FIFTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
) 
) 
) 
SENATE 
/ 
S.B. No. ;2128 
Introduced by Senator EDGARDO J. ANGARA 
EXPLANATORY NOTE 
The economic downturn that emerged in 2008 and the mayhem it has brought 
upon the world will not be soon forgotten. Dubbed as the worst crisis since the Great 
Depression, it started with the disastrous collapse of the United States housing market, 
which exposed the way banks and other lenders dealt with risks. The crisis created a ripple 
of fear and anxiety throughout global financial markets and severely undermined the 
banking system of many countries. From the United States to Europe and Asia, banks 
struggled to remain afloat, necessitating the intervention of and aid from their respective 
governments. 
The unprecedented bank closures in the United States demonstrated that bank 
regulation does not stop at merely keeping banking institutions alive and healthy. To be 
responsive and thorough, bank regulation mllst likewise deal with the systematic and 
efficient process for handling banking institutions when they fail. Both the process and the 
regulatory agencies must ensure the least disruption to the financial system, the 
preservation of the public's confide\lce in the banking industry, and the protection of the 
bank's creditors, most especially its depositors. 
The Philippines has long needed to update its rules for the liquidation of banks. 
This need has now become more pronounced with the recent passage into law of the 
Financial Rehabilitation and Insolvency Act (FRIA), which explicitly excludes in its 
application the liquidation of banking institutions. The legal basis for the current bank 
liquidation process is found in a number of different laws such as the New Central Bank 
Act, the General Banking Law of 2000, the Rules of Court, The PDIC Charter, and 
decisions of the Supreme Court. The lack of a single comprehensive law to govern bank 
liquidation has resulted in an often cumbersome and impracticable process for all parties 
concerned. 
The proposed bill, entitled The Closed Bank Liquidation Act (CBLA), seeks to 
establish a more functional and improved framework for the liquidation and winding-up of 
the affairs of banking institutions that fail. It builds on a wealth of [insights based on the 1 
experience and difficulties perennially encountered under the current practice as well as the 
positive examples of other countries. The salient points of the proposed bill are as follows: 


... 
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Seamless Transition. 
The CBLA seeks to remove the mandatory 90-day 
receivership period prior to liquidation prescribed under Section 30 of the New 
Central Bank Act to allow for a seamless transition from closure to liquidation. 
Experience has shown that rehabilitation is no longer feasible or economically 
viable after the Monetary Board has closed a bank and the receivership period 
required by current laws merely delays the inevitable. Prudence dictates that 
any action to rehabilitate the bank should be conducted and exhausted prior to 
closure during the period of the Prompt Corrective Action (PCA) phase with the 
Bangko Sentral ng Pilipinas. The delay in the commencement of the liquidation 
process on account of the 90-day receivership period simply adds to the cost of 
liquidation and even contributes to the diminution in value of the assets of the 
closed bank which are restricted in the hands of the receiver during said period. 
• 
Alternative Modes of Liquidation. The CBLA seeks the grant of authority to 
the statutory liquidator of closed banks, the Philippine Deposit Insurance 
Corporation (PDIC). to implement alternative bank liquidation methods to 
facilitate the exit of closed banks. 
Apart from the conventional mode of 
liquidation under current laws, two other modes of liquidation are being 
proposed: the Purchase and Assumption (P&A), and Bridge Banking. A P&A 
transaction involves the entry of a third party acquirer who will purchase some 
or all of the assets, and assume some or all of the liabilities, ofa closed bank. In 
Bridge Banking, a temporary bank (the bridge bank) will be set up to continue 
the critical banking functions of the failed bank without causing panic among 
its depositors and creditors, thereby preserving its franchise value until a final 
resolution of the bank is reached. Both the P&A and the Bridge Banking 
liquidation methods are widely used in other jurisdictions and are deemed to be 
less costly for the government in dealing with bank failures. More importantly, 
compared to existing procedures, the alternative methods are designed to be 
less disruptive to the financial system, thereby maintaining stability and 
preserving confidence in the banking industry. 
• 
Enhanced Liquidation Process. The CBLA likewise proposes the codification 
into law of specific policies and practices that address operational and practical 
concerns of the Liquidator arising from the actual liquidation of closed banks. 
These inclUde the following: 
o Clear procedures for the takeover of closed banks and for the filing of 
the Petition for Assistance in Liquidation (PAL) in order to prevent any 
delay in takeover which often gives opportunity for records tampering, 
destruction of bank documents, or illegal asset disposal by the bank's 
personnel; 
o Unequivocal termination of the bank's corporate existence as well as the 
powers and functions of its stockholders, directors, and officers upon the 
bank's closure. Consistent with international best practices, this proposal 
will pave the way for the Liquidator to promptly dissolve the closed 
bank and adopt the most viable liquidation method without being 
subjected to delays caused by uncooperative or conflicting factions of 
stockholders, directors, and officers; 
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o Explicit authority of the Liquidator to determine the liquidation price of 
the closed bank's assets based on generally-accepted valuation 
principles 
and 
internationally-accepted 
valuation 
standards 
and 
practices. 
Through such authority, the Liquidator would be able to 
attract buyers or acquirers and quickly dispose of the closed bank's 
assets even before their values diminish or before their maintenance 
result in additional costs of liquidation; 
o Explicit authority of the Liquidator to avail of various modes of 
disposing real and personal properties of closed banks in order to 
maximize the conversion of the closed bank's properties into cash for 
payment of its obligations; and 
o Adoption of Alternative Dispute Resolution (ADR) to expedite 
resolution of cases for or against the closed bank and lessen the litigation 
expenditures of the closed bank. 
• 
Winding-Up Phase. The CBLA prescribes a one-year period within which the 
closed bank's creditors and stockholders are paid their claims against the bank. 
The one-year period shall be reckoned from the publication of the decision or 
order of the final distribution of the assets of the closed bank. If there are no 
claimants after the winding-lip phase, unclaimed assets shall be escheated in 
favor of the government. 
Thus, the CBLA is both an evolution and an innovation of the existing liquidation 
process for closed banks. It is founded not only on legal but also practical considerations in 
order to respond to the operational reality of liquidating and winding-up the affairs of 
closed banks. It seeks the protection' of the closed bank's depositors and creditors and the 
maximization of the liquidation process to the end that most, if not all, ofthe obligations of 
the closed bank are fully settled. Above all, the CBLA emphasizes the stability of the 
financial system and the preservation of the public'S trust and confidence in the banking 
industry by putting in place a quick, efficient, and cost-effective bank liquidation process. 
For many countries, including the Philippines, the global financial crisis has offered 
an opportunity to initiate the review of the existing financial and regulatory landscape. 
Identifying the gaps and weaknesses in the financial system and strengthening the will and 
ability of the regulatory agencies to perform their functions have resulted in regulatory 
reforms through legislative action. The CBLA is another crucial step in this direction. By 
modernizing and consolidating under a single law the rules and procedures for bank 
liquidation, we will contribute greatly to the security and stability of our banking system. 
Hence, the passage ofthis bill is earnestly recommended. 
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3 
FIFTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
) 
) 
) 
SENATE 
S.B.No. 2128 
Introduced by Senator EDGARDO J. ANGARA 
AN ACT 
i 0 
,Jl.J'L Tf 
/\'\ 1 :7. £\ 
PROVIDING FOR THE TAKEOVER, LIQUIDATION AND WINDING UP OF A 
CLOSED BANKING INSTITUTION 
Be it enacted in the Senate and House of Representatives of the Philippines in the 
Congress assembled: 
CHAPTER I 
GENERAL PROVISIONS 
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Section 1. Title and Coverage. - This Act shall be known as the "Closed Bank 
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Liquidation Act of 2010." 
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Section 2. Declaration of Policy. - It is the policy of the State to promote the 
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efficient and orderly liquidation of the assets, and the settlement of the obligations, of 
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banks which have been ordered closed by the Monetary Board. In so doing, the State shall 
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recognize creditor rights, respect the priority of claims, and ensure equitable treatment of 
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creditors who are similarly situated. 
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Section 3. Definition of Terms. - As used in this Act, the term: 
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( a) "Bank" shall refer to an entity engaged in the lending of funds obtained in the 
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form of deposits. This shall include commercial banks, savings banks, mortgage 
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banks, rural banks, development banks, cooperative banks, stock savings and 
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loan associations, branches in the Philippines of foreign banks, and all other 
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corporations authorized by the Bangko Sentral ng Pilipinas (BSP) to perform 
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banking functions in the Philippines. 
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(b) "Alternative Dispute Resolution /I means any process or procedure used to 
resolve a dispute or controversy, other than by adjudication of a presiding judge 
of a court or an officer of a government agency in which a neutral third party 
participates to assist in the resolution of issues, which includes arbitration, 
mediation, conciliation, early neutral evaluation, mini-trial, or any combination 
thereof; 
(c) "Claim" shall refer to any claim or demand of whatever nature or character 
against the closed bank or its property, whether for money or otherwise, 
liquidated or unliquidated, fixed or contingent, matured or unmatured, disputed 
or undisputed. Creditors or third parties are not prohibited from filing cases 
directly against the directors and officers acting in their personal capacities. 
(d) "Liquidation" shall refer ,to the proceedings under this Act. 
(e) "Liquidation Court" shall refer to the Regional Trial Court (RTC) which has 
acquired jurisdiction over the Petition for Assistance in the liquidation of a 
closed bank. 
(f) "Payout" shall refer to the payment of valid claims for insured deposits. 
(g) "Petition for Assistance in the Liquidation of a Closed Bank" (PAL) shall refer 
to the petition filed by the Liquidator with the Regional Trial Court (RTC) in 
accordance with Section IS of this Act. 
(h) "Principal Obligation" shall refer to the outstanding obligation including 
interest as of date of closure of the bank as validated by the Liquidator. 
(i) "Project of Distribution" (POD) shall refer to the plan of distribution of the 
assets of a closed bank as of the cut-off date of the Statement of Condition of 
the closed bank, in accordance with the Rules on Concurrence and Preference 
of Credits. This plan specifies in detail the total amount of assets available for 
distribution, and the amount and kind of payment for the settlement of the 
liabilities of the closed bank. 
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A POD may be partial when it pertains to the distribution of a portion or some 
of the assets of the closed bank, or final, when it pertains to the distribution of 
all its assets. 
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(j) "Real and Other Properties Acquired" (ROPA) shall refer to real and other 
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properties acquired by a bank judicially or extra-judicially in the settlement of 
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loans and/or acquired for other reasons. 
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(k) "Records" shall include all documents, titles, papers and electronic data of the 
closed bank, including those pertaining to deposit accounts of and with the 
closed bank, and its assets, transactions and corporate affairs. 
(I) "Residual Assets" shall refer to the remaining assets of the closed bank which 
shall be turned-over to the stockholders of record, after full payment or 
distribution of the assets of the closed bank for the settlement of valid principal 
obligations and surplus claims of the creditors. 
(m) "Statement of Affairs" (SOA) shall refer to a report of financial condition at a 
given date, showing the: 1) estimated realizable value of assets; 2) classification 
of credits; and 3) total estimated liabilities to be settled. 
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(n) "Surplus Claim" shall refer to the remaining assets of a closed bank after 
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payment in full of the validated principal claims of the creditors which are 
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outstanding as of closure date of the bank, before any distribution can be made 
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to the stockholders. 
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(0) "Takeover" shall refer to the act of physically taking possession and control of 
a closed bank for purposes of liquidation. 
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(p) "Winding Up Period" shall refer to the period after the finality of the order of 
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the Liquidation Court approving the final POD as provided in Chapter VIII of 
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this Act. 
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Section 4. Bank Closure and Liquidation. -
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(a) The authority to forbid a bank from doing business in the Philippines and direct 
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its liquidation under this Act is vested exclusively with the Monetary Board, 
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consistent with existing laws. 
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(b) Banking is a public ttust. As such, the closure of a bank is an exercise of police 
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power of the State. 
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(c) The actions of the Monetary Board taken under this Act shall be final and 
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executory, and may not be restrained or set aside except on petition for 
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certiorari filed with the Court of Appeals on the ground and upon a finding 
• 
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after due hearing that the action taken was in excess of jurisdiction or with such 
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grave abuse of discretion as to amount to lack or excess of jurisdiction. The 
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petition for certiorari may only be filed by the stockholders of record 
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representing the majority of the capital stock within ten (10) days from receipt 
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by the board of directors of the bank of the resolution or order directing the 
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closure, Takeover and Liquidation of the bank. 
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CHAPTER II 
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APPOINTMENT OF A BANK LIQUIDATOR AND MODES OF LIQUIDATION 
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Section 5. Appointment of a Bank Liquidator. -
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(a) Whenever a bank is ordered closed by the Monetary Board, the latter shall 
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designate the Philippine Deposit Insurance Corporation (PDIC) as Liquidator 
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and direct it to Takeover and proceed with the Liquidation of said closed bank. 
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Notwithstanding any provision of law to the contrary, the following clause in 
Section 30 of Republic Act No. 7653, as amended, shall not be applicable to 
banks: 
"The receiver shall determine, as soon as possible, but not 
later than ninety (90) days from take-over, whether the 
institution may be rehabilitated or otherwise placed in such a 
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condition so iliat 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." 
(b) The Monetary Board shall send to the Board of Directors of the closed bank a 
copy of the Monetary Board resolution or order placing the bank under 
Liquidation. The ten (1 ~)-day period within which the stockholders of record 
representing the majority of the capital stock may file ilie petition for certiorari 
referred to under Section 4 ( c) of this Act shall be reckoned from receipt of the 
MonetaTY BOaTd resolution or order. 
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Section 6. Modes of Liquidation. - Whenever a bank is ordered closed by the 
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Monetary BOaTd, the Liquidator is authorized to adopt any or a combination of the 
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following modes of liquidation: 
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(a) Conventional Liquidation 
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(b) Purchase of Assets and Assumption of Liabilities 
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(c) Bridge Banking 
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In determining which mode of liquidation is appropriate, the PDIC, is authorized to 
• 
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conduct, through a special examination of the bank in accordance with Section 8 of 
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Republic Act No. 3591, as amended, a due diligence audit on such bank. Notwithstanding 
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the provisions of Republic Act 1405, as amended, Republic Act 6426, as amended, 
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Republic Act 8791, and other laws, this audit shall include the examination and audit of the 
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deposit accounts in the bank and/or records to establish a deposit profile of the bank as to 
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the number of deposit accounts and total insured deposits: Provided, that the information 
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on individual accounts obtained through such examination or audit shall not be disclosed 
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or released to any third party except upon order of the court. 
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CHAPTER III 
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SERVICE OF NOTICE OF CLOSURE AND TAKEOVER ACTIVITIES 
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Section 7. Service of Notice of Closure. - Upon receipt of the Monetary Board 
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resolution referred to in Section 5, the Liquidator shall serve a notice of closure to the 
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highest-ranking officer of the bank present in the bank premises, or in the absence of such 
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officer, post the notice of closure in the bank premises. Thereafter, the Liquidator shall 
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Takeover the bank and exercise the powers of the Liquidator as provided in this Act. 
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Section 8. Authority to Force Open. - The Liquidator shall have authority to use 
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reasonable force, including the autHority to force open the premises of the bank, and 
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exercise such acts necessary to take actual physical possession and custody of the bank and 
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all its assets, records, documents, and take charge of its affairs provided the notice 
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requirement under Section 7 of this Act has been complied with. 
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Section 9. Obligations of Directors, Officers, Employees or Agents of the Closed 
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Bank. - Upon service of the notice of closure to the bank as provided in Section 7 of this 
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Act, all directors, officers, employees or agents of the closed bank shall have the duty to 
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immediately account for, surrender or turn over to the Liquidator, and provide information 
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relative to, the assets, records, documents, and affairs of the closed bank in their possession 
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or custody. 
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Section 10. Mandatory Assistance of Local Government and the Law 
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Enforcement Agencies. - When the circumstances so warrant, the local government unit 
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concerned and law enforcement agencies shall provide mandatory assistance to the 
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Liquidator during the service of notice of closure and actual Takeover operations to ensure 
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the security and safety of the personnel of the Liquidator and the orderly conduct thereof. 
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In case of the absence of bank employees and officers, at least one representative of 
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the local government unit concerned shall act as witness to the inventory taking of the 
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assets, records, and documents of the bank. 
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CHAPTER IV 
CONVENTIONAL LIQUIDATION 
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Section 11. Authority of the Liquidator. - The Liquidator is empowered to: 
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(a) Represent and act for and in behalf of the closed bank; 
(b) Gather and take charge of all the assets which shall include the bank license or 
franchise, records, documents, and affairs of the closed bank, and administer 
the same for the benefit of its creditors; 
(c) Collect loans and other claims of the closed bank, and for this purpose, modify, 
compromise or restructure the terms and conditions of such loans or claims as 
may be deemed advantageous to the interest of the creditors and claimants of 
the closed bank; 
(d) Convert the assets of the closed bank to money, as far as practicable; 
(e) Appoint and hire persons or entities to perform powers and functions of the 
Liquidator or assist in the performance thereof; 
(f) Bring suits to enforce liabilities of the directors, officers, employees, agents of 
the closed banlc and other entities related or connected to the closed bank or to 
collect, recover, and preserve all assets, including assets over which the bank 
has equitable interest; 
(g) Hire or retain private counsel as may be necessary; 
(h) Pay accrued utilities, rentals and salaries of retained personnel of the closed 
bank, for a period not exceeding three (3) months, from available funds of the 
closed bank and provided that these are essential to the Takeover operations; 
(i) Borrow or obtain a loan, or mortgage, pledge or encumber any asset of the 
closed bank, when necessary to preserve or prevent dissipation of the assets, or 
to redeem foreclosed assets of the closed banlc, or to minimize losses to the 
depositors and creditors; 
(j) Distribute the available assets of the closed bank, in cash or in kind, to its 
creditors in accordance with the provisions of the Civil Code on Concurrence 
and Preference of Credits; 
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(k) Dispose records of the closed bank that are no longer needed in the Liquidation, 
notwithstanding the laws on archival period and disposal of records; 
(1) Reduce the interest rate to a reasonable rate if the stipulated interest on deposits 
is unusually high compared with the prevailing applicable interest rate; 
Provided, That, any modification or reduction shall apply to earned and unpaid 
interest; 
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(m)Adopt modes ofliquidation as provided in this Act; 
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(n) Utilize revenues and earnings realized by the Liquidator to pay for reasonable 
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costs, fees and expenses in the liquidation of the closed bank, including 
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administrative expenditures; and 
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(0) Exercise such other powers as are necessary for the effective discharge of the 
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duties of the Liquidator. 
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Section 12. Liquidation Expenses. - Before any distribution of the assets of the 
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closed bank is undertaken in accordance with the preference established by law, the 
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Liquidator shaJl periodically charge against said assets reasonable liquidation expenses, 
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including administrative expenditures, incurred by the Liquidator as part of the cost of 
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liquidation proceedings and collect payment therefor from available assets. 
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Section 13. Immunity of Liquidator. - The Liquidator, its officers and agents, and 
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aJl persons employed by it shall not be subject to any action, claim or demand in 
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connection with any act done or omitted to be done by them in good faith in connection 
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with the exercise of their powers and functions under this Act or other actions duly 
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approved by the court. 
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Section 14. Effect of Placement of a Bank under Liquidation. -
(a) On the corporate franchise 
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Except for purposes of Liquidation and Winding Up as provided in this Act, 
the corporate existence of a bank shall be deemed terminated upon its closure 
by the Monetary Board. 
(b) On the powers and functions of its Directors, Officers and Stockholders. 
The powers, functions and duties, as well as the allowances, remuneration and 
perquisites of the directors, officers, and stockholders of such bank are ipso 
facto terminated. As such, the directors, officers, and stockholders shall be 
barred from interfering in any way with the assets, records, and affairs of the 
bank. 
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(c) On the assets ofthe closed bank. 
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From the time the closed bank is placed under liquidation, all assets of the 
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closed bank shall not be subject to attachment, garnishment, execution, levy or 
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any other similar order, nor shaH any involuntary lien attach to the property of 
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the closed bank. Any judge, officer of the court, or any person who shall issue, 
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order, process or cause the issuance or implementation of the writ of 
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garnishment, levy, attachment or execution shall be liable under Section 21 
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Republic Act No. 3591, as amended. 
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(d) On labor relations. 
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Notwithstanding the provisions of the Labor Code, the employer-employee 
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relationship between the closed ban1e and its employees shall be deemed 
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terminated upon service of the notice of closure in accordance with this Act. 
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Payment of separation payor benefits shall be made from available assets of 
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the ban1e, pursuant to a Project of Distribution of assets approved by the 
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Liquidation Court. 
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(e) Contractual obligations 
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The closed bank shall honor all contractual obligations that are: 1) validly 
entered into, and 2) which the closed bank may still be capable of performing. 
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Nothing contained herein shall prevent the Liquidator from canceling, 
terminating, rescinding or repUdiating any contract of the closed bank for any 
ground provided by law. 
Cf) 
Liability for penalties and surcharges for late payment and non-payment of 
taxes 
From the time of closure, the closed bank shall not be liable for the payment of 
penalties and surcharges arising from the Jate payment or nonpayment of real 
property tax, capital gains tax, transfer tax and similar charges. 
(g) Bank charges and fees on services 
The Liquidator, in behalf of the closed bank, may continue to impose the usual 
bank charges and fees for services rendered after bank closure, such as, but not 
limited to, the execution of pertinent deeds and certifications. 
(h) Cases pending for or against the closed bank 
Cases pending for or against the closed bank in any court or quasi-judicial 
body shall, upon motion of the Liquidator, be suspended and referred to 
Alternative Dispute Resolution; Provided, That: this shall not apply to cases 
pending before the Supreme Court. The case shall be referred back to the court 
or quasi-judicial body for further proceedings upon termination of Alternative 
Dispute Resolution. 
The payment of docket, filing fees, and other fees required in the institution of 
a case before the judicial or quasi-judicial bodies shall be deferred and shall 
constitute as a lien on any recovery. 
Section 15. Petition for Assistance in the Liquidation of a Closed Balik. -
(a) Filing of the Petition 
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Within sixty (60) days upon receipt of resolution of the Monetary Board placing a 
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bank under liquidation, the Liquidator shall file ex parte a Petition for Assistance in the 
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Liquidation (PAL) of a bank with the Regional Trial Court (RTC) where the head office of 
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the closed bank or the head office of the PDIC is located, at the discretion of the 
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Liquidator, pursuant to a Master Liquidation Plan (MLP) adopted by PDIC for general 
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application to all closed banks. 
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(b) Posting/Publication of the Order setting the case for initial hearing 
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Upon receipt of the Petition, an order may be issued by the Liquidation Court: 
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1) Stating that the petition is sufficient in form and substance; 
2) Setting the date and time ofthe initial hearing of the petition; 
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a. Ordering the Liquidator to cause the posting in three (3) public 
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places and a one-time publication in a newspaper of general 
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circulation of the order of the Liquidation Court setting the 
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petition for initial hearing; and ordering the public or those 
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whose interest may be adversely affected to file an opposition to 
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the petition. Otherwise, they shall be barred from questioning or 
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opposing the petition. 
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b. Directing those who may have a claim against the assets of the 
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bank to file their respective claims with the Liquidator within 90 
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days from the date of publication of such order of the 
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Liquidation Court. 
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(c) Hearing 
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During the initial hearing of the PAL, the Liquidator shall present proof of 
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compliance with the jurisdictional requirements and evidence in support of the petition. 
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(d) Constitution as Liquidation Court 
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When an order is issued giving due course to the petition, the court is considered as 
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the Liquidation Court of the closed bank. 
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(e) Proceedings in the Liquidation Court 
I) Jurisdiction of the Liquidation Court 
The duly constituted Liquidation Court shall have exclusive 
jurisdiction to adjudicate claims against the closed bank, to assist in the 
enforcement of individual liabilities of the stockholders, directors and 
officers, and to decide on other issues as may be material to implement the 
liquidation plan adopted. 
2) Filing of disputed claims 
a. All disputed claims against the closed bank shall be filed with 
the Liquidation Court through the filing of a motion for 
intervention under Rule 19 of the Rules of Court and payment of 
fees as may be required under the rules. 
b. All claims which were verified and found to be in order by the 
Liquidator need not be filed and proved with the Liquidation 
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3) Treatment of each claim 
Each claim is considered separate and distinct from others. The 
order relative to a particular claim applies only to said claim, leaving the 
other claims unaffected. 
4) Appeal 
The order approving or disapproving a claim is in the nature of a 
final order, which may be subject of multiple appeals in accordance with the 
Rules of Court. 
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5) Inclusion in the Project of Distribution of approved claims 
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All claims that were approved by the Liquidation Court shall be 
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included among the recognized liabilities of the closed bank to be settled in 
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accordance with the Rules on Concurrence and Preference of Credits under 
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the Civil Code. 
S 
9 
(f) Submission of Project of Distribution (POD) 
10 
II 
I) Filing of POD 
12 
13 
14 
IS 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
Upon motion, the proposed POD shall be submitted for approval of 
the Liquidation Court. 
2) Notice of Hearing 
a. Creditors who shall receive payment under the proposed POD 
shall be notified of the hearing of the motion in accordance with 
the Rules of Court. 
b. The Notice to Creditors of the hearing of the motion seeking the 
approval of the POD shall be published once in a newspaper of 
general circulation. However, the approval of the Liquidation 
Court may be obtained to dispense with the publication if the 
circumstances so warrant. 
28 
3) Approval of POD 
29 
30 
The POD shall be implemented as soon as the court order approving the same has 
31 
attained finality. 
32 
33 
34 
(g) Termination of Liquidatiop Proceeding 
13 


• 
1 
The liquidation proceeding shall be deemed closed and terminated upon finality of 
2 
the order of the Liquidation Court approving the termination of the liquidation proceeding 
3 
and discharging PDIC as Liquidator from any and all liabilities arising from or in 
4 
connection with the Liquidation of the closed bank. 
5 
6 
Section 16. Implementation of Court-Approved Final POD. - Upon finality of 
7 
the court order approving the final POD, the Liquidator shall notify the creditors of the 
8 
date and requirements for the payment of their approved claims. Notwithstanding any laws 
9 
to the contrary, the creditors shall have a period of one (I) year from date of such notice 
10 
within which to submit the complete requirement~; otherwise, their claim shall be deemed 
11 
to have prescribed. 
12 
13 
14 
CHAPTER V 
15 
PURCHASE OF ASSETS AND ASSUMPTION OF LIABILITIES 
16 
17 
Section 17. Definition. - A purchase and assumption (P&A) transaction is one in 
18 
which a qualified third party or the acquirer purchases some or all of the assets, and 
19 
assumes some or all of the liabilities,'ofthe closed bank. 
20 
21 
Section 18. Adoption of a Purchase and Assumption Transaction. -
The PDIC, 
22 
as Liquidator of a closed bank, may, by a majority vote of its Board of Directors and 
23 
without need of the consent of the stockholders of the closed bank, adopt a P&A 
24 
transaction as a mode of liquidating a closed bank when it has determined that: 
25 
26 
27 
28 
29 
(a) A P&A mode of liquidation would be less disruptive compared to Payout, and 
would aid in the expeditious disposition of the assets and prompt settlement of 
the claims of the creditors of the closed bank; and 
30 
(b) The cost of adopting such mode of liquidation is less than the estimated cost 
31 
arising from Payout. 
32 
33 
Section 19. Additional Powers of the Liquidator. - The Liquidator, in addition to 
34 
the authorities enumerated under this Act, shall have the power to: 
35 
14 


1 
(a) Adopt any type ofP&A transaction it deems appropriate for the closed bank; 
2 
3 
(b) Provide assistance to the acquirer through loans and other forms of support as 
4 
may be determined by the-PDIC Board of Directors; 
5 
6 
(c) Provide the acquirer with a full or partial guarantee against loss arising from its 
7 
assumption ofliabilities and purchase of the assets of the closed bank; or 
8 
9 
(d) Adopt any combination of the actions referred to in subparagraphs (a) to (c). 
10 
11 
In the exercise of these powers, the Liquidator shall always be subject to the criteria 
12 
provided in Section 18. 
13 
14 
Section 20. Mandatory Conditions. - The following conditions shall be applicable 
15 
to and included in any P&A transaction implemented under this Act: 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
29 
(a) Upon the effectivity of the P&A transaction, the acquirer shall give the closed 
bank's depositors the option of either withdrawing their deposits or maintaining 
the funds with the acquirer under a new account. Deposit liabilities in the 
closed bank assumed by an acquirer shall not be subject to the Rules on 
Concurrence and Preference of Credits under the Civil Code. 
(b) The rights of the stockholders of the closed bank are terminated, except the 
right to the payment of the Residual Assets, if any, of the closed bank. 
CHAPTER VI 
BRIDGE BANKING 
30 
Section 21. Definition. - A "Bridge Bank" shall refer to a temporary bank licensed 
31 
by the Bangko Sentral ng Pilipinas (BSP), established and operated to acquire assets and 
32 
assume liabilities of a closed bank, for the purpose of facilitating the liquidation of a closed 
33 
bank. In issuing a Bridge Bank license, the BSP is authorized to waive the minimum 
34 
requirements for establishing a bank under existing laws. 
35 
15 


1 
Section 22. Formation, Establishment or Organization of a Bridge Bank. - The 
2 
PDIC may form, establish, organize, operate, and/or contract to operate corporations 
3 
whose primary purpose is to operate as a Bridge Bank and which shall hereafter be referred 
4 
to as a "bridge corporation". 
5 
6 
Section 23. When Adopted. - A Bridge Bank mode of liquidation may be adopted 
7 
only if the PDIC determines that: 
8 
9 
(a) It is a cost-effective and viable mode of liquidation and the amount necessary to 
10 
implement such measure is less than the estimated cost arising from Payout; 
11 
and 
12 
13 
(b) The preservation of critical banking functions is in the best interest of the 
14 
depositors and the public. 
15 
16 
17 
18 
19 
20 
21 
22 
23 
Section 24. Authority. - The Bridge Bank shall: 
(a) Have the authority to purchase assets, assume deposits and other liabilities of 
the closed banle which the Liquidator may determine to be appropriate; and 
(b) Perform such banking functions as the Monetary Board may authorize, 
consistent with the objectives of this Act. 
24 
Section 25. Additional Powers of the Liquidator. - To carry out its authority under 
25 
this Chapter, the Liquidator, in addition to the authorities enumerated under this Act, shall 
26 
have the power to: 
27 
28 
29 
30 
31 
32 
33 
34 
(a) Sell, assign, transfer, or convey its shareholdings in its bridge corporation to the 
closed bank; 
(b) Transfer such assets and deposit liabilities of a closed bank to the Bridge Banle, 
as the Liquidator may deem appropriate. All transfers of assets under this 
subsection shall: 
16 


, 
I 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
1) Not be subject to any taxes, such as capital gains tax, income tax, value 
added tax and documentary stamp tax, and other taxes, as may be 
applicable; 
2) Be effective without any consent from the stockholders and creditors of 
the closed bank, notwithstanding any provision of law to the contrary. 
(e) Make advances to the Bridge Bank for the Bridge Bank to operate, upon such 
terms and conditions and in such form and amounts as the Liquidator may 
prescribe. Advances made by the Liquidator to the Bridge Bank shall be booked 
as a liability of the Bridge Bank and shall be paid immediately by the Bridge 
Bank as soon as it is able to generate sufficient funds. 
In the event that the Bridge Bank is terminated pursuant to Section 27, 
paragraphs (d) and (e) of this Act, the advances made to the Bridge Bank shall 
partake of the nature of public funds and as such, must be considered a 
preferred credit similar to taxes due to the national government in the order of 
preference under Article 2224 of the New Civil Code; and 
20 
(d) Appoint, install, designate, andlor remove the directors, officers and other 
21 
personnel of a Bridge Bank and fix their compensation. 
22 
23 
The provisions of existing laws notwithstanding, the officers and employees of 
24 
the PDIC may be assigned as directors, officers or other personnel of a Bridge 
25 
Bank under such terms and conditions as the PDIC Board of Directors may 
26 
prescribe. 
27 
28 
Section 26. Term of Existence. - The Bridge Bank shall automatically terminate at 
29 
the end of two (2) years following the date it was granted a banking license, subject to the 
30 
provisions of Section 27 of this Act; Provided, That the Liquidator may extend the status 
31 
of the Bridge Bank if deemed necessary to conclude pending negotiations for the merger or 
32 
consolidation, sale, or acquisition of the Bridge Bank by an acquirer: Provided, finally, that 
33 
the maximum extension shall be one (1) year. 
34 
17 


1 
Section 27. Termination. - The Bridge Bank shall likewise terminate upon the 
2 
earliest of any of the following occurrences: 
3 
4 
(a) The merger or consolidation of the Bridge Bank with another bank that is not a 
5 
Bridge Bank; or 
6 
7 
(b) The sale of the Bridge Bank to a qualified buyer, as may be determined by the 
8 
Liquidator; or 
9 
10 
(c) The purchase of all or substantially all of the assets and assumption of all or 
11 
substantially all of the drposits and other liabilities of the Bridge Bank by a 
12 
qualified third party; or 
13 
14 
(d) The expiration of the period provided in Section 26; or 
15 
16 
(e) The termination or dissolution of a Bridge Bank, if determined by the 
17 
Liquidator that the operation of the Bridge Bank is no longer viable, 
18 
notwithstanding any other provision of law to the contrary. 
19 
20 
21 
Section 28. Effects of Termination Events. -
22 
(a) Merger or Consolidation. - The merger or consolidation of a Bridge Ban1e with 
23 
another bank as provided in Section 27 (a) of this Act shall be conducted in 
24 
accordance with, and shall have the effect provided in, the provisions of 
25 
applicable laws. 
26 
27 
(b) Sale to a Qualified Buyer. - Following the sale of a Bridge Bank as provided in 
28 
Section 27 (b) of this Act, the BSP shall terminate the license of the Bridge 
29 
Bank and the proceeds from such sale shall be distributed in accordance with 
30 
this Act and the rules on Concurrence and Prefen;mce of Credits. 
31 
32 
(c) Purchase of Assets and Assumption of Liabilities. - Following the purchase of 
33 
all or substantially all of the assets, and assumption of all or substantially all of 
34 
the deposits and other liabilities, of a Bridge Bank by a qualified third party as 
35 
provided in Section 27 (c) of this Act, the proceeds and the remaining assets 
18 


2 
3 
and liabilities, if any, shall be distributed in accordance with this Act and the 
rules on Concurrence and Preference of Credits. 
4 
(d) Term Expiration or Early Termination Due to Non-Viability. - Once the tenn of 
5 
a Bridge Bank has expired or is terminated earlier if determined by the 
6 
Liquidator that its operation is no longer viable, PDIC shall conduct Payout 
7 
operations on the insured deposits of the subject Bridge Bank. The Liquidator 
8 
shall then file a Petition for Assistance in the Liquidation (PAL) of the Bridge 
9 
Bank under Section 15 of this Act, and the proceeds, if any, shall be distributed 
lOin 
accordance with this Act and the rules on Concurrence and Preference of 
11 
Credits. 
12 
13 
In all the foregoing cases, the Liquidator shall have all the rights, powers, and privileges, 
14 
and shall perform the duties related to the exercise of such rights, powers, or privileges, 
15 
granted by this Act to the Liquidator of a closed bank. 
16 
17 
18 
CHAPTER VII 
19 
ASSET MANAGEMENT AND CONVERSION 
20 
21 
Section 29. Asset Management. - The assets gathered by the Liquidator shall be 
22 
evaluated and verified as to their exi;;tence, ownership and other factors to determine their 
23 
realizable value. To the extent possible and provided that the closed bank has sufficient 
24 
funds, the Liquidator shall endeavor to preserve the assets of the closed bank and 
25 
maximize recovery. 
26 
27 
Section 30. Conversion of Assets. - The conversion of the assets of the closed 
28 
bank shall be carried out in a fair and transparent manner in accordance with the rules and 
29 
procedure as may be determined by the Liquidator. 
30 
31 
Section 31. Actions of the Liquidator. - In the management andlor conversion of 
32 
the assets of the closed bank, the Liquidator shall have the authority to: 
33 
34 
35 
(a) Represent the closed bank before the Land Registration Authority (LRA), 
Bureau of Lands, Register of Deeds, the Land Transportation Office (L TO), the 
19 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
Assessor's Office or other appropriate office of the local government unit, the 
Securities and Exchange Commission (SEC), or such other similar government 
agencies or private entities in ---
1) Verifying the authenticity of ownership documents; 
2) Registering the interest of the closed bank on a specific property; 
3) Consolidating ownership over an asset of the closed bank; 
• 
4) Securing certified true copies of documents held by the foregoing 
agencies/entities in relation to an asset of the closed bank; 
5) Securing 
the 
appropriate 
certification 
from 
the 
foregoing 
agencies/entities in relation to an asset ofthe closed bank; and 
6) Performing other related activities; 
(b) Conduct a physical or ocular inspection of the properties owned by, or 
mortgaged to, the closed bank, to determine their existence and present 
condition; 
(c) Determine the disposal price of assets in accordance with generally accepted 
valuation principles and internationally-accepted standards and practices, 
subject to such gnidelines as the Liquidator may determine; 
(d) Dispose real or personal properties of the closed bank through bidding, 
negotiated sale or any other mode, whether by piece or by lot, such as lease 
with option to purchase or bulk sale, as may be reasonably determined by the 
Liquidator; and 
27 
(e) Engage third parties to manage and/or dispose the assets of the closed bank to 
28 
qualified individuals or entities, as may be determined by the Liquidator. 
29 
30 
Section 32. Special Provisions. - Notwithstanding any provision of law to the 
31 
contrary, the following rules shall apply to the management and/or conversion by the 
32 
Liquidator of the assets of the closed bank: 
33 
34 
35 
(a) Upon notification of the closure ofa bank, the LRA, Bureau of Lands, Register 
of Deeds, the LTO, the Assessor's Office or other appropriate office of the local 
20 


I 
2 
3 
4 
5 
6 
7 
8 
9 
10 
II 
12 
13 
14 
15 
16 
government unit, the SEC or such other similar government agencies or private 
entities shall not allow any transaction affecting the assets of the closed bank 
without the consent of the Liquidator. 
(b) Upon issuance by the Monetary Board of the resolution ordering the closure of 
a bank, all persons or entities in possession of any asset of the closed bank, 
including deposit accounts belonging to the closed bank, shall hold the said 
assets in trust for the Liquidator. As such, the persons or entities in possession 
of such asset shall not allow, authorize or cause the withdrawal, transfer, 
disposition, removal, conversion, concealment, or other transaction involving or 
relating to the subject asset. 
(c) Any person or entity in possession of assets of the closed bank, including, but 
not limited to, deposit accounts and land titles, shall, upon closure of a bank, 
immediately turn over custody of said assets to the Liquidator. 
17 
Section 33. Administration of Funds. - The Liquidator shall have the authority to 
18 
invest funds received from the conversion of the assets of the closed bank in government 
19 
securities and other government-guaranteed marketable securities. Any provision to the 
20 
contrary notwithstanding, administrative expenses advanced and incurred by the 
21 
Liquidator in the liquidation of a closed bank may be immediately charged against 
22 
available funds of said closed bank. 
23 
24 
Section 34. Disposal of Banking Franchise. - The Bangko Sentral ng Pilipinas 
25 
(BSP) may, if public interest so requires, award to an institution, upon such terms and 
26 
conditions as the Monetary Board may approve, the banking franchise of a closed bank to 
27 
operate in the area where said bank or its branches were previously operating: Provided, 
28 
That whatever proceeds may be realized from such award shall be for the benefit of the 
29 
creditors of the closed bank which shall be distributed in accordance with this Act and the 
30 
rules on Concurrence and Preference of Credits. 
31 
32 
33 
34 
35 
CHAPTER VIII 
WINDING-UP 
21 


1 
Section 35. 
Payment of the Principal Obligations and Surplus Claims of the 
2 
Creditors. -
3 
4 
(e) The creditors shall have It period of one (1) year from date of publication of 
5 
notice of the approval by the court of the final distribution of the assets of the 
6 
closed bank within which to claim payment of the Principal Obligations and 
7 
Surplus Claims. 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
(f) Payment of the Principal Obligations and Surplus Claims shall be effected upon 
submission by the creditors of the documentary requirements prescribed by the 
Liquidator. 
Section 36. 
Turnover of the Residual Assets. -
(a) The individual stockholders of record or their duly-authorized representative or 
the court-appointed stockholders' representative, shall have a period of one (I) 
year from publication of notice of the approval by the court of the final 
distribution of the assets of the closed bank within which to claim the Residual 
Assets. 
(b) Turnover of the Residual Assets to the stockholders shall be effected upon 
submission of the documentary requirements to be prescribed by the Liquidator. 
24 
Section 37. Escheat. -
The Liquidator has a period of one (1) year reckoned from 
25 
the lapse of the one-year period as provided under Sections 35 and 36 within which to 
26 
report any unclaimed Principal Obligations, Surplus Claims and Residual Assets for 
27 
escheat to the appropriate government agency in accordance with the provisions of the 
28 
Rules of Court. 
29 
• 
30 
Failure by the creditor to comply with the documentary requirements within the 
31 
prescribed period and/or refusal to accept the asset as payment shall be deemed as 
32 
abandonment or waiver of his right to payment. The asset constituting the payment shall be 
33 
subject to escheat. 
34 
22 


1 
Failure by the individual stockholders of record or their duly-authorized 
2 
representative or the court-appointed stockholders' representative to comply with the 
3 
documentary requirements within the prescribed period and/or refusal to accept the 
4 
Residual Assets in kind shall be deemed as abandonment or waiver of right to receive the 
5 
Residual Assets, and therefore subject to escheat. 
6 
7 
Section 38. 
Disposal of records. - The remaining records of the closed bank 
8 
may be disposed of through escheat proceedings within one (1) year from date of finality 
9 
ofthe court order approving the final POD. 
10 
11 
12 
13 
14 
CHAPTER IX 
MISCELLANEOUS PROVISIONS 
15 
Section 39. Penalties. - THe penalty of prision mayor or a fine of not less than 
16 
Fifty thousand pesos (P50,000.00) but not more than Two million pesos (P2,000,000.00), 
17 
or both, at the discretion of the court, shall be imposed: 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
29 
30 
31 
32 
33 
(a) Upon a director, officer, employee or agent of a closed bank for ---
1) Refusing to allow the Liquidator to take over a bank placed under 
liquidation or obstructing such action of the Liquidator; 
2) Refusing to receive the notice of closure; 
3) Refusing to turn over, or destroying or tampering bank records; 
4) Fraudulently disposing, transferring, assigning, or concealing any asset, 
property or liability of the closed bank; 
5) Wilfully making a false statement or entry III any bank report or 
document required by the Liquidator; 
23 


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3 
4 
5 
6 
7 
8 
9 
10 
II 
.12 
13 
14 
IS 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
29 
30 
31 
32 
33 
6) Violating or causing any person to violate, the exemption from 
garnishment, levy, attachment or execution provided under this Act and 
the New Central Bank Act; or 
7) Willfully violating any provision of this Act; 
(b) Upon any person or entity for ---
1) Refusing to turn over possession or custody of the asset of the closed 
bank to the Liquidator; 
2) Refusing or delaying the a. verification of authenticity of the ownership 
documents; b. registration of interest of the closed bank on a specific 
property; c. consolidation of ownership over an asset of the closed bank; 
d. act of securing certified true copies of documents in relation to an 
asset of the closed bank; e. act of securing the appropriate certification 
from the agencies or entities stated in Chapter VII of this Act in relation 
to an asset of the closed bank; f. Conduct of a physical or ocular 
inspection of the properties owned by, or mortgaged to, the closed bank, 
to determine their existence and present condition; or g. other related 
activities of the Liquidator; or 
3) Willfully violating any provision of this Act; 
(c) Upon any law enforcement officer who refuses or fails to assist the Liquidator 
in the service of the notite of closure as provided for under Section 10 of this 
Act. 
The penalty herein imposed is without prejudice to any administrative action 
that may be filed against erring law enforcement officers, directors, officers, 
employees or agents of a closed bank, or other persons and entities of 
government agencies or instrumentalities. 
24 


Section 40. 
Presumption of ownership. - All assets, records, and documents in 
2 
the possession of the closed bank at the time of its closure are presumed held by the bank 
3 
in the concept of an owner. 
4 
5 
Section 41. Presumption of regularity. - The exercise of authority, functions, and 
6 
duties by the Liquidator under this Act is presumed regularly performed. 
7 
8 
Section 42. Finality of actions. - The actions of the Liquidator under this Act shall 
9 
be final and executory, and may not be restrained or set aside by any court, except on 
10 
petition for certiorari with the Court of Appeals on the ground that the action was taken in 
II 
excess of jurisdiction or with grave abuse of discretion as to amount to a lack or excess of 
12 
jurisdiction. 
13 
14 
No court, except the Court of Appeals, shall issue any temporary restraining order, 
15 
preliminary injunction or preliminary mandatory injunction against the Liquidator for any 
16 
action under this Act. This prohibition shall apply in all cases, disputes or controversies 
17 
instituted by a private party, the closed bank, or any shareholder of the closed bank. 
18 
19 
Section 43. Visitorial Audit. - Assets and documents of the closed bank shall retain 
20 
their private nature even if administered by the Liquidator. Matters relating to the exercise 
21 
by the Liquidator of the functions under this Act shall be subject to visitorial audit only. 
22 
23 
Section 44. Implementing Rules. - The PDIC shall prescribe, by its Board of 
24 
Directors, the rules and regulations necessary to implement the provisions of this Act. 
25 
26 
27 
28 
29 
30 
31 
32 
33 
34 
CHAPTER X 
TRANSITORY PROVISIONS 
Section 45. Application to Pending Actions, Petitions and Claims. -
(a) This Act shall govern all actions, petitions and claims filed against a closed 
bank after this Act has taken effect. 
25 


.. 
1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
(b) This Act shall apply to all actions, petitions, and claims against the closed bank 
pending at the time of the effectivity of, and insofar as consistent with, this Act. 
(c) In the event a new enactment or regulation is issued decreasing the rights and 
authorities hereunder granted, such new enactment or regulation shall not apply 
to this Act except in a suppletory manner. 
CHAPTER XI 
FINAL PROVISIONS 
12 
Section 46. Repealing Clause. - All acts or parts of acts and executive orders, 
13 
administrative orders, or parts thereof which are inconsistent with the provisions of this 
14 
Act are hereby repealed or modified accordingly. 
15 
16 
Section 47. Separability Clause. - If any provision or section of this Act or the 
17 
application thereof to any person or circumstances is held invalid, the other provisions or 
18 
sections of this Act, in the application of such provision or section to other persons or 
19 
circumstances, shall not be affected thereby. 
20 
21 
Section 48. Effectivity. - This Act shall take effect fifteen (15) days following the 
22 
completion of its publication in the Official Gazette or in two (2) newspapers of general 
23 
circulation. 
24 
25 
Approved, 
26