution certified by its external
auditor to be good and available for
collateral purposes should the
release of the subsequent tranche
be thereafter applied for.
The Monetary Board may, by a vote
of at least five (5) of its members,
authorize the release of a the Monetary Board and shall have
subsequent tranche on condition
that the principal stockholders of
the institution:
(a) furnish an acceptable
undertaking to indemnify and hold
harmless from suit a conservator
whose appointment the Monetary
Board may find necessary at any
time; and
(b) provide acceptable security
which, in the judgment of the
Monetary Board, would be adequate
to supplement, where necessary, the
assets tendered by the banking
institution to collateralize the
subsequent tranche.
In connection with the exercise of
these powers, the prohibitions in
Section 128 of this Act shall not
apply insofar as it refers to
acceptance as collateral of shares
and their acquisition as a result of
foreclosure proceedings, including
the exercise of voting rights
pertaining to said shares: Provided,
however, That should the Bangko
Sentral acquire any of the shares it
has accepted as collateral as a
result of foreclosure proceedings,
the Bangko Sentral shall dispose of
said shares by public bidding within
one (1) year from the date of
consolidation of title by the Bangko
Sentral.
Whenever a financial institution
incurs an overdraft in its account
with the Bangko Sentral, the same
shall be eliminated within the period
prescribed in Section 102 of this
Act.”
B. Appointment of Conservator
Sec. 29 of the New Central Bank
Act states that: “Whenever, on the
basis of a report submitted by the
appropriate supervising or
examining department, the
Monetary Board finds that a bank or
a quasi-bank is in a state of
continuing inability or unwillingness
to maintain a condition of liquidity
deemed adequate to protect the
interest of depositors and creditors,
the Monetary Board may appoint a
conservator with such powers as the
Monetary Board shall deem
necessary to take charge of the
assets, liabilities, and the
management thereof, reorganize the
management, collect all monies and
debts due said institution, and
exercise all powers necessary to
restore its viability. The conservator
shall report and be responsible to
the power to overrule or revoke the
actions of the previous management
and board of directors of the bank
or quasi-bank.
The conservator should be
competent and knowledgeable in
bank operations and management.
The conservatorship shall not
exceed one (1) year.
The conservator shall receive
remuneration to be fixed by the
Monetary Board in an amount not to
exceed two-thirds (2/3) of the salary
of the president of the institution in
one (1) year, payable in twelve (12)
equal monthly payments: Provided,
That, if at any time within one-year
period, the conservatorship is
terminated on the ground that the
institution can operate on its own,
the conservator shall receive the
balance of the remuneration which
he would have received up to the
end of the year; but if the
conservatorship is terminated on
other grounds, the conservator shall
not be entitled to such remaining
balance. The Monetary Board may
appoint a conservator connected
with the Bangko Sentral, in which
case he shall not be entitled to
10
 receive any remuneration or
emolument from the Bangko Sentral
during the conservatorship. The
expenses attendant to the
conservatorship shall be borne by
the bank or quasi-bank concerned.
The Monetary Board shall terminate
the conservatorship when it is
satisfied that the institution can
continue to operate on its own and
the conservatorship is no longer
necessary. The conservatorship
shall likewise be terminated should
the Monetary Board, on the basis of
the report of the conservator or of its
own findings, determine that the
continuance in business of the
institution would involve probable
loss to its depositors or creditors, in
which case the provisions of Section
30 shall apply.”
*Experiencing liquidity problems
only.
Powers of Conservator:
1. To take charge of the assets,
liabilities, and the management
thereof;
2. To reorganize the management of
the subject bank;
3. To collect all monies and debts
due said institutions; and
4. To exercise all powers necessary
to restore its viability
Except: Those already perfected
C. Appointment of Receiver
Sec. 30 of the New Central Bank
Act provides that: “Whenever, upon
report of the head of the supervising
or examining department, the
Monetary Board finds that a bank or
quasi-bank:
(a) is unable to pay its liabilities as
they become due in the ordinary
course of business: Provided, That
this shall not include inability to pay
caused by extraordinary demands
induced by financial panic in the
banking community;
(b) has insufficient realizable
assets, as determined by the Bangko
Sentral, to meet its liabilities; or
(c) cannot continue in business
without involving probable losses to
its depositors or creditors; or
(d) has willfully violated a cease and
desist order under Section 37 that
has become final, involving acts or
transactions which amount to fraud
or a dissipation of the assets of the
institution; in which cases, the
Monetary Board may summarily and
without need for prior hearing forbid
the institution from doing business
in the Philippines and designate the
Philippine Deposit Insurance
Corporation as receiver of the
banking institution.
For a quasi-bank, any person of
recognized competence in banking
or finance may be designed as
receiver.
The receiver shall immediately
gather and take charge of all the
assets and liabilities of the
institution, administer the same for
the benefit of its creditors, and
exercise the general powers of a
receiver under the Revised Rules of
Court but shall not, with the
exception of administrative
expenditures, pay or commit any act
that will involve the transfer or
disposition of any asset of the
institution: Provided, That the
receiver may deposit or place the
funds of the institution in non-
speculative investments. The
receiver shall determine as soon as
possible, but not later than ninety
(90) days from takeover, whether the
institution may be rehabilitated or
otherwise placed in such a condition
so that it may be permitted to
resume business with safety to its
depositors and creditors and the
general public: Provided, That any
determination for the resumption of
business of the institution shall be
subject to prior approval of the
Monetary Board.
If the receiver determines that the
institution cannot be rehabilitated
or permitted to resume business in
accordance with the next preceding
paragraph, the Monetary Board
shall notify in writing the board of
directors of its findings and direct
the receiver to proceed with the
liquidation of the institution. The
receiver shall:
(1) file ex parte with the proper
regional trial court, and without
requirement of prior notice or any
other action, a petition for
assistance in the liquidation of the
institution pursuant to a liquidation
plan adopted by the Philippine
Deposit Insurance Corporation for
general application to all closed
banks. In case of quasi-banks, the
liquidation plan shall be adopted by
the Monetary Board. Upon acquiring
jurisdiction, the court shall, upon
motion by the receiver after due
notice, adjudicate disputed claims
against the institution, assist the
enforcement of individual liabilities
of the stockholders, directors and
11
 officers, and decide on other issues
as may be material to implement the
liquidation plan adopted. The
receiver shall pay the cost of the
proceedings from the assets of the
institution.
(2) convert the assets of the
institutions to money, dispose of the
same to creditors and other parties,
for the purpose of paying the debts
of such institution in accordance
with the rules on concurrence and
preference of credit under the Civil
Code of the Philippines and he may,
in the name of the institution, and
with the assistance of counsel as he
may retain, institute such actions as
may be necessary to collect and
recover accounts and assets of, or
defend any action against, the
institution. The assets of an
institution under receivership or
liquidation shall be deemed in
custodia legis in the hands of the
receiver and shall, from the moment
the institution was placed under
such receivership or liquidation, be
exempt from any order of
garnishment, levy, attachment, or
execution.
The actions of the Monetary Board
taken under this section or under
Section 29 of this Act shall be final
and executory, and may not be
restrained or set aside by the court
except on petition for certiorari on
the ground that the action taken
was in excess of jurisdiction or with
such grave abuse of discretion as to
amount to lack or excess of
jurisdiction. The petition for
certiorari may only be filed by the
stockholders of record representing
the majority of the capital stock
within ten (10) days from receipt by
the board of directors of the
institution of the order directing
receivership, liquidation or
conservatorship. The designation of
a conservator under Section 29 of
this Act or the appointment of a
receiver under this section shall be
vested exclusively with the Monetary
Board. Furthermore, the designation
of a conservator is not a Section 30 shall apply.”
precondition to the designation of a
receiver.”
*There is a bank closure.
“Close Now, Hear Later” Scheme:
Sec. 29 of the New Central Bank Act states
that: “Whenever, on the basis of a report
submitted by the appropriate supervising or
examining department, the Monetary Board
finds that a bank or a quasi-bank is in a state
of continuing inability or unwillingness to
maintain a condition of liquidity deemed
adequate to protect the interest of depositors
and creditors, the Monetary Board may
appoint a conservator with such powers as the
Monetary Board shall deem necessary to take
charge of the assets, liabilities, and the
management thereof, reorganize the
management, collect all monies and debts due
said institution, and exercise all powers
necessary to restore its viability. The
conservator shall report and be responsible to
the Monetary Board and shall have the power
to overrule or revoke the actions of the
previous management and board of directors
of the bank or quasi-bank.
The conservator should be competent and
knowledgeable in bank operations and
management. The conservatorship shall not
exceed one (1) year.
The conservator shall receive remuneration to
be fixed by the Monetary Board in an amount
not to exceed two-thirds (2/3) of the salary of
the president of the institution in one (1) year,
payable in twelve (12) equal monthly
payments: Provided, That, if at any time
within one-year period, the conservatorship is
terminated on the ground that the institution
can operate on its own, the conservator shall
receive the balance of the remuneration which
he would have received up to the end of the
year; but if the conservatorship is terminated
on other grounds, the conservator shall not be
entitled to such remaining balance. The
Monetary Board may appoint a conservator
connected with the Bangko Sentral, in which
case he shall not be entitled to receive any
remuneration or emolument from the Bangko
Sentral during the conservatorship. The
expenses attendant to the conservatorship
shall be borne by the bank or quasi-bank
concerned.
The Monetary Board shall terminate the
conservatorship when it is satisfied that the
institution can continue to operate on its own
and the conservatorship is no longer
necessary. The conservatorship shall likewise
be terminated should the Monetary Board, on
the basis of the report of the conservator or of
its own findings, determine that the
continuance in business of the institution
would involve probable loss to its depositors or
creditors, in which case the provisions of
*No prior hearing is necessary in appointing a
receiver and in closing the bank. It is enough
that subsequent judicial review is provided
for. Indeed, to require such previous hearing
would not only be impractical but would tend
to defeat the very purpose of the law when it
invested the Monetary Board with such
authority.
12
Purpose: To avoid creation of panic from the
depositors or public.
Reason: The government has responsibility to
see to it that the person dealing with the bank
is protected.
Effects of receivership and liquidation:
1. Suspension of operation
2. The assets under receivership or
liquidation shall be deemed in custodia
legis in the hands of the receiver and
shall be exempt from garnishment, levy,
attachment or execution
3. Bank is not liable to pay interest on
deposits during the period of
suspension of operation
Reason: There is no source of income
4. Banks under liquidation retain their
legal personality
*The bank can sue and be sued but any
case should be initiated and prosecuted
through the liquidator.
5. There will be no preference even if the
claimant-depositor obtained a writ of
preliminary attachment.
Supervision of Banks:
Sec. 4 of the General Banking Law states
that: “The operations and activities of banks
shall be subject to supervision of the
Bangko Sentral. “ Supervision” shall include
the following:
4.1. The issuance of rules of, conduct or the
establishment standards of operation for
uniform application to all institutions or
functions 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;
4.2 The conduct of examination to
determine compliance with laws and
regulations if the circumstances so warrant as
determined by the
Monetary Board;
4.3 Overseeing to ascertain that laws and
regulations are complied with;
4.4 Regular investigation which shall not be
oftener than once a year from the last date
of examination to determine whether an
institution is conducting its business on a
safe or sound basis: Provided, That the
deficiencies/irregularities found by or
discovered by an audit shall be immediately
addressed;
4.5 Inquiring into the solvency and liquidity
of the institution; or
4.6 Enforcing prompt corrective action.
The Bangko Sentral shall also have
supervision over the operations of and
exercise regulatory powers over quasi-banks,
trust entities and other financial
institutions which under special laws are
subject to Bangko Sentral supervision.
For the purposes of this Act, “ quasi-
banks” shall refer to entities engaged in
the borrowing of funds through the
issuance, endorsement or assignment with
recourse or acceptance of deposit substitutes
as defined in Section 95 of Republic Act
No. 7653 (hereafter the “New Central Bank
Act”) for purposes of re-lending or purchasing
of receivables and other obligations.”
Money Function:
Sec. 50 of the New Central Bank Act states
that: “The Bangko Sentral shall have the sole
power and authority to issue currency, within
the territory of the Philippines. No other
person or entity, public or private, may put
into circulation notes, coins or any other
object or document which, in the opinion of
the Monetary Board, might circulate as
currency, nor reproduce or imitate the
facsimiles of Bangko Sentral notes without
prior authority from the Bangko Sentral.
The Monetary Board may issue such
regulations as it may deem advisable in order
to prevent the circulation of foreign currency
or of currency substitutes as well as to
prevent the reproduction of facsimiles of
Bangko Sentral notes.
The Bangko Sentral shall have the authority
to investigate, make arrests, conduct searches
and seizures in accordance with law, for the
purpose of maintaining the integrity of the
currency.
Violation of this provision or any regulation
issued by the Bangko Sentral pursuant
thereto shall constitute an offense punishable
by imprisonment of not less than five (5) years
but not more than ten (10) years. In case the
Revised Penal Code provides for a greater
penalty, then that penalty shall be imposed.”
Anti-Money Laundering Act:
Sec. 4.1 of Republic Act 9160 states that:
“Money laundering is a crime whereby the
proceeds of an unlawful activity AS HEREIN
DEFINED are transacted, thereby making
them appear to have originated from
legitimate sources. It is committed by the
following:
a) Any person knowing that any monetary
instrument or property represents, involves, or
relates to, the proceeds of any unlawful
activity, transacts or attempts to transact said
monetary instrument or property.
b) Any person knowing that any monetary
instrument or property involves the proceeds
of any unlawful activity, performs or fails to
perform any act as a result of which he
facilitates the offense of money laundering
referred to in paragraph (a) above.
c) Any person knowing that any monetary
instrument or property is required under this
13
Act to be disclosed and filed with the Anti-
Money Laundering
Council (AMLC), fails to do so.”
Definitions:
Covered Transaction is a transaction in cash
or other equivalent monetary instrument
involving total amount in excess of P500,000
within one banking day.
*P500,000 is the threshold/controlling
Suspicious Transaction are transactions,
regardless of amount, where any of the
following circumstances exists:
1. There is no underlying legal or trade
obligation, purpose or economic
justification;
2. The client is not properly identified;
3. The amount involved is not
commensurate with the business or
financial capacity of the client;
4. Taking into account all known
circumstances, it may be perceived that
the client’s transaction is structured in
order to avoid being the subject of
reporting requirements under the ACT;
5. Any circumstance relating to the
transaction which is observed to deviate
from the profile of the client and/or the
client’s past transactions with the
covered institution;
6. The transaction is in any way related to
an unlawful activity or any money
laundering activity or offense under this
ACT that is about to be, is being or has
been committed; or
7. Any transaction that is similar,
analogous or identical to any of the
foregoing.
Sec. 3.i. of Republic Act 9160 states that:
“Unlawful activity" refers to any act or
omission or series or combination thereof
involving or having relation, to the following:
(A) Kidnapping for ransom under Article 267
of Act No. 3815, otherwise known as the
Revised Penal Code, as amended; (14)
Kidnapping for ransom
(B) Sections 4, 5, 6, 8, 9, 10, 12,13, 14, 15
and 16 of Republic Act No.9165, otherwise
known as the COMPREHENSIVE Dangerous
Drugs Act of 2002;
(14) Importation of prohibited drugs;
(15) Sale of prohibited drugs;
(16) Administration of prohibited drugs;
(17) Delivery of prohibited drugs
(18) Distribution of prohibited drugs
(19) Transportation of prohibited drugs
(20) Maintenance of a Den, Dive or Resort for
prohibited users
(21) Manufacture of prohibited drugs
(22) Possession of prohibited drugs
(23) Use of prohibited drugs
(24) Cultivation of plants which are sources of
prohibited drugs
(25) Culture of plants which are sources of
prohibited drugs
(C) Section 3 paragraphs b, c, e, g, h and i of
Republic Act No. 3019, as amended, otherwise
known as the Anti-Graft and Corrupt
Practices Act;
(14) Directly or indirectly requesting or
receiving any gift, present, share, percentage
or benefit for himself or for any other person
in connection with any contract or transaction
between the Government and any party,
wherein the public officer in his official
capacity has to intervene under the law;
(15) Directly or indirectly requesting or
receiving any gift, present or other pecuniary
or material benefit, for himself or for another,
from any person for whom the public officer,
in any manner or capacity, has secured or
obtained, or will secure or obtain, any
government permit or license, in consideration
for the help given or to be given, without
prejudice to Section 13 of R.A. 3019;
(16) Causing any undue injury to any party,
including the government, or giving any
private party any unwarranted benefits,
advantage or preference in the discharge of his
official, administrative or judicial functions
through manifest partiality, evident bad faith
or gross inexcusable negligence;
(17) Entering, on behalf of the government,
into any contract or transaction manifestly
and grossly disadvantageous to the same,
whether or not the public officer profited or
will profit thereby;
(18) Directly or indirectly having financial or
pecuniary interest in any business contract or
transaction in connection with which he
intervenes or takes part in his official
capacity, or in which he is prohibited by the
Constitution or by any law from having any
interest;
(19) Directly or indirectly becoming interested,
for personal gain, or having material interest
in any transaction or act requiring the
approval of a board, panel or group of which
he is a member, and which exercise of
discretion in such approval, even if he votes
against the same or he does not participate in
the action of the board, committee, panel or
group.
(D) Plunder under Republic Act No. 7080, as
amended;
(20) Plunder through misappropriation,
conversion, misuse or malversation of public
funds or raids upon the public treasury;
(21) Plunder by receiving, directly or
indirectly, any commission, gift, share,
percentage, kickbacks or any other form of
pecuniary benefit from any person and/or
entity in connection with any government
contract or project or by reason of the office or
position of the public officer concerned;
(22) Plunder by the illegal or fraudulent
conveyance or disposition of assets belonging
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to the National Government or any of its
subdivisions, agencies, instrumentalities or
government-owned or controlled corporations
or their subsidiaries;
(23) Plunder by obtaining, receiving or
accepting, directly or indirectly, any shares of
stock, equity or any other form of interest or
participation including the promise of future
employment in any business enterprise or
undertaking;
(24) Plunder by establishing agricultural,
industrial or commercial monopolies or other
combinations and/or implementation of
decrees and orders intended to benefit
particular persons or special interests;
(25) Plunder by taking undue advantage of
official position, authority, relationship,
connection or influence to unjustly enrich
himself or themselves at the expense and to
the damage and prejudice of the Filipino
people and the Republic of the Philippines
(E) Robbery and extortion under Articles 294,
295, 296, 299, 300, 301 and 302 of the
Revised Penal Code, as amended;
(26) Robbery with violence or intimidation of
persons;
(27) Robbery with physical injuries, committed
in an uninhabited place and by a band, or
with use of firearms on a street, road or alley;
(28) Robbery in an uninhabited house or
public building or edifice devoted to worship.
(F) Jueteng and Masiao punished as illegal
gambling under Presidential Decree No. 1602;
(29) Jueteng;
(30) Masiao.
(G) Piracy on the high seas under the Revised
Penal Code, as amended and Presidential
Decree No. 532;
(31) Piracy on the high seas;
(32) Piracy in inland Philippine waters;
(33) Aiding and abetting pirates and brigands.
(H) Qualified theft under Article 310 of the
Revised Penal Code, as amended;
(34) Qualified theft.
(I) Swindling 'under Article 315 of the Revised
Penal Code, as amended;
(35) Estafa with unfaithfulness or abuse of
confidence by altering the substance, quality
or quantity of anything of value which the
offender shall deliver by virtue of an obligation
to do so, even though such obligation be
based on an immoral or illegal consideration;
(36) Estafa with unfaithfulness or abuse of
confidence by misappropriating or converting,
to the prejudice of another, money, goods or
any other personal property received by the
offender in trust or on commission, or for
administration, or under any other obligation
involving the duty to make delivery or to
return the same, even though such obligation
be totally or partially guaranteed by a bond; or
by denying having received such money,
goods, or other property;
(37) Estafa with unfaithfulness or abuse of
confidence by taking undue advantage of the
signature of the offended party in blank, and
by writing any document above such
signature in blank, to the prejudice of the
offended party or any third person;
(38) Estafa by using a fictitious name, or
falsely pretending to possess power, influence,
qualifications, property, credit, agency,
business or imaginary transactions, or by
means of other similar deceits;
(39) Estafa by altering the quality, fineness or
weight of anything pertaining to his art or
business;
(40) Estafa by pretending to have bribed any
government employee;
(41) Estafa by postdating a check, or issuing a
check in payment of an obligation when the
offender has no funds in the bank, or his
funds deposited therein were not sufficient to
cover the amount of the check;
(42) Estafa by inducing another, by means of
deceit, to sign any document;
(43) Estafa by resorting to some fraudulent
practice to ensure success in a gambling
game;
(44) Estafa by removing, concealing or
destroying, in whole or in part, any court
record, office files, document or any other
papers.
(J) Smuggling under Republic Act Nos. 455
and 1937;
(45) Fraudulent importation of any vehicle;
(46) Fraudulent exportation of any vehicle;
(47) Assisting in any fraudulent importation;
(48) Assisting in any fraudulent exportation;
(49) Receiving smuggled article after
fraudulent importation;
(50) Concealing smuggled article after
fraudulent importation;
(51) Buying smuggled article after fraudulent
importation;
(52) Selling smuggled article after fraudulent
importation;
(53) Transportation of smuggled article after
fraudulent importation;
(54) Fraudulent practices against customs
revenue.
(K) Violations under Republic Act No. 8792,
otherwise known as the Electronic Commerce
Act of 2000;
K.1. Hacking or cracking, which refers to:
(55) unauthorized access into or interference
in a computer system/server or information
and communication system; or
(56) any access in order to corrupt, alter,
steal, or destroy using a computer or other
similar information and communication
devices, without the knowledge and consent of
the owner of the computer or information and
communications system, including
(57) the introduction of computer viruses and
the like, resulting in the corruption,
destruction, alteration, theft or loss of
15
electronic data messages or electronic
document;
K.2. Piracy, which refers to:
(58) the unauthorized copying, reproduction,
(59) the unauthorized dissemination,
distribution,
(60) the unauthorized importation,
(61) the unauthorized use, removal, alteration,
substitution, modification,
(62) the unauthorized storage, uploading,
downloading, communication, making
available to the public, or
(63) the unauthorized broadcasting, of
protected material, electronic signature or
copyrighted works including legally protected
sound recordings or phonograms or
information material on protected works,
through the use of telecommunication
networks, such but not limited to, the
internet, in a manner that infringes
intellectual property rights;
K.3. Violations of the Consumer Act or
Republic Act No. 7394 and other relevant or
pertinent laws through transactions covered
by or using electronic data messages or
electronic documents:
(64) Sale of any consumer product that is not
in conformity with standards under the
Consumer Act;
(65) Sale of any product that has been banned
by a rule under the Consumer Act; ,
(66) Sale of any adulterated or mislabeled
product using electronic documents;
(67) Adulteration or misbranding of any
consumer product;
(68) Forging, counterfeiting or simulating any
mark, stamp, tag, label or other identification
device;
(69) Revealing trade secrets;
(70) Alteration or removal of the labeling of
any drug or device held for sale;
(71) Sale of any drug or device not registered
in accordance with the provisions of the E-
Commerce Act;
(72) Sale of any drug or device by any person
not licensed in accordance with the provisions
of the E-Commerce Act;
(73) Sale of any drug or device beyond its
expiration date;
(74) Introduction into commerce of any
mislabeled or banned hazardous substance;
(75) Alteration or removal of the labeling of a
hazardous substance;
(76) Deceptive sales acts and practices;
(77) Unfair or unconscionable sales acts and
practices;
(78) Fraudulent practices relative to weights
and measures;
(79) False representations in advertisements
as the existence of a warranty or guarantee;
(80) Violation of price tag requirements;
(81) Mislabeling consumer products;
(82) False, deceptive or misleading
advertisements;
(83) Violation of required disclosures on
consumer loans;
(84) Other violations of the provisions of the E-
Commerce Act;
(L) Hijacking and other violations under
Republic Act No. 6235; destructive arson and
murder, as defined under the Revised Penal
Code, as amended, including those
perpetrated by terrorists against non-
combatant persons and similar targets;
(85) Hijacking;
(86) Destructive arson;
(87) Murder;
(88) Hijacking, destructive arson or murder
perpetrated by terrorists against non-
combatant persons and similar targets;
(M) Fraudulent practices and other violations
under Republic Act No. 8799, otherwise
known as the Securities Regulation Code of
2000;
(89) Sale, offer or distribution of securities
within the Philippines without a registration
statement duly filed with and approved by the
SEC;
(90) Sale or offer to the public of any pre-need
plan not in accordance with the rules and
regulations which the SEC shall prescribe;
(91) Violation of reportorial requirements
imposed upon issuers of securities;
(92) Manipulation of security prices by
creating a false or misleading appearance of
active trading in any listed security traded in
an Exchange or any other trading market;
(93) Manipulation of security prices by
effecting, alone or with others, a series of
transactions in securities that raises their
prices to induce the purchase of a security,
whether of the same or different class, of the
same issuer or of a controlling, controlled or
commonly controlled company by others;
(94) Manipulation of security prices by
effecting, alone or with others, series of
transactions in securities that depresses their
price to induce the sale of a security, whether
of the same or different class, of the same
issuer or of a controlling, controlled or
commonly controlled company by others;
(95) Manipulation of security prices by
effecting, alone or with others, a series of
transactions in securities that creates active
trading to induce such a purchase or sale
though manipulative devices such as marking
the close, painting the tape, squeezing the
float, hype and dump, boiler room operations
and such other similar devices;
(96) Manipulation of security prices by
circulating or disseminating' information that
the price of any security listed in an Exchange
will or is likely to rise or fall because of
manipulative market operations of anyone or
more persons conducted for the purpose of
raising or depressing the price of the security
for the purpose of inducing the purchase or
sale of such security;
16
(97) Manipulation of security prices by making
false or misleading statements with respect to
any material fact; which he knew or had
reasonable ground to believe was so false and
misleading, for the purpose of inducing the
purchase or sale of any security listed or
traded in an Exchange;
(98) Manipulation of security prices by
effecting, alone or with others, any series of
transactions for the purchase and/or sale of
any security traded in an Exchange for the
purpose of pegging, fixing or stabilizing the
price of such security, unless otherwise
allowed by the Securities Regulation Code or
by the rules of the SEC;
(99) Sale or purchase of any security using
any manipulative deceptive device or
contrivance;
(100) Execution of short sales or stop-loss
order in connection with the purchase or sale
of any security not in accordance with such
rules and regulations as the SEC may
prescribe as necessary and appropriate in the
public interest or the protection of the
investors;
(101) Employment of any device, scheme or
artifice to defraud in connection with the
purchase and sale of any securities;
(102) Obtaining money or property in
connection with the purchase and sale of any
security by means of any untrue statement of
a material fact or any omission to state a
material fact necessary in order to make the
statements made, in the light of the
circumstances under which they were made,
not misleading;
(103) Engaging in any act, transaction,
practice or course of action in the sale and
purchase of any security which operates or
would operate as a fraud or deceit upon any
person;
(104) Insider trading;
(105) Engaging in the business of buying and
selling securities in the Philippines as a broker
or dealer, or acting as a salesman, or an
associated person of any broker or dealer
without any registration from the
Commission;
(106) Employment by a broker or dealer of any
salesman or associated person or by an issuer
of any salesman, not registered with the
SEC; ,
(107) Effecting any transaction in any
security, or reporting such transaction, in an
Exchange or using the facility of an Exchange
which is not registered with the SEC;
(108) Making use of the facility of a clearing
agency which is not registered with the SEC;
(109) Violations of margin requirements;
(110) Violations on the restrictions on
borrowings by members, brokers and dealers;
(111) Aiding and Abetting in any violations of
the Securities Regulation Code;
(112) Hindering, obstructing or delaying the
filing of any document required under the
Securities Regulation Code or the rules and
regulations of the SEC;
(113) Violations of any of the provisions of the
implementing rules and regulations of the
SEC;
(114) Any other violations of any of the
provisions of the Securities Regulation Code.
(N) Felonies or offenses of a similar nature to
the afore-mentioned unlawful activities that
are punishable under the penal laws of other
countries.
In determining whether or not a felony or
offense punishable under the penal laws of
other countries, is "of a similar nature", as to
constitute the same as an unlawful activity
under the AMLA, the nomenclature of said
felony or offense need not be identical to any
of the predicate crimes listed under Rule 3.i.”
Safe Harbor Provisions:
Sec. 9.3.e of Republic Act 9160 states that:
“No administrative, criminal or civil
proceedings, shall lie against any person for
having made a covered transaction report or a
suspicious transaction report in the regular
performance of his duties and in good faith,
whether or not such reporting results in any
criminal prosecution under this Act or any
other Philippine law.”
Truth in Lending Act:
Sec. 4 of Republic Act No. 3765 states that:
“Any creditor shall furnish to each person to
whom credit is extended, prior to the
consummation of the transaction, a clear
statement in writing setting forth, to the
extent applicable and in accordance with rules
and regulations prescribed by the Board, the
following information:
(1) the cash price or delivered price of the
property or service to be acquired;
(2) the amounts, if any, to be credited as down
payment and/or trade-in;
(3) the difference between the amounts set
forth under clauses (1) and (2);
(4) the charges, individually itemized, which
are paid or to be paid by such person in
connection with the transaction but which are
not incident to the extension of credit;
(5) the total amount to be financed;
(6) the finance charge expressed in terms of
pesos and centavos; and
(7) the percentage that the finance bears to
the total amount to be financed expressed as a
simple annual rate on the outstanding unpaid
balance of the obligation.”
*Failure to comply with the Truth in Lending
Act, the contract of loan is still valid however,
the bank cannot recover finance charges.
Purpose: To avoid hidden charges; to know
the actual amount borrowed.
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