Source: https://www.scribd.com/document/270710515/2009-Banking-Law-Expanded-Outline-Als-Commercial-Law-Review
Timestamp: 2019-01-23 02:57:46
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Matched Legal Cases: ['Art. 3', 'Art. 100', 'Art.2', 'Art. 100', 'Art. 353', 'Art. 379', 'Art.4', 'Art. 509']

2009 Banking Law Expanded Outline - Als Commercial Law Review | Money Laundering | Banks
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1. Definition – Sec. 3.1, GBL1:
2. Elements – Republic v. Security Credit and Acceptance Corporation,
19 SCRA 58 (1967): receiving savings account deposits which are lent out
considered as banking, even without authority from BSP; Central Bank v.
Morfe, 20 SCRA 507 (1967): even if “savings” given as “financial
assistance” to “members”, but anybody can be a depositor, then
considered as banking; Bañas v. Asia Pacific Finance Corporation, 343
SCRA 527 (2000): if purchase of receivables at a discount (not deposits),
then investing, reinvesting or trading in securities, not considered as
a. Engaged in lending of funds
b. Obtained in the form of deposits
c. From the public, which shall mean 20 or more persons – Sec. 8.2, GBL
1. Elements of Quasi-Banking – Sec. 4, par. 3, GBL; xSec. X234, MRB2
a. Borrowing of funds for borrower’s own account
b. From 20 or more lenders at any one time
c. Through issuance, endorsement or assignment with recourse or
acceptance of deposit substitutes – Sec. 95, NCBA3
d. For purposes of relending or purchasing of receivables and other
2. Requirement of Separate License – Sec. 6, pars. 1 and 2, GBL: BSP
authority required for banking and quasi-banking, except for UB and KB,
which if authorized as such, are authorized to engage in quasi-banking
Republic Act No. 8791 (“General Banking Law of 2000”), which repealed Republic Act No. 337
(“General Banking Act”)
Manual for Regulation of Banks
Republic Act No. 7653 (“New Central Bank Act”), which repealed Republic Act No. 265 (“Central
Bank Act”)
1. Investment Houses – xSecs. 2 and 3, Investment Houses Law4
2. Financing Companies – xSec. 3(a), Financing Company Act5
3. Investment Companies – xSec. 4, Investment Company Act6
4. Non-Stock Savings and Loans Associations – xSec. 3, Revised NonStock Savings and Loans Association Act of 1997 7
5. Cooperatives – xArt. 3, Cooperative Code8; But See xArt. 100,
6. Insurance Companies – xSec. 2, Insurance Code9
D. NATURE OF BANKING BUSINESS – Sec. 2, GBL
1. Vital Role in Economy10 – Simex International (Manila) Inc. v. Court of
Appeals, 183 SCRA 360 (1990): indispensable institution in modern
world, vital role in economic life, whether as passive entities for
safekeeping and saving of money, or as active instruments of business
a. Subject to reasonable regulation by the State – Central Bank of the
Philippines v. Court of Appeals, 208 SCRA 652 (1992): police power
allows placing of bank under conservatorship, among other remedies
b. Strikes and Lockouts – Sec. 22, GBL: banking industry indispensable
to national interest, therefore if strike/lockout unresolved within 7 days,
BSP may report it to Secretary of Labor, who shall assume jurisdiction,
also, President may at any time assume jurisdiction; xBSP11 Circular
No. 299 (Series of 2001); Article 263(g), Labor Code
2. Fiduciary Nature of Banking Business
a. Degree of diligence required 12 – Simex International (Manila) Inc. v.
Court of Appeals, 183 SCRA 360 (1990): banking affected by public
interest, so deposits treated with utmost fidelity (bank liable for failure
to credit deposit, took 23 days to correct); Bank of the Philippine
Islands v. Intermediate Appellate Court, 206 SCRA 408 (1992): bank
not expected to be infallible, but must observe established procedure
to check errors (wrong account number on deposit slip)
b. When utmost diligence required
Presidential Decree No. 129, as amended
Republic Act No. 59080, as amended by Republic Act No. 8556
Presidential Decree No. 612, as amended
Prudential Bank v. Lim, 474 SCRA 485 (2005)
Solidbank Corporation/Metropolitan Bank and Trust Company v. Tan, 520 SCRA123 (2007)
In dealing with accounts of depositors 13 – Philippine Banking
Corporation v. Court of Appeals, 419 SCRA 487 (2004):
fiduciary obligation deemed written into every deposit agreement,
even prior to GBL effectivity, bank liable for wrongful acts of
officers within scope of authority, but not beyond (offset time
deposit with fictitious PN); Bank of the Philippine Islands v.
Casa Montessori Internationale, 430 SCRA 261 (2004): banks
bound to know signatures of customers (bank failure to detect 8
instances of forgery in checks proximate cause of loss), no waiver
or estoppel from failure to report error in bank statement
In selection and supervision of employees 14 – Philippine
Commercial and International Bank v. Court of Appeals, 350
SCRA 446 (2001): bank liability primary, not vicarious, for fraud of
officers if they have apparent authority, even if bank did not
benefit from such fraud (bank failed to detect no clearing stamps
on switched checks); Philippine National Bank v. Pike, 470
SCRA 328 (2005): bank liability primary, not vicarious, for
negligence of employees (allowing withdrawal by non-account
holder without signing withdrawal slip, no passbook and authority)
(iii) To be mortgagees in good faith 15 – Cruz v. Bancom Finance
Corporation, 379 SCRA 490 (2002): cannot rely merely on face
of title, must observe precautions to ascertain flaws in title (sale
absolutely simulated) and to examine condition of property,
because funds are being lent out
(iv) In the custody of documents; integrity of records 16 – Heirs of
Eduardo Manlapat v. Court of Appeals, 459 SCRA 412 (2005):
bank liable for delivering titles to mortgaged properties to stranger
(for photocopying purposes)
Exception: does
Reyes v. Court
not involve their
not cover transactions outside bank deposits –
of Appeals, 363 SCRA 51 (2001): exercise of
not required in commercial transactions that do
fiduciary relationship with their depositors, i.e.,
Simex International (Manila) Incorporated v. Court of Appeals, 183 SCRA 360 (1990); Bank of
the Philippine Islands v. Court of Appeals, 326 SCRA 641 (2000); Philippine Commercial
International Bank v. Court of Appeals, 350 SCRA 446 (2001); Firestone Tire & Rubber Company
of the Philippines v. Court of Appeals, 353 SCRA 601 (2001); Westmont Bank v. Ong, 375 SCRA
212 (2002); Traders Royal Bank v. Radio Philippines Network, Inc., 390 SCRA 608 (2002);
Consolidated Bank and Trust Corporation v. Court of Appeals, 410 SCRA 562 (2003)
Metropolitan Bank and Trust Company v. Cabilzo, 510 SCRA 259 (2006); But See Go v.
Intermediate Appellate Court, 197 SCRA 22 (1991)
Development Bank of the Philippines v. Court of Appeals, 331 SCRA 267 (2000); Canlas v.
Court of Appeals, 326 SCRA 425 (2000); Premiere Development Bank v. Court of Appeals, 453
SCRA 630 (2005); Private Development Corporation of the Philippines v. Court of Appeals, 475
SCRA 591 (2005); Citibank, N.A. v. Cabamongan, 488 SCRA 517 (2006); Metropolitan Bank and
Trust Company, Inc. v. SLGT Holdings, Inc., 536 SCRA 517 (2007); Omengan v. Philippine
National Bank, 512 SCRA 305 (2007)
See Also United Coconut Planters Bank v. Basco, 437 SCRA 325 (2004)
sale and issuance of foreign exchange demand draft (swift code
error, but did everything in its power to correct)
c. Applicability to government financial institutions – xGovernment
Service Insurance System v. Santiago, 414 SCRA 563 (2003)
d. Liability for negligence
Rules on determination of negligence – Philippine Bank of
Commerce v. Court of Appeals, 269 SCRA 695 (1997): culpa
aquilana to tort rules, i.e., proximate cause, last clear chance,
contributory negligence 60-40 sharing of loss (failure to duly credit
deposits); Consolidated Bank and Trust Corporation v. Court
of Appeals, 410 SCRA 562 (2003): culpa contractual (breach of
contract raised presumption of negligence, defense of exercising
required diligence not a complete defense) vs. culpa aquiliana
(burden to prove bank was negligent, defense of exercising
required diligence complete defense)
Award of actual, moral, compensatory or temperate damages –
Araneta v. Bank of America, 40 SCRA 144 (1970): if no
pecuniary loss, temperate damages allowed for injury to
commercial credit or goodwill; Prudential Bank v. Court of
Appeals, 328 SCRA 264 (2000): moral damages allowed even if
no malice or bad faith, exemplary damages allowed also;
Citytrust Banking Corporation v. Villanueva, 361 SCRA 446
(2001): if embarrassment or inconvenience timely and adequately
corrected, no moral damages, if damnum absque injuria, no
(iii) Cannot rely on judgment of other banks to escape liability –
xMetropolitan Bank and Trust Company v. Cablizo, 510 SCRA
(iv) Right to recover against erring employee – xPacific Banking
Corporation v. Court of Appeals, 173 SCRA 102 (1989)
E. AUTHORITY TO OPERATE
1. Incorporation – Secs. 17 and 46, Corporation Code; Sec. 14, GBL
2. Operation – Sec. 6, GBL
a. Authority required – Sec. 6, par. 1, GBL
b. MB17 determination – Sec. 6, par. 2, GBL
c. Unauthorized advertisement/ business representation – Sec. 64, GBL
d. Change in name – xP.C. Javier & Sons, Inc. v. Court of Appeals, 462
SCRA 36 (2005): no need to notify all debtors of bank
xSec. IRR of Investment Houses Law18 (iI) Limitations on UB’s exercise of investment house powers – xSec. whether regularly or on an isolated basis. 20 SCRA 507 (1967) : injury not pre-requisite for quo warranto proceedings. GBL 1. MRB: (a) (b) (c) subject to pertinent laws and SEC regulations if investment house functions performed directly by UB. MRB a. Monetary Board.e. through a subsidiary) c. 23.e. GBL. such functions shall be undertaken by separate department/unit UB cannot perform functions of investment house both directly (i. 3. 129 . Commercial Bank (KB) powers – xSec. guaranteeing distribution and sale) of securities of any kind issued by another corporation – xSec. xSec. To invest in equity of non-allied enterprises – xSec. Investment Houses Law. MRB 18 Rules and Regulations to Implement the Provisions of Presidential Decree No. 7.5 e. 3. 6. through a separate department/unit) and indirectly (i.2(a). in the underwriting (i. 27. xSec. xSEC Omnibus Rules and Regulations for Investment Houses and Universal Banks Registered as Underwriter of Securities (i) Definition/function of investment house – any enterprise which engages or purports to engage. 20 SCRA 502 (1957) II. to Sec. Security Credit and Acceptance Corporation.. in rel. 2(a). 66. 1381... xSec. xPerez v. par. UNIVERSAL BANKS (UB) – Sec. CLASSIFICATION OF BANKS A. 5. Powers – Sec. Central Bank v. Sanctions for operating without authority: quo warranto instituted by Solicitor General – Sec. X101(b)(2). MRB b. GBL. 19 SCRA 58 (1967): unauthorized banking subject to quo warranto.e. X101(b)(1). 29. Morfe. 101(b)(1). Investment House powers – xSec. GBL. Governing Law – xGBL 2. Investment Houses Law. Republic v. GBL.
shares. 1 and 3. 74. par. COMMERCIAL BANKS (KB) – Sec. GBL a. 29. supervision. act as managing agent. 51 and 52. THRIFT BANKS (TB) – Secs.6 B. 53. and other evidences of debt (iv) Accepting or creating demand deposits (i) Receiving other types of deposits and deposit substitutes (ii) Buying and selling foreign exchange and gold or silver bullion (iii) Acquiring marketable bonds and other debt securities (iv) Extending credit b. and general conduct of business – xThrift Banks Act19 b. drafts. 1. par. pars. GBL (i) Accepting drafts (ii) Issuing letters of credit (L/Cs) (iii) Discounting and negotiating promissory notes (PNs). Powers – xSec. 3. documents and valuable objects Act as financial agent and buy and sell. GBL c. General Banking Act C. GBL 1. MRB a. GBL c. Net worth to risk assets ratio – xSec. 31 and 32. GBL 1 2 1. in rel. Engage in quasi-banking functions – xSec.2(c). 3. To purchase. by order of and for the account of customers. ownership. 3. 6.2(b). hold and convey real estate – xSecs. consultant or administrator of investment management/advisory/ consultancy accounts (v) Rent out safety deposit boxes f. 71. capital requirements. GBL d. 71. Other matters: GBL of suppletory application 19 Republic Act No. Governing Law – xGBL 2. 7906 . bills of exchange. To issue guarantees – See xSec. Governing Law – Sec. powers. X101(b)(2). Organization. evidences of indebtedness and all types of securities (iii) Make collections and payments for the account of others and perform such other services for their customers as are not incompatible with banking business (iv) Upon prior MB approval. GBL (i) (ii) Receive in custody funds. to Sec. KB powers – Sec. 33. GBL e. Other services – xSec. adviser. To invest in equity of allied enterprises – xSecs.
xSec. powers. Thrift Banks Act a. GBL 5 6 1. commercial papers and accounts receivable. 2. MRB E. Powers – Sec. Governing Law – Sec. acceptances. 99 to 109.2(c). personal and investment credit or medium. and (iii) Private development banks b. to businesses engaged in agriculture. 7353 . X101(b)(3). Cooperative Code a. 3. or notes arising out of commercial transactions (ii) Providing short-term working capital. Sec. Governing Law – Sec. supervision. 3(a). Rural Banks Act: Establishment of rural banking system to make needed credit available and readily accessible in rural areas on reasonable terms 3. Declaration of Policy – Sec. GBL. Organization. a. industry and housing (iii) Providing diversified financial and allied services for its chosen market and constituencies specially for small and medium enterprises and individuals 4. drafts. Thrift Banks Act. RURAL BANKS (RB) – Sec. 10. GBL. 1 and 3. supervision.2(d). 3. For purposes of: (i) Accumulating savings of depositors and investing them in marketable bonds and other debt securities. GBL. GBL 8 9 1. COOPERATIVE BANKS (Coop Banks) – Sec. Definition/Purpose – Sec. Composed of: (i) Savings and mortgage banks (ii) Stock savings and loans associations. 3.and long-term financing. services. Rural Banks Act. Thrift Banks Act: establishment of thrift banks to meet needs for capital.and long-term loans for Filipino entrepreneurs 4 3. Art. Other matters: GBL of suppletory application 20 Republic Act No. Other matters: GBL of suppletory application 7 2. ownership. xSec. and general conduct of business – xRural Banks Act20 b. 1 and 3.2(e). medium. ownership. 71. powers. 2. pars. Declaration of Policy – Sec. capital requirements. Powers – Sec. X101(b)(4). MRB D. bills of exchange. 12. 71. 99. Organization. pars. Cooperative Code b. capital requirements.7 3 2. and general conduct of business – xArts.
Powers – Sec. the majority shares of which is owned and controlled by. 7169 26 Executive Order No. and general conduct of business – xIslamic Bank Charter21 2. ISLAMIC BANKS (IB) – Sec. capital requirements. 3. Functions – xArt. GBL 1. principal functions include lending. i. 2. 560 SCRA 606 (2008): non-bank “financial intermediaries” (since primary function is lending). or otherwise coursed through them. Islamic Bank Charter. 3. xAn Act to Rehabilitate the PVB25 4. Definition: Organized by. Inc. xBSP Circular No. X101(b)(5). Code of Agrarian Reform of the Philippines22 2. 114 28 Rules and Regulations for Pawnshops 22 . Declaration of Policy – Art.2(f).e. Series of 1986 24 Republic Act No. Pawnshops? – xPawnshop Regulation Act27. investing or placement of funds or evidences of indebtedness or equity deposited with them. First Planters Pawnshop. MRB G. Commissioner of Internal Revenue. v. GBL 12 13 1..8 10 2. powers. Development Bank of the Philippines (DBP) – xRevised Charter of Development Bank of the Philippines23 3. acquired by them. 74 to 100-A. cooperatives primarily to provide financial and credit services to cooperatives b. 3844 23 Executive Order No. Organization. 80 Series of 1986 27 Presidential Decree No. Land Bank of the Philippines (Land Bank) – xSecs. 71. xSec. 3. supervision. ownership.2(g). MRB F. Velasco. 81. 37428. Cooperative Code a. 6848 (“Charter of Al Amanah Islamic Development Bank of the Philippines”) Republic Act No. GBL a. Purpose – Sec. Cooperative Code 11 3. OTHER CLASSIFICATIONS OF BANKS – Sec. Governing Law – Sec. 6. Definition/Functions – Art. 100. Powers: Same as RB – xSec. 2. either for their own account or for the account of others 21 Republic Act No. X101(b)(6). 3518 25 Republic Act No. 564 SCRA 512 (2008) 5. Philippine National Bank (PNB) but now privatized – xRevised Charter of Philippine National Bank26. par. 100 Cooperative Code 4. xPhilippine National Bank v. Islamic Bank Charter 3. Philippine Veterans Bank (PVB) – xPhilippine Veterans Bank Act24.
Foreign Investments Act of 199131 29 Republic Act No. guidelines – Secs. 121. 3. Control of 70% of resources or assets of entire banking system must be held by banks which are at least majority-owned by Filipinos – Sec. Foreign Banks Liberalization Act 2. GBL. 3. 3(d). Foreign Banks Liberalization Act. Foreign Banks Liberalization Act b. 7221 Philippine Stock Exchange 31 Republic Act No. 73. MB shall secure the listing in the PSE 30 of shares of stocks of banks established under this mode of entry – Sec. Subject to MB approval. par. par. Foreign Banks Liberalization Act c. Equal treatment of local banks – Sec. par. 3. But may change from one mode of entry to another – xSubsec. 4. GBL (ii) Which acquired up to 60% of voting stock under the Foreign Banks Liberalization Act and Thrift Banks Act. GBL c. Modes of entry – Sec. Sec. par. 73. Entry of Foreign Banks a. Within 7 years from GBL effectivity. to further acquire up to 100% voting stock thereof – Sec.10. 2. Foreign Banks Liberalization Act 29 (i) By acquiring. 73.9 H. MB may authorize foreign bank: (i) To acquire up to 100% of voting stock of only 1 domestic bank – Sec. Foreign Banks Liberalization Act e. FOREIGN BANKS 1. 1. purchasing or owning up to 60% of the voting stock of an existing domestic bank (ii) By investing in up to 60% of a new banking subsidiary incorporated under the laws of the Philippines (iii) By establishing branches with full banking authority b. 3. Rules on Acquisition of Voting Stock in Existing Domestic Bank a. License to do business not required: Equity investment is not deemed doing business – Sec. 2. Foreign bank may avail of only 1 mode of entry – Sec. 3. GBL. 7042 30 . 2 and 3. Sec. May own up to 60% voting stock of only 1 domestic bank – Sec. 8. par. par. 73. Foreign Banks Liberalization Act d. MRB d. 2. 2.
Treatment of multiple branches – Sec. 4(ii). GBL b. 74 of GBL treats all 32 Presidential Decree No. Must be among top 150 foreign banks in the world or top 5 in their country of origin as of application date – Sec. 3. 4. directors or officers of corporations to each other and the corporation: Law of place where foreign bank established – Sec. 4(i). Foreign Banks Liberalization Act c. Foreign Banks Liberalization Act d. organization or dissolution of corporations. members. par. Must be among top 150 foreign banks in the world or top 5 in country of origin – Sec. par. Foreign Banks Liberalization Act f. Foreign Banks Liberalization Act f. Rules on Establishing Branches a. Sabeniano. par. fixing of relations. Must be widely-owned and publicly-listed in its country of origin. unless government-owned – Sec. Time limitation on entry – Sec. 2. Foreign Banks Liberalization Act d. 3. 77. 4. 3(d). 2. Capitalization – Sec. responsibilities. GBL. GBL (ii) Entry into the Philippines through establishment of branches: xForeign Banks Liberalization Act – Sec. or duties of stockholders. 72. par. liabilities. Capitalization – Sec. GBL (iii) Conduct of offshore banking business: xOffshore Banking System Decree32. BSP Circular No. Citibank. Governing Laws (i) Creation. but Sec. 1389 – Sec. 1. as amended .10 3. Must be widely-owned and publicly-listed in country of origin.A. unless applicant is owned by government thereof – Sec. Foreign Banks Liberalization Act e. 3. 514 SCRA 441 (2007): Sec. 3. Foreign Banks Liberalization Act b. Foreign Banks Liberalization Act e. License to do business not required: Equity investment is not deemed doing business – Sec. formation. v. 74. 6. Rules on Acquisition of Voting Stock in New Domestic Bank a. 72. par. xChapter 1. Foreign Banks Liberalization Act c. May own up to 60% of the voting stock of only 1 new banking subsidiary – Sec. 2. MB shall secure the listing in the PSE of shares of stocks of banks established under this mode of entry – Sec. 1034. 3. 20 of GBL treats domestic bank and all branches as one unit. 2. GBL (iv) All other matters: GBL – Sec. par. Part Three. 3. par. N. 77. Foreign Investments Act of 1991 4.
Qualification – Sec. 4. 59 Phil. NATURE OF DEPOSIT 1. Central Bank. X262. Ong. v. 5. Foreign Banks Liberalization Act h. Deposit is voluntary agreement. Ltd. GBL. 75 of GBL and Sec. Offshore Banking Units (OBU) – Secs. 133. 76. GBL. Serrano v. Ltd. Sec. Consolidated Bank and Trust Corporation v. GBL 5.11 branches of a foreign bank as one unit. Sec. Head office guarantee – Sec. Must be licensed to transact business – Sec. Bank of the Philippine Islands. 3. 8.. 230 SCRA 799 (1994). g.. but as to relation of local branches. People v. 83 Phil. Deposits as Simple Loans 33 – Arts. 5 of Foreign Banks Liberalization Act provide for “Head Office Guarantee” for clients to invoke in order to establish accountability of head office for liabilities of its foreign branches. DEPOSIT FUNCTION A. Offshore Banking System Decree b. 12. 78. xSec. 59 (1933). Offshore Banking System Decree a. MRB 33 San Carlos Milling Co. client’s liability to RP branch does not extend to liability to head office and branch in other countries. 2. 75. 1997 Rules of Civil Procedure j. Effects of certain laws – Sec. Saulog. 410 SCRA 562 (2003) . 201 SCRA 137 (1991): foreign bank not doing business in RP need not obtain license in order to sue i. But does not apply in the reverse. Certificate of authority to operate – Sec. and not breach of trust from failure to return subject matter of deposit. savings. Summons and legal processes – Sec. 2. Offshore Banking System Decree d. 1953 and 1980. Offshore Banking System Decree III. Hilado v. i.1. “Know Your Customer” standards – xMemorandum dated 1 October 2002. failure to honor time deposit is failure to pay obligation as debtor. Bank as Debtor a. so off-setting cannot be effected. Revocation of license – Sec. 1(a) and 1(b). v. 96 SCRA 96 (1980): bank deposits (fixed. Civil Code. Rule 14. Hang Lung Bank. current) are irregular deposits which are really loans. Sec. Head office guarantee – Sec. 471 (1949). Court of Appeals. 204 SCRA 942 (1991). Court of Appeals. Offshore Banking System Decree c. hence.e. Moran v. De la Costa. Corporation Code.
Bank of the Philippine Islands v. Firestone Tire & Rubber Company of the Philippines v. 512 SCRA 620 (2007): while bank has right to set-off. it should act judiciously. 326 SCRA 641 (2000). 519 (1935): general rule. Simex International (Manila). bank not liable for estafa for failure to pay deposit. 65 SCRA 186 (1975): depositor has every right to apply his credit with bank to loans he obtained. not breach of trust 34 Serrano v. China Banking Corp. Court of Appeals. Puig. Bank of the Philippine Islands v.. Court of Appeals. Bank of the Philippine Islands v.. 232 SCRA 302 (1994): since ownership of deposit disputed. 128 SCRA 577 (1984): hence. Bank acquires ownership of money deposited. GBL. Court of Appeals. thus banks allowed to offer lowest possible interest rate on deposits and charge highest possible interest rate on loans. but no obligation to return the same money 34 – Guingona. v. Bank of the Philippine Islands v. Court of Appeals. deposits non-preferred credits subject to rules on preference of credits e. 538 SCRA 184 (2007): deposit of money is generic and fungible. obligation to pay amount. Philippine Bank of Commerce v. Bank’s Duty of Utmost Care 35 – Sec.e. Bank has right to compensation – Gullas v. 563 SCRA 564 (2008). Morfe. bank without notice justified in paying out to depositor. 55 Phil. 96 SCRA 96 (1980). 269 SCRA 695 (1997). i. Jr. c. v. People v. 197 SCRA 22 (1991). Go v. Central Bank. 2. 410 SCRA 562 (2003): fiduciary nature does not convert contract between bank and its depositors from simple loan to trust agreement. bank has a right to set off of the deposit in its hands for payment of any indebtedness to it on part of depositor. and failure to pay deposit is failure to pay simple loan. Republic v. 62 Phil. authority of heirs to withdraw not equivalent to court order to release deposit to heirs. City Fiscal of Manila. Mandamus not a remedy – xLucman v. No breach of trust. bank no right to pay persons indisputably entitled thereto d. Payment to proper party-depositor – Fulton Iron Works Co. BPI Family Bank v. 559 of Civil Code (which allows owner unlawfully deprived of movable property to recover the same from current possessor) does not apply. whether express or implied.12 b. Court of Appeals. Philippine National Bank. determination by probate court provisional. Court of Appeals. notify depositor f. Intermediate Appellate Court. 63 SCRA 114 (1975): if bank insolvent. 206 SCRA 408 (1992). compensation takes place ipso jure?. hence. Consolidated Bank and Trust Corporation v. Inc. v. Malawi. 208 (1930): depositor presumed owner of funds. 511 SCRA 268 (2006) 3. Franco. Intermediate Appellate Court. Court of Appeals. Deposits are not preferred credits – Central Bank v. so Art. 353 SCRA 601 (2001) 35 . because banks do not accept deposits to enrich depositors but to enrich themselves. 183 SCRA 360 (1990). Court of Appeals.
Lim Sio Wan. 58-60. Islamic Bank Charter 2. BPI Family Savings Bank v. 520 SCRA 688 (2007): fixed savings deposit treated as time deposit (provides higher interest rate if not withdrawn within required fixed period) as opposed to regular savings deposit (also with passbook but withdrawable any time) 3. (7)(a). People v. MRB. International Exchange Bank v. 429 SCRA 30 (2004): deposit the payment of which cannot be legally required within such specified number of days. 520 SCRA 688 (2007): if withdrawn within period. First Metro Investment Corporation. KINDS OF DEPOSIT 1. par. as amended (“Foreign Currency Deposit Act”) . like a deposit. xSecs. no prohibition against demand deposits earning interest. Money market transaction. Commissioner of Internal Revenue. GBL b. 10(b). Commissioner of Internal Revenue. Reyes. 6426. For UB and KB – Sec. is a simple loan or mutuum.13 B. NCBA: MRB. X223 to X226. For RB/Coop Bank – Sec. MRB d. 36 Republic Act No. Rural Banks Act. 549 SCRA 504 (2008): Money market is a market dealing in standardized short-term credit instruments (involving large amounts) where lenders and borrowers do not directly deal with each other but through middle man or dealer in open market. 429 SCRA 30 (2004): liabilities of banks denominated in RP currency and subject to payment in legal tender upon demand by presentation of depositor’s checks. Bank and client relationship is also creditor-debtor. Savings Deposits – xSec. First Metro Investment Corporation. X201. 33. X213 and X214. 2 and 3. Negotiable Order of Withdrawal (NOW) Accounts – xSecs. MRB. X231. 6. still deemed as check for purposes of estafa. Thrift Banks Act c. For TB – Sec. hence. Demand Deposits – Secs. BPI Family Savings Bank v. Money Market Placements? – Allied Banking Corporation v. 12(b). MRB a. 454 SCRA 635 (2005): interest-bearing accounts that combine payable on demand feature of checks and investment feature of savings account. although gravamen is deceit. with the investor as a lender who loans his money to a borrower through a middleman or dealer. Time Deposits – xSecs. will be subject to interest as if regular savings deposit 5. X201 to X204. Foreign Currency Deposits – Secs. not negotiability 4. xSubsec. FCDA36 6. International Exchange Bank v.1. For Islamic Banks – Sec. MRB.
496 SCRA 459 (2006): if bank refuses to pay check. not negotiable. 1. 485. of the Phil. Villanueva v. 22. not acceptable 2. Sec. 9(a). even if funds deposited later in the day. Anonymous Accounts/Fictitious Names – Sec. bank not liable for refusal to pay check for insufficiency of funds. Bank Officers and Employees: Prohibited from maintaining demand deposits or current accounts in banking office where they are assigned – xSec. 7192 3. 178. AMLA. conversely. MRB D. 9160. Court of Appeals. AMLA37 b. Civil Code c. From current accounts: Allowing withdrawal of value of check drawn: (i) 37 In case of insufficiency of funds – Moran v. payee-holder cannot sue bank. Withdrawal of Funds a. 5. Thrift Banks Act 2. therefore. Revised Penal Code. ID optional – xSubsec. Acceptability of withdrawal slips as deposits – Firestone Tire & Rubber Co. Sec. Know Your Customer Standards: At least 3 specimen signatures updated every 5 years. MRB 2. OPENING OF DEPOSIT ACCOUNTS 1. Corporations: Through signatories designated by Board of Directors – Sec. 1934. as amended. Deposit of Funds a. X204. 1207 and 1208. 9(a). FCDA 3. Nite. Pseudonyms – xArt. 379-380. Joint Accounts – Arts. 353 SCRA 601 (2001): deposit slips not legal tender. 230 SCRA 799 (1994): if deposit is sufficient. as amended by Republic Act No. Married Women – Sec. but instead sue drawer. ADMINISTRATION OF DEPOSIT ACCOUNTS 1. bank failure to pay entitled depositor to damages. 23. xCommonwealth Act No. 734. v. Exception: Numbered accounts – Sec. Delivery required – Art. X262. 142. Civil Code b. Corporation Code 4. CAPACITY OF DEPOSITORS 1. 9194 (“Anti-Money Laundering Act of 2001”) . Court of Appeals. Republic Act No. who in turn may sue bank Republic Act No.14 C.1. xArts. 3(1). Prohibitions: a. Civil Code E. Presidential Decree No. Minors – Sec.
But See: xSec. X243. MRB 4. Not subject to interest ceilings – xSec. 326 SCRA 641 (2000): present passbook and withdrawal slip and. MRB c. 5.A.2. Booking of Deposits – xSec. 488 SCRA 517 (2006): loan or forbearance of money.1. FCDA: based on contract e.. Disclosure requirements – xSec. N. Querimit. X242. Cabamongan. From foreign currency deposits – Sec. v. (b) may be negotiated only once to one with account in bank. From time deposits – Far East Bank and Trust Company v. Pacilan. present authorization (SPA) c. If deceased depositor: (i) Tax clearance required – Sec. Interest on Deposits – Citibank. drawn upon itself. not for unlawful purpose (inofficious donation) 3. if third party. otherwise. Court of Appeals. NIRC (ii) Survivorship Agreements – Vitug v. he is not a holder in due course (iv) In contrast with manager’s check – Equitable PCI Bank v. 97. 390 SCRA 608 (2002): if crossed check. regarded substantially as good as cash b. MRB d. MRB 5. Ong. NIRC. 373 SCRA 665 (2002): surrender of certificate of deposit d. so interest due is that stipulated in writing. Inc. obligation with a term (death). and in absence thereof. Radio Philippines Network. bank duty bound to ascertain indorser’s title to check or nature of his possession because crossed check: (a) may not be encashed but only deposited. Court of Appeals. 12% per annum counted from time of demand a. Matured time deposits – xSubsec. From savings accounts – Bank of the Philippine Islands v.15 (ii) Prior to clearing – Associated Bank v.. X242. Time of payment of interest on time deposits – xSubsec. 502 SCRA 119 (2006): manager’s check is order of bank to pay. MRB b. hence. Closing of Account – Far East Bank and Trust Company v. X242. 183 SCRA 755 (1990): “survivor-take-all” feature allowed. (c) serves as warning that check issued for particular purpose and bank must inquire if holder received check pursuant to said purpose. Tan. 446 SCRA 282 (2004): bank allowing withdrawal of face value of deposited check prior to clearing assumes risk of dishonor (iii) In favor of other persons when check crossed – Traders Royal Bank v. Jr. 465 SCRA 372 (2005): bank not liable for closing of account in exercise of bank’s rights under express rules and regulations (due to frequent drawing of checks against insufficient funds) . 28(A)(1) (a) and (6). X261.
Sandiganbayan (Special Division). 2 and 3. Secs. 509 SCRA190 (2006): “fruit of the poisonous tree” principle not applicable in absence of statutory provision calling for application 2. Republic v. broad enough to cover trust accounts b.16 F. NCBA. while bank accounts not covered by right to information or requirement of full public disclosure. III. Coverage – Sec. 28. Dollar deposits. 1405. SECRECY OF BANK DEPOSITS 1. and 7 and Art.4. Officers. Related Interests . 1987 Constitution. II. 2. 377 SCRA 63 (2002): if accounts are U. hence.S. General Rules a. which applies to Philippine Peso deposits. Sec. Ejercito v. not constitutional. 2 and 3. applicable law is FCDA. 2. Court of Appeals. as amended Directors. 545 SCRA 384 (2008): right to privacy is statutory. MRB (b) In cases of impeachment (c) Upon the order of a competent court in cases of bribery or dereliction of duty of public officials (d) In cases where the money deposited or invested is the subject of litigation Republic Act No. Sandiganbayan (Special Division). Eugenio. 1987 Constitution. and not R. Law on Secrecy of Bank Deposits. c. III. Law on Secrecy of Bank Deposits (a) Upon written permission of the depositor or investor: (1) (2) 38 39 DOSRI39 loans – Sec. X337. Rationale: right to privacy – Art. 509 SCRA190 (2006): “of whatever nature” proscribes restrictive interpretation of “deposits”. 55. Secs. including investments in bonds issued by GOP.1(b) and 55. X315(f).A. MRB For loans secured by hold-out or assignment of CTDs – xSec. 2. Applicable law – Intengan v. Secs. Applicability of exclusionary rule – Art. Rules for Peso Deposits a. 26. 3. thus. Exceptions (i) Under the Law on Secrecy of Bank Deposits – Sec. Prohibitions – Secs. neither is it subject to requirements for issuance of search or arrest warrants b. Ejercito v. Law on Secrecy of Bank Deposits 38: all deposits of whatever nature with banks or banking institutions in RP. xSec. 1405. Stockholders. GBL c.
which is similar to bribery. Ejercito v. 509 SCRA190 (2006): cases of unexplained wealth. (c) bank personnel and account holder must be notified to be present during inspection. except that no court order is required in cases of: (1) (2) (3) (b) 40 kidnapping for ransom drug trafficking hijacking. 15(8). 545 SCRA 384 (2008): even if bank inquiry order may be availed of without need of pre-existing case under AMLA. 359 SCRA 772 (2001): requisites for in camera inspection: (a) pending case before court of competent jurisdiction. such as plunder. Marquez v. unlike freeze orders which are authorized to be issued upon application ex parte under Sec. 509 SCRA190 (2006): Marquez v. 7080. 1(d) and 4. therefore. Banco Filipino Savings and Mortgage Bank v. Anti-Graft and Corrupt Practices Act. Gancayco. since nothing in Sec. destructive arson and murder. Philippine National Bank v. else circumvention (iii) Under the Ombudsman Act41 – Sec. (d) inspection may cover only the account identified in pending case Ejercito v. AMLA. when the inquiry or examination is made in the course of the BSP’s periodic or special examination Republic Act No. in case of doubt. constitutes exception to confidentiality of deposits (v) Under the AMLA – Sec. 3019. 6770 42 Republic Act No. Republic v. Disierto ruling (accountholder must be notified) has no retroactive application (iv) Under the Plunder Law42 – Secs. Purisima. Disierto. 11. “notwithstanding any provision of law to the contrary”. resolved in favor of confidentiality (a) Upon order of a competent court in cases of violation of the AMLA where there is probable cause of money laundering. 8. and inspection limited to subject matter of pending case. as amended 41 . including those perpetrated by terrorists against non-combatants and similar targets BSP inquiry into or examination of deposits or investments with any bank. 11 authorizes it. Eugenio. 161 SCRA 576 (1988): inquiry extends to cases where property is concealed or held or recorded in name of other persons. (b) account must be clearly identified. 10 of AMLA.17 (ii) Under the Anti-Graft and Corrupt Practices Act 40: In cases involving unexplained wealth – Sec. as amended Republic Act No. Plunder Law. Sandiganbayan (Special Division). it does not follow that such order may be availed of ex parte. Ombudsman Act. Sandiganbayan (Special Division). 15 SCRA 91 (1965): clear exception to bank secrecy law.
193 SCRA 452 (1991) (b) Preliminary attachment – Sec. PDIC Charter: PDIC and BSP may inquire into and examine deposit accounts in case there is a finding of unsafe or unsound banking practice (vii) Under the Human Security Act45 – Secs. par. 2.18 (vi) Independent auditor hired by the bank to conduct its regular audit. xPhilippine Commercial and Industrial Bank v. 49 SCRA 356 (1973): disclosure purely incidental to execution process. Unclaimed Balances Law. No. 243 (Series of 1957). Rule 39. and no legislative intent to place accounts beyond reach of execution to satisfy final judgment. Disierto. 6(F). 3936. Human Security Act: Note that: (a) exception is only with respect to R. xDOJ Opinion No. NIRC (a) Upon inquiry by the Commissioner of Internal Revenue for the purpose of determining the net estate of a deceased depositor (b) In case a taxpayer files and application to compromise his tax liabilities on the ground of financial incapacity (waiver required) (ix) Under the Unclaimed Balances Law46 – Disclosure to the Treasurer of the Philippines for dormant deposits for at least ten (10) years – Sec. Rule 57. 9(c). 104 (Series of 1975) (x) Under the Rules of Court (a) Garnishment – Sec. Eighth. 8. 359 SCRA 772 (2001) (vii) Under the PDIC43 Charter44 – Sec. 7400 and Republic Act No. 5. 679 44 . 3591. xMarquez v. 27-43. Court of Appeals. Ortega. 9576 45 Republic Act No. Penalty for Violation – Sec. 1997 Revised Rules of Civil Procedure. (b) exclusionary rule is made to apply (viii) Under the NIRC – Sec. as amended by Republic Act No. 1405. 10. provided that the examination is for audit purposes only and the results thereof shall be for the exclusive use of the bank – xDOJ Opinion No. and not FCDA. as amended by Presidential Decree No. 9732 46 Act No. Law on Secrecy of Bank Deposits 43 Philippine Deposit Insurance Corporation Republic Act No. d. 1997 Revised Rules of Civil Procedure.A. China Banking Corporation v.
FCDA c. FCDA 4. but this is exceptional case. 8. 26(a)(2). 55. Rural Banks Act c. 8. Exceptions (i) Upon written consent of the depositor 47 – Sec. Penalty for Violation – Sec. Thrift Banks – Sec. 11. Rules for Foreign Currency Deposits a. 10. AMLA (iv) Under the PDIC48 Charter49 – Sec. 278 SCRA 27 (1997): FCDA intent to cover only foreign lenders and investors. when the inquiry or examination is made in the course of the BSP’s periodic of special examination of said bank – Sec. Salvacion v. 511 SCRA 110 (2006): co-payee of a foreign currency depositor in checks deposited in account of latter deemed depositor and may give consent to allow inquiry (ii) Upon order of a competent court in cases of violation of the AMLA where there is probable cause of money laundering. as amended by Republic Act No. FCDA. Central Bank of the Philippines). 7400 and Republic Act No. not transients. are not covered by FCDA and thus not exempt from BIR-issued processes b. Court of Appeals. Rural Banks – Sec. 445 SCRA 655 (2004) Philippine Deposit Insurance Corporation 49 Republic Act No. FCDA: all foreign currency doposits authorized under FCDA. except that no court order is required in specified cases – Sec. Central Bank of the Philippines. Court of Appeals. 11. China Banking Corporation v. par. 8. Revised NonStock Savings and Loans Association Act of 1997 47 Intengan v. 33 and 45. Estrada v. 3591. citing Salvacion v. 21(a)(2). Non-Stock Savings and Loans Association – xSec. Islamic Banks – Secs. PDIC Charter: PDIC and BSP may inquire into and examine deposit accounts in case there is a finding of unsafe or unsound banking practice d. 9576 48 . Islamic Bank Charter b. Under the GBL – Sec.1(b). Thrift Banks Act d. AMLA (iii) BSP inquiry into or examination of deposits or investments with any bank. Rules for Deposits in Specific Banks and Financial Institutions a. 377 SCRA 63 (2002).19 3. 445 SCRA 655 (2004): Seems to adopt view that foreign currency deposits of Filipinos (as opposed to foreign lenders and investors. Disierto. Estrada v. Prohibition – Sec. 6. 8. GBL a. Eighth. Coverage – Sec. Desierto.
Unclaimed Balances Law 50 Philippine Deposit Insurance Corporation Republic Act No. Effects of Compliance/Non-Compliance – Secs. 3.000. as amended by Republic Act No. 1. Exempt Deposits a. GARNISHMENT 1. 7400 and Republic Act No. Court of Appeals. Foreign currency deposits – Sec. Court of Appeals. 9. Rule 39. Republic Act No. Republic v. 13.20 G. Ortega. 3 and 4. 49 SCRA 356 (1973). xPhilippine Commercial and Industrial Bank v. Rules on Payment – Secs. even if time deposit certificates indicates that it is insured with PDIC I. 3591. Unclaimed Balances Law 4.00 – Sec. 283 SCRA 462 (1997): only for deposits actually received by a bank (and therefore insured with PDIC). Central Bank of the Philippines. Publication – Sec. Amount Insured: Maximum of P500. Notice. 193 SCRA 452 (1991) H. Procedure – Sec. 193 SCRA 452 (1991) 4. 9576 52 As further amended by Secs. FCDA 2. 9(c). DEPOSIT INSURANCE 1. Escheat Proceedings – Sec. but not for money not received. 345 SCRA 63 (2000): publication mandatory to notify persons who may have interest in funds for purposes of escheat proceedings 3. FCDA. 278 SCRA 27 (1997) b. 8. Posting. 9576 51 . 4(g). 168 SCRA 49 (1988): bank not liable for rlease of funds pursuant to a court order. Rule 39. Court of Appeals. Liability for Release – Rizal Commercial Banking Corporation v. 1997 Rules of Civil Procedure 2. Unclaimed Balances Law 2. Coverage – Sec. Liability of PDIC – Philippine Deposit Insurance Corp. 4. v. 4 and 5. 1997 Rules of Civil Procedure 3. Court of Appeals. Report to Treasurer. 10(b) to (d). Definition – Sec. De Castro. UNCLAIMED BALANCES 1. xPhilippine Commercial and Industrial Bank v. No violation of Law on Secrecy of Bank Deposits – xChina Bank v. 2. Under the Rules of Court – Sec. Sec. PDIC Charter 4. PDIC Charter52 3. But See xSalvacion v. PDIC50 Charter51. Unclaimed Balances Law.
AMLA 3. by the following acts: – Sec. remittance. closed-end investment companies. or relates to proceeds of any Unlawful Activity b. cash substitutes and other similar monetary instruments or property 54 Anti-Money Laundering Council . ANTI-MONEY LAUNDERING ACT 1. and other similar entities. Insurance companies and other entities supervised/regulated by Insurance Commission c. within 5 working days from occurrence. Customer Identification: Establish and record. Obligations of Covered Institutions – Sec. investment houses. AMLA a. AMLA a. 2. in cash or other equivalent monetary instrument in excess of P500. AMLA 4. Record Keeping: Keep records for 5 years c. common trust funds. and maintain a system of verifying true identities of clients. (d) Other entities administering or dealing in currency. based on official documents b. b. Reporting of Covered and Suspicious Transactions: Report Covered Transactions and Suspicious Transactions to AMLC 54. valuable objects. 3(b). Banks and other entities. brokers. and transfer companies. SEC supervised/regulated entities53 5. Declared Policy – Sec. knowing it represents. commodities or financial derivatives based thereon. by failing to perform an act 53 (a) Securities dealers. including legal existence and organizational structure of corporate clients. or consultants. and other entities managing securities or rendering services as investment agents. 4. Facilitating money-laundering referred to in Item (a) above. Covered Institutions – Sec. AMLA a. Suspicious Transactions: Transaction with Covered Institution. where any of the enumerated suspicious circumstances exist – Sec. money changers. AMLA 2. (c) Foreign exchange corporations. FCDA. Transacting or attempting to transact. and other similar entities. Money-Laundering Crime: Committed when the proceeds of an Unlawful Activity are transacted to make them appear to have originated from legitimate sources. and GBL 6. 3(b-1). and their representatives. with monetary instrument or property. pre-need companies.21 J. regardless of amount involved. advisor.000 within 1 banking day – Sec. involves. money payment. Covered Transactions: Transaction. 9. 3(a). salesmen. supervised/regulated by BSP their subsidiaries and affiliates. which shall not violate the Law on Secrecy of Bank Deposits. (b) Mutual funds.
12. Composition and Powers – Sec. Freezing of Accounts: Issued by Court of Appeals upon ex-parte application of AMLC after determination of probable cause that monetary instrument or property is in any way related to Unlawful Activity. 545 SCRA 384 (2008): ex-parte application allowed. Glasgow Credit and Collection Services. No. which is in rem. involving or having relation to the crimes enumerated – Sec. Penalties – Sec. 10. AMLA 9. AMLA. 11. hijacking. AMLA. Penalties and Other Consequences a. 14. BSP inquiry into or examination of deposits or investments with any bank. Mutual Assistance among States – Sec.22 c. Republic v. unlike inquiry into deposit 13. ordered seizure of any monetary instrument or property related to such report. Eugenio. AMLC. 12. for 20 days unless extended – Sec. AMLA (i) (ii) (iii) (iv) Money laundering Failure to keep records Malicious reporting Breach of confidentiality b. destructive arson and murder.M. and (2) court has. Upon order of a competent court in cases of violation of the AMLA where there is probable cause of money laundering. 05-11-04-SC . 5. Civil Forfeiture – Sec. Eugenio. Examination of Accounts – Sec. b. xRules on Civil Forfeiture55. Inc. Criminal action for an unlawful activity is not a prerequisite for institution of civil forfeiture proceeding. 13. Jurisdiction: Regional Trial Court/Sandiganbayan – Sec. 6. including those perpetrated by terrorists against non-combatants and similar targets. AMLA 15. 7. when the inquiry or examination is made in the course of the BSP’s periodic of special examination of said bank to ensure compliance with AMLA 14. Failing to disclose and file report with AMLC of any monetary instrument or property as required under AMLA 7. AMLA 55 SC Circular A. except that no court order is required in cases of kidnapping for ransom. Unlawful Activities: Act or omission or series or combination thereof. AMLA 10. AMLA 8. Republic v. 542 SCRA 95 (2008): 2 conditions: (1) there is a suspicious transaction report or a covered transaction report deemed suspicious after investigation by AMLC. in a petition filed for the purpose. 3(i). 16.. Prohibition against Political Harassment – Sec. AMLA. AMLA 11. xRepublic v. Prosecution – Sec. drug trafficking. 545 SCRA 384 (2008) a.
bank must ascertain that debtor capable of fulfilling his commitments. 40. Banco de Oro-EPCI. must be consistent with safe and sound banking practices b. Inc. 3765 . a. 39 and 40. 55. Terms and conditions – Sec. X301. BASIC CONCEPTS 1. 41. LOAN FUNCTION A. if bank finds that proceeds employed. GBL d. 2. MRB. Prohibited Transactions – Secs. Renewal or extension – Sec. 9182 (Special Purpose Vehicle Act of 2002) 4. GBL. Ramos. bank has right to terminate loan and demand immediate repayment c. 49 GBL. furnishing false statements. 551 SCRA342 (2008): bank should verify capacity to repay. 46. if financial statements prove false or incorrect in any material detail. bank has right to terminate loan and demand immediate repayment. bank should verify identity and other information regarding its debtors. NCBA c. GBL. hence. and 55. Purpose of loans – Sec. 415 SCRA 596 (2003). Sec. 56 Republic Act No. 48 GBL. Requirement for loans – Sec. bank may require submission of financial statements. 4 and 6. if financial statements falsified. xSec. without its approval for other purposes. MRB e. GBL: Must be stated in application and in contract between bank and borrower. commissions for loan approval 3. 55.2. offering and accepting gifts. Inc. Purpose. Other security requirements – Sec. xSecs. bank may terminate 2. GBL. X332. MB Regulation a. GBL b. xSec. Unsecured loans – Sec. Disclosure Requirements – Secs. xRepublic Act No. Provisions for losses and write-offs – Sec. GBL: prohibition against bank officers and borrowers in overvaluing security. Grant. X302 and 304. New Sampaguita Builders Construction. United Coconut Planters Bank v.23 IV. Development Assistance Incentives – Sec. xSecs X302 and X306 MRB. X307.1(c). 39. Grant of loans – Sec. v. fees. GBL: Only in amounts and for periods of time essential for effective completion of operations to be financed. 42. MRB.1(d). and Requirement of Loans – Secs. Truth in Lending Act 56. 106. JAPRL Development Corporation. 39. 43. GBL: for banks that extend loan for social purposes without government guarantee 5.
1956. 515 SCRA 79 (2007): 24% per annum reasonable. especially in contracts of adhesion. 905. Dagupan City Branch. s. 2655 as amended . 218 SCRA 426 (1993) d. Floating rates of interest – xSec. Inc. prepay loan or portion thereof. Escalation clause. v. may defer amortization. Philippine National Bank. Ng Sheung Ngor. MRB. still stipulated interest rates are illegal if unconscionable (here 4% per month. 435 SCRA 565 (2004): If borrower not clearly informed of Disclosure Statements prior to consummation of loan. Yasuma. Consolidated Bank and Trust Corporation (Solid Bank) v. 45. GBL: borrower may. xSec. 1250. for violation of Truth in Lending Act B. 356 SCRA 671 (2001): if no reference rate upon which to peg variable interest rate. In the absence of stipulation – xSec. X305. MRB. Civil Code. Civil Code. even if stipulated in the loan documents (PN). v. 1-a. New Sampaguita Builders Construction. GBL: adapted to nature of operations to be financed. Interest – Art. X305. legal interest rate of 12% per annum shall apply. Jr. MRB.24 (NSBCI) v. subject to such reasonable terms agreed upon 3. Amortization – Sec. Extraordinary Inflation/Deflation – Art. No ceiling – xSec. provisions for periodic amortization. Civil Code: expressly stipulated in writing a. Equitable PCI Bank v. Bangko Filipino Savings and Mortgage Bank. other cases 3% per month unconscionable). 4-a. Philippine National Bank v. Court of Appeals. 527 SCRA 727 (2007): although usury law suspended by C. increases. then invalid 4. Court of Appeals. when allowable – Art. X305. Bulos. bank’s closure does not diminish liquidator’s power to carry on administration of bank including imposition of interest and institution of foreclosure proceedings b. xSec. in which case. Court of Appeals. 196 SCRA 536 (1991): provision allowing increase “within limits allowed by law at any time depending on whatever policy it may adopt in the future” invalid because it violates mutuality of contracts. 1982. if maturity more than 5 years. Jr. X305. 541 SCRA 223 (2007): (a) valid escalation clause provides: (i) interest rate will only be increased if applicable maximum interest rate increased by law or MB. 1308.B. TERMS AND CONDITIONS 1. if purpose will not initially produce revenues. 45 of Usury Law 57. also. But See xLlorin. subject to original or stipulated interest rate. bank has no right to collect upon such charges. but initial date not later than 5 years 2. MRB c. (NSBCI) v. and (ii) stipulated interest 57 Act No. Pre-Payment – Sec. Bacolor v. 435 SCRA 565 (2004): if escalation clause annulled. at any time. 44. Circular No. Philippine National Bank.
What is Included in Ceiling – Secs. shipping documents. Tolentino v. fully guaranteed by GOP. warehouse receipts or other similar documents transferring or securing title covering readily marketable. include liabilities of all members e. 35. Ceilings – Sec.1 to 303. retained earnings and undivided profit. MRB C. GBL 1. include all liabilities of corporation. Total credit commitment of bank to borrower shall at no time exceed 20% of net worth (total unimpaired paid-in capital including paid-in surplus. other entity. 144 (1954). If corporation. xSec. (b) for extraordinary inflation (or deflation to apply: (i) there is an official declaration of extraordinary inflation or deflation from BSP: (ii) obligation is contractual in nature. to Sec. 34 Phil. Camus. But Exclude: loans and obligations secured by obligations of BSP or GOP. 35. 323 (1957) . Hon. association. SINGLE BORROWERS LIMIT – Sec.1 and 35. 24. Direct liability of maker or acceptor of paper discounted with or sold to bank such bank and liability of general indorser.7. MRB: a. in rel. GBL. 101 Phil. and (iii) parties expressly agreed to consider effects of extraordinary inflation or deflation. Judge of First Instance of Iloilo. non-perishable goods fully insured 2. 96 Phil. net of valuation reserves and other adjustments as may be required by BSP) of bank b. If individual. Araneta v. xSubsec X303. X322. Restructuring – xSec. or association where he owns or controls majority interest c. MRB a. include all liabilities of subsidiaries in which corporation owns or controls majority interest d. partnership. 140 (1938). GBL58. Carlos. 157 (1916). covered by assignment of deposits. 35. 5. 66 Phil. drawer or guarantor who obtains a loan or discounts or sells papers with such bank b. If partnership.25 rate will be reduced if maximum interest rate is reduced by law or MB. Gutierrez v.3 to 35. margin deposits..2.4. X303. May be increased by an additional 10% of net worth of bank if adequately secured by trust receipts. and other non-risk items 58 Government of the Philippine Islands v. Gatmaitan.
indorser. Sec. GBL: Note. Coverage: Persons and Transactions Covered – xSecs. Covered Persons: Directors.1. upon due notice to Board of Directors.26 3. Exceptions a. As MB may otherwise prescribe for reasons of national interest – Sec. Officers. Note that if there is a violation of Sec. 36 of GBL. guarantor. MRB . excluding director concerned. MRB D. X336. X330 to X332. 17. Limit of loans to DOSRI – amount equivalent to unencumbered deposits and book value of paid-in capital contribution in bank b. MRB a. credit accommodations. X334 and X335. Ceilings: Individual and Aggregate Ceilings and Exclusions – xSecs. Covered Transactions: DOSRI becoming a borrower (directly or indirectly. or advances to officers in the form of fringe benefits 2. Deposits of RB with government financial institutions – Sec. Requirements: Procedural and Reportorial – xSecs. Sanctions – xSubsec. MRB a. Sanctions – xSec. credit accommodations and guarantees extended by Coop Bank b. the office of director or officer who violates may be declared vacant and the director or officer may be subject to penal provisions of NCBA b. Related Interests b. 26. Excluded Transactions: Loans. for himself or as representative of others). DOSRI ACCOUNTS – Sec. NCBA 1. GBL. If Director or Officer – loan must be approved in writing by majority of all directors of bank. SBL currently set at 25% of net worth of bank b. Rural Banks Act 4. surety (MB may also regulate amount of investments of bank in enterprises owned or controlled by DOSRI) c. X326 to X329.5. and approval shall be entered upon records of bank and copy transmitted to BSP’s SED. 36. 303. If DOSRI – dealings shall be upon terms not less favorable to bank than those offered to others 4. Excluded Persons: Shareholders Coop Bank with respect to loans. Exclusions from limit – loans secured by non-risk assets 3. MRB a. 35. Stockholders.
plus 60% appraised value of insured improvements. 37. 38. xMetropolitan Bank and Trust Co. 331 SCRA 267 (2000): “due diligence” required of banks: (i) send representatives to premises. Types of security (i) Chattel Mortgage – xChattel Mortgage Law59 (ii) Pledge – xArts. (ii) conveyed to bank in satisfaction of previously contracted debt. MRB 2. 448 SCRA 705 (2005) 3. Carandang-Villalon. xSec. hence.27 E. or (iii) purchased under judgments. mortgagee in bad faith – Philippine National Cooperative Bank v. Court of Appeals. 2047. Inc. v. X313. Court of Appeals. Civil Code (iii) Hold-out and/or Assignment – xArts. surety not liable beyond amount or period stipulated. Loans Secured by Chattels or Intangible Property a. Court of Appeals. X319. 198 SCRA 767 (1991): liability of surety based on contract. 1207 to 1225. GBL: Property (i) mortgaged to bank in good faith by way of security for debts. Pascual. Loans Secured by Real Estate Mortgages (REMs) a. valid 59 Act No. Cuenca. 547 SCRA 246 (2009) c. “Dragnet Clause” or “Blanket Mortgage Clause” – Union Bank of the Philippines v. mortgages. MRB b. Civil Code. v. xSec. xOng v. Joint and Solidary Signature (JSS) – Art. but if manifest intent of parties that mortgaged property shall also answer for future loans. Security Bank and Trust Company. and (ii) investigate who are real owners of property. GBL: not exceed 75% appraised value of real estate. Philippine National Bank v. GBL: not exceed 75% appraised value of security. Development Bank of the Philippines v. Civil Code 4. 471 SCRA 751 (2005): mortgage liability usually limited to amount in contract. MRB b. X311. absent clear showing that surety waived right to be notified or to give consent. bank may acquire but must dispose within 5 years d. trust deeds. 341 SCRA 781 (2000): suretyship strictly construed against creditor. xArts. 139 SCRA 570 (1985): old rule. Unsecured Loans – xSec. even if continuing surety agreement. 326 SCRA 425 (2000): degree of diligence more than good father of a family. 52. Canlas v. Limits – Sec. 1624-1635. because public interest. 1508 . Mortgagee in good faith vs. Limits – Sec. COLLATERAL/SECURITY 1. Philippine Commercial Industrial Bank. Court of Appeals. bank not required to investigate title of property. Civil Code. decrees. 2085-2123. Acquisition of property by way of satisfaction of claims – Sec.
Court of Appeals. 1. 359 SCRA 480 (2001): governed by GBL (GBA then) which amends Act No. 1. expenses less income.. Rules of Court (ii) Extra-judicial – Act No. 3135. one (1) year from registration of certificate of sale. Inc. 31 SCRA 329 (1970): legal redemption converted by agreement of parties to conventional redemption. Foreclosure of REMs – Sec. Court of Appeals. 192 SCRA 34 (1990): Not even by TRO. GBL a. 47. Court of Appeals. Possession – Sec. People’s Financing Corporation v. par.4 and 3311. c. Development Bank of the Philippines v. 150 SCRA 591 (1987): Yes. Rule 39 of Rules of Court not applicable. 1. Section 30. See also CMS Stock Brokerage. Development Bank of the Philippines. par. hence. hence. v. there was fraud. 391 SCRA 330 (2002): DBP governed by charter d. Rural Banks Act. Redemption Price – Sec. par. Letter dated 26 September 2001 addressed to Ayala Life. 1997 Rules of Civil Procedure. 569 SCRA 814 (2009): statement of intent to redeem must be with actual and simultaneous tender of payment (iii) Extension of redemption period – Lazo v. GBL: registration of certificate of sale. Intermediate Appellate Court. as amended (iii) Specific rules for TB/RB/Coop Banks – Sec. But see Consolidated Bank and Trust Corporation (Solidbank) v. par. GBL. MRB b. 21 SCRA 1374 (1967): Not. 47. 1. v. 3135. Rule 39.28 5. Inc. 47. Act No. Republic Surety and Insurance Co. 275 SCRA 790 (1997): in prior case of Consolidated. Union Bank of the Philippines v. West Negros College. as amended. Samson v. Injunction and Bond – Sec. GBL: amount due under mortgage deed plus stipulated interest. Sec. even within redemption period e. 3135. 6. Rivera. GBL . Ibaan Rural Bank. 321 SCRA 88 (1999): estoppel (iv) Tolling of redemption period – Sumerariz v. 2. 99-10-05 (as further amended on 7 August 2001) (i) Exception: Extrajudicial foreclosure of property mortgaged by juridical person – Sec. 47. 28. xSubsecs. 6.. period tolled (v) Payment of CGT and DST – xBIR Ruling 0046-2001. par. Inc. Right and period of redemption – Sec. 47.2311. Court of Appeals. GBL: General rule. Sec. 47. 428 SCRA 759 (2004): Issue of WOP ministerial. xSC Circular AM No.4. but not exceeding three (3) months (ii) Exercise of right of redemption – Metropolitan Bank and Trust Company v. Types of foreclosure (i) Judicial – Rule 68. Tan. costs.
GBL: Whether UB or its wholly or majority-owned subsidiary. GBL: Max. 402 SCRA 612 (2003) (i) Must be with prior approval of MB – Sec. GBL: Max.. xAgan. retained earnings and undivided profits. Limits on Equity Investments of KB a. GBL (ii) Total investment in equities of allied and non-allied enterprises – Sec. 24. 1. 3. 378. RB. 24. MRB. 52.. 30. In general – Sec. GBL: total unimpaired paid-in capital including paid-in surplus. INVESTMENTS AND OTHER FUNCTIONS OF BANKS A. xSec. GBL (by analogy) (vi) Sanctions if without prior MB approval – xSec. 30. X383(a). 3. Jr. MRB (v) In quasi-banks – Sec. GBL: Up to 100% of equity.2. xSec. xSec. GBL: Up to 100% of TB. GBL (i) Must be with prior approval of MB – Sec.xSec. xSubsec. 28. if UB publicly listed. 24. MRB (iii) In non-financial allied enterprises – Sec. v. MRB (ii) In Venture Capital Corporations (VCCs) – xSec. MRB 2. Limits on Equity Investments of UB a.1. GBL: MB may limit to 40% of equity to promote competitive conditions (vi) In subsidiaries and affiliates abroad . 25. X382. 1381. Inc. par. MRB. xSec. X380. X379. par. Philippine International Air Terminals Co. In general – Sec. xSec. X116. X376. MRB (iv) In non-allied enterprises – Sec. GBL: May invest in equity of allied (financial or non-financial) and non-allied enterprises.. par. MRB (iii) Investment in equity of any one enterprise – Sec.3(i). 24. 35% of equity and voting stock of non-allied enterprise. 26. In specific areas (i) In financial allied enterprises – Sec. 24. GBL . net of valuation reserves and other adjustments as may be required by BSP (v) Do the foregoing limits apply to debt-to-equity conversions? No. up to 100% of only one other UB or KB. max. 4. or financial allied enterprise.29 V. xSec. X383(b). 25% of net worth. 385. 1. MRB (iv) Definition of net worth – Sec. 27. par. MRB b. 50% of net worth. xSec. par. EQUITY INVESTMENTS 1.
. 1-3. Vintola v. Reliance Commodities. xBSP Circular No. Limits on Equity Investments of RB – Sec. 24. Court of Appeals. 31. Nitafan. Ltd. Daway. OTHER KB FUNCTIONS – Sec. GBL: MB may limit to 40% of equity to promote competitive conditions (v) In subsidiaries and affiliates abroad . Thrift Banks Act 4. 29. Insular Bank of Asia and America. GBL: Up to 100% of equity (iv) In quasi-banks – Sec. 76-80. Luzon Hydro Corporation. 150 SCRA 578 (1987)61 (previously discussed under Letters of Credit and Trust Receipts) 3. 61 Philippine National Bank v.xSec. GBL: Up to 100% of TB or RB. 30. 30. 12. if other financial allied enterprise. 5. Issuing L/Cs60 – Sec. 35% of net worth (iii) Investment in equity of any one enterprise – Sec.2. 25% of net worth (iv) Definition of net worth – Sec. Islamic Bank Charter B. Bank of America. Ordoñez. Transfield Philippines. GBL. 4. minority holding only (ii) In VCCs – xSec. In specific areas (i) In financial allied enterprises – Sec. Non-Core/Quasi-Banking Functions – Sec. GBL 60 Abad v. 228 SCRA 545 (1993). OTHER SERVICES – Sec. 271 (Series of 2001) 1. Daewoo Industrial Co. MRB 3. Inc. Foreign Exchange Operations: Buying and selling foreign exchange and gold or silver bullion – Secs.30 (ii) Total investment in equities of allied (financial or non-financial) enterprises – Sec. NCBA C. 32. Sec. 207 SCRA 726 (1991). Limits on Equity Investments of Islamic Bank – Sec.. 105. 95. 13. Limits on Equity Investments of TB – Sec. 28. MRB b. GBL: Max. v. NT & SA v. GBL (see above) (v) Sanctions if without prior MB approval – xSec. GBL: Max. Inc. MRB (iii) In non-financial allied enterprises – Sec. 197 SCRA 1 (1991). GBL. 53. People v. 3. X379. X382. 228 SCRA 357 (1993). Court of Appeals. NCBA 2.Metropolitan Waterworks and Sewerage System v. 6(11). Allied Banking Corporation v. pars. Pineda. 385. 181 SCRA 191 (1990). v.1. NCBA. 443 SCRA 307 (2004). 432 SCRA 559 (2004). 192 SCRA 246 (1990) . including another commercial bank. par. Rural Banks Act.
Insurance Code (definition of insurance business) 2. Issue Guarantees – See Sec. MRB E. 55(1)(e). GBL 2. 54. GBL 5. X320. Documents. Valuable Objects – Sec.1. Court of Appeals. CA AgroIndustrial Development Corporation v. TRUST OPERATIONS – Secs. GBL 4. Financial Agent – Sec. Credit Card Operations – xSec. correspondent bank’s liability depends on whether it is merely an advising. and thereafter apply funds to obligations owed to it by individual (no shortcut for set-off) 3. (b) stipulation exempting from liability for loss due to fraud.A. and it creates principal-agent. Collection/Payment Agent – Sec. PROHIBITED ACTS 1.4. 2. GBL VI. Court of Appeals. 53. Insurance business – Sec. not trustor-trustee (trusts) or creditor-debtor (deposits). Court of Appeals. 53. Sia v. 74. Financial Adviser – Sec. 539 SCRA 69 (2007): investment management activities may be exercised by bank. Panlilio v..3. its failure to give notice of fact renders it liable (flooding which damaged stamp collection) D. negligence or delay is void as contrary to law and public policy. GBL. Philippine National Bank v. or it is a confirming. Renting Out Safety Deposit Boxes – Sec. 259 SCRA 174 (1996): local bank. Act as Correspondent Bank – Feati Bank & Trust Company v. N. Outsourcing of inherent bank functions – Sec. GBL. GBL: bank shall not directly engage in insurance business Sec. 53. so governed by rules on agency 3. 79 to 93.31 1. Court of Appeals.5. degree of diligence is good father of family. 196 SCRA 576 (1991): if L/C transactions. 222 SCRA 24 (1993): while fortuitous event may exempt bank from liability. Custodian of Funds. 219 SCRA (1993): (a) not ordinary contract of lease (because full and absolute control and possession of safety deposit box not with renter) but special kind of deposit. (c) if no stipulation. General Banking Act 2. Citibank. bank. OTHER FUNCTIONS/OPERATIONS 1.2. cannot intercept funds coursed through it by foreign counterpart for transmittal and deposit to account of individual with another local bank. while acting as correspondent bank. BANK REGULATIONS . 53. 53. relationship. GBL: Essentially provides for rules on trust operations by a trust entity to govern trustor-trustee-beneficiary relationship F.
1. Summers.32 A. 11. 8. 257 (Series of 2000) d. xBSP Circular No. GBL. only par value shares may be issued by bank (ii) Treasury stocks – Sec. Stock corporation – Sec. 8. GBL. 8. Stockholdings of family groups or related interests – Secs. Organization – Sec.3. GBL c. GBL (for KB) c. assessment of ownership structure. 256 (Series of 2000). Sec. GBL: MB may prescribe rules and regulations on types of stock issued by bank to ensure compliance with governing capital and equity structure. GBL: aggregate up to 40% of voting stock of domestic bank.1. except with MB approval. 2. xBSP Circular No. Funds obtained from the public (20 or more persons) – Sec. 12 and 13. Dayrit. senior management. Filipino stockholdings (i) Individuals and non-bank corporations – Sec. sold within 6 months.2. 9. provided. now. par. 8. 11. directors. 25. under Sec. Foreign Banks Liberalization Act (see previous discussions) b. v. Filipinas Mils. financial projects and capital base 2. 31. xBasic Guidelines for Establishment of Banks (BSP Circular-Letter dated 13 July 1998) a. 256 (Series of 2000) (ii) Foreign banks – Secs. 192 SCRA 177 (1990): based on Sec. GBL: determine capability in terms of financial resources and technical expertise. both specific and general exception. OWNERSHIP/CAPITALIZATION OF BANKS 1. xBSP Circular No. Inc. Stockholdings a. GBL: bank cannot acquire own shares or accept own shares as security for a loan. Foreign stockholdings (i) Individuals and non-bank corporations – Sec. with MB approval b. xBSP Circular No. operating plan. 44 Phil. GBL (for UB). 332 (Series of 2002) (ii) Domestic banks – Sec. 8. GBL: What must be disclosed: transactions of (i) individual with bank if . 10 of GBL. provided. 24 of GBA. internal controls. GBL. 10. GBL: individually up to 40% of voting stock of domestic bank. par. only 1 exception. Minimum capital requirements (amount in million Pesos) – Sec. Capability and other requirements – Sec. if so acquired. 11 and 73. GBL (i) Issuance of stocks – Sec. 705 (1923): bank has no lien on shares of stock for indebtedness of stockholder. Fua Cun v.
19. Criminal conviction – Sec. X141. Sec. Corporation Code b. Own at least one share – Sec. Code notwithstanding. or otherwise provided by law. Sec. 15 and 17. consider integrity. 16 of GBL controlling. Rural Banks Act. GBL: (a) Corp. so Sec. experience. Required public offering: At least 10% of capital stock of UB – xSec. subsidiaries. Other minimum qualifications – xGuidelines for the Establishment of Banks. 7. xSubsec. training.1. related interests). MB may disqualify. 10. education. PDIC Charter b. Corporation Code. 271 (Series of 2001) B. BSP Circular No. xSubsec. MRB (Guidelines For The Organization Of Cooperative Banks) . with 2 Independent Directors (person other than officer or employee of bank.2. X141. MB shall prescribe. 23. MRB c.2. pass upon. GBL: cannot serve as officer in private bank. (b) Non-Filipinos may be directors to represent extent of foreign participation. Public officials (whether appointive or elective) – Sec. MRB a. Foreign Banks Liberalization Act. DIRECTORS AND OFFICERS 1. suspend.2. (iii) in determining fitness. up to 21). 5-15 Directors (but if merger or consolidation. (ii) after due notice to Board of Directors of bank. 16. 23. X141. Corporation Code 2. xSec. competence Busuego v. Sec. xSubsec. 2. 304 SCRA 473 (1999): although involving Savings and Loans Associations. or remove any bank director or officer who commits or omits act which renders him unfit for the position. 5. 17. Appendix 38. (ii) corporations with bank if 2 or more corporations owned by same family group or group of persons (considered related interests). xBSP Circular No. Disqualifications – xGuidelines for the Establishment of Banks. Sec.33 stockholdings of individuals related within 4 th degree of consanguinity or affinity. 332 (Series of 2002) d. 27. legitimate or common-law (considered family groups). Composition of Board – Secs. Fit and proper rule – Sec. and review qualifications and disqualifications of directors and officers and disqualify those unfit. GBL: (i) To maintain quality of bank management and afford better protection to depositors and public. Court of Appeals. MB has wide latitude in administrative proceedings and prior notice and hearing not strictly required. MRB 3. except if incidental to financial assistance of GOP/GOCC to bank. Qualifications a.
325 SCRA 99 (2000). employee. Sec. with actual or constructive knowledge thereof. Inc. Prohibited Acts – Sec. or BSP-regulated entity. 25. lawyer or agent. Rural Bank of Milaor (Camarines Sur) v. par. Ocfemia. within or beyond scope of his ordinary powers. Specific Duties/ Responsibilities – xSubsec. 18. Associated Bank v. First Metro Investment Corporation. 558 SCRA 113 (2008): apparent authority ascertained through: (a) general mannter in which bank holds out officer or agent as having power to act. Corporation Code. 223 SCRA 350 (1993): bank liable to innocent third persons if representation is made in course of its business by agent acting within general scope of his authority even though agent secretly abusing the same to perpetrate fraud. 55. Doctrine of Apparent Authority62 – Prudential Bank v.5 and 4141Q5. GBL: MB may regulate compensation and other benefits in exceptional cases where circumstances warrant. found by MB to be conducting business in unsafe and unsound manner. 350 SCRA 446 (2001) . xSEC Memorandum Circular No. MRB b. Court of Appeals. xBSP Circular No. disclose. MRB c. information regarding deposits..e. 23. i. Meetings – Sec. GBL: teleconferencing and videoconferencing allowed. BPI Family Savings Bank. General Powers – Sec. without court order. Corporation Code 5. Inc. 15 dated 20 November 2001 6. 283 (Series of 2001). MB member/BSP personnel – Secs. consultant or stockholder. Court of Appeals. or in an unsatisfactory financial condition. outsource inherent banking functions 62 Limketkai Sons Milling. Corporation Code. NCBA: DQ as officer. bank under comptrollership or conservatorship. Court of Appeals. Certification of Directors – xBSP Circular No. overvalue security. with which it clothes him. First Philippine International Bank v. 1 December 1995. 283 (Series of 2001) 7. v. of any bank. except non-stock savings and loans associations solely for BSP employees 4. GBL: make false entries in bank report or participate in fraudulent transaction. 3. X141. 9 and 27. 15. or (b) acquiescence in his acts of a particular nature. 429 SCRA 30 (2004): third person not chargeable with what transpires in board room. 252 SCRA 259 (1996): third person not chargeable with knowledge of internal memoranda showing limited actual authority.34 c. quasi-bank. Philippine Commercial and International Bank v.1. directly or indirectly. X141. Sec. Pronstroller. 8. Powers of Directors a. Court of Appeals. Compensation and Other Benefits – Sec. xSubsec. director. v. accept gifts/fees/commissions for loan approval. 30.3.
35 C. 2. MRB. whether or not director or officer profited b. xCircular No. 21. 74 to 75. 56. Caused undue injury or has given unwaranted benefits. Financial Statements – Secs. X156. (b) publication. GBL: (a) With prior MB approval. Effect of persistence in conducting business in unsafe and unsound manner: MB may – i. 59. all banks including branches and offices transact business on all working days (Mondays to Fridays. or abnormal risk or danger to safety. Resulted or may result in material loss or damage. BSP. (b) With prior MB approval. and on Saturdays. xBSP Circular No. Independent Auditor – Sec. Take action under Sec. xSec. creditors. GBL: Unless BSP authorizes in interest of public. 60 to 62. except holidays) for at least 6 hours. bank may use branches as outsets for presentation/sale of financial products of allied undertaking/investment house units. Sundays and holidays for at least 3 hours (submit report to BSP). GBL. advantage or preference to bank or any party in discharge by director or officer of his duties and responsibilities through manifest partiality. Branches – Secs. GBL: (a) regular submission. Banking Days and Hours – Sec. GBL: BSP may regulate 6. UB or KB may open branches within or outside RP (other banks. GBL: MB may require bank to engage services of independent auditor 4. evident bad faith or gross inexcusable negligence iv. liquidity and solvency of bank ii. 341 (Series of 2002) a. 500. or abnormal risk to bank’s depositors. Unsound Banking Practice – Sec. Resulted or may result in material loss or damage. pertinent law). Series of 2005 3. 37 of NCBA ii. and bank and its branches treated as one unit. Immediately exclude erring bank from clearing. 20. investors. (c) capital stock 5. Factors to be considered by MB: If act or omission – i. 30 of NCBA (receivership and liquidation) iii. stability. Involves entering into contract or transaction manifestly and grossly disadvantageous to bank. (c) Bank responsible for business in branches as if in head office. public in general iii. 58. provisions of law to the contrary notwithstanding . stockholders. Electronic Transactions – Sec. Without prejudice to administrative sanctions under Sec. BANK OPERATIONS 1.
v. 50 to 52. PCHC Rules). GBL: Prohibited if: (a) clearing account with BSP overdrawn. 63. until minimum ratio restored. (b) deficient in liquidity floor for GOP deposits for 5 or more consecutive days. NCBA: refusal to make reports. except purchase of readily marketable evidences of indebtedness of GOP or BSP or obligations guaranteed by GOP. Major Investments/Ownership of Real Property – Secs. except Sec. 2. or both. proceedings upon violation. Home Bankers Savings and Trust Co. but not compelled by mandamus. GBL: quo warranto. PENALTY FOR VIOLATIONS – Sec. b. Risk Based Capital – Sec. 24 of Arbitration Law. 13. (c) non-compliance with BSP liquidity standards. GBL: (a) major acquisitions or investments subject to MB criteria to avoid undue risk. 57. Sec. (d) committed major violation as determined by BSP E. Declaration of Dividends – Sec. Effect of Non-Compliance – MB may: (i) limit or prohibit distribution of net profits and require the same to be used to increase capital accounts of bank until minimum requirements are met. (ii) which may be suspended if necessary for max. GBL. false statements. 20 SCRA 592 (1967): BSP may cause prosecution. D. Monetary Board. . 66. 492 SCRA 145 (2006): Remedies: (a) Petition RTC to issue order vacating award on grounds provided under Sec. 318 SCRA 558 (1999): Primary recourse to PCHC arbitration for disputes between banks involving check cleared. 52 (see previous discussions) 3. (b) Petition for review under Rule 43 with CA on questions of fact. period of 1 year. Court of Appeals. or (c) Petition for certiorari under Rule 65 with CA on grounds of grave abuse of discretion by Arbitration Committee. MB Authority – MB shall prescribe minimum net-worth-to-risk-assets ratio: (i) in accordance with internationally accepted standards. of law. except by way of appeal on questions of law to RTC (Sec. private person may initiate. Allied Banking Corporation v. Far East Bank and Trust Company. Perez v. making of new investments. Court of Appeals. Insular Savings Bank v.36 7. GBL: a. but such real estate. Settlement of Disputes – Sec. OTHER REGULATIONS 1. improvements and equipment (including equity investment in realty company) should not exceed 50% of combined capital accounts. administrative sanctions on banks and officers. (b) real estate necessary for its own use allowed. 34-37. and (iii) which shall be applied uniformly to all banks of same category. 294 SCRA 803 (1998): Decisions of Arbitration Committee final and executory. (ii) restrict or prohibit acquisition of major assets. 34. subject to right to petition court for measures to safeguard/conserve matter subject of arbitration.
29. par. MB (by vote of at least 5 members) may authorize BSP to grant extraordinary loans or advances to banks secured by assets. 29 and 30. BSP may extend loans and advances to banks for period not exceeding 7 days without collateral 2. Emergency loans – Sec. designation of conservator not precondition to designation of receiver 3. GBL: applies to banks and quasi-banks. based on report submitted by appropriate SED. NCBA: MB may appoint conservator when. par. Court of Appeals. each B. 84. NCBA: (a) in periods of national and/or local emergency or of imminent financial panic which directly threaten monetary and banking stability. Secs. (b) even during normal periods. though enormous and extensive. otherwise.37 VII. NCBA: 5. released in 2 tranches of 25% max. hence. 30. MB finds that bank/quasibank in state of continuing inability or unwillingness to maintain condition of liquidity deemed adequate to protect interest of depositors and creditors 2. 29. cannot extend to post-facto repudiation of perfected transactions. and restore viability. First Philippine International Bank v. 83. NCBA: such powers as MB deems necessary to take charge of assets. Appointment of Conservator – Sec. 252 SCRA 259 (1996): conservator merely takes place of bank’s Board of Directors. par. LOANS TO BANKS 1. powers of conservator. for purpose of assisting banks in precarious financial condition or under serious financial pressures due to fortuitous events (provided bank is not insolvent). Grounds – Sec. par. NCBA 1. liabilities. at most. collect monies/debts due. last par. and management. 1 and Sec. NCBA: Shall not exceed one (1) year . 1. 1. 29. CESSATION OF BANKING BUSINESS A. reorganize management. BANKS IN DISTRESS. 29. NCBA: Designation of conservator vested exclusively with MB. in amount not exceeding 50% of total deposits and deposit substitutes of bank. 67. merely gives conservator power to revoke contracts that under existing law are deemed defective 4. Loans without collateral – Sec. 2. Qualifications and Remuneration – Sec. 2 and 3. Period – Sec. would infringe non-impairment clause of Constitution. Powers of Conservator – Sec. NCBA: For purposes of providing liquidity to banking system in times of need. CONSERVATORSHIP – Sec. pars. 29.
Grounds – Secs. requirements in one cannot be imposed in other 2. GBL: applies to banks and. NCBA. and MB may intervene and take necessary steps to protect creditors’ interest D. prior written notice sent to MB.. to extent possible. 68. 30 of NCBA (receivership and liquidation) will apply 6. liquidation or conservatorship C. RECEIVERSHIP AND INVOLUNTARY LIQUIDATION – Sec. 29. Termination of Conservatorship – Sec. NLRC.. has insufficient realizable assets. 29 and 30 final and executory. summarily and without need of prior hearing. 30. PDIC v.. GBL. 2nd to last par. Sec. 2nd par. Petition may only be filed by stockholders of record representing majority of capital stock within 10 days from receipt by Board of order directing receivership. MB may. 53. 69. upon report of head of SED. GBL: If voluntary liquidation of RP bank or RP branch or office of foreign bank. last par. Secs. Inc. 30 to 33. b. Governing Law – In Re: Petition for Assistance in the Liquidation of the Rural Bank of Bokod (Benguet). 511 SCRA 123 (2006): NCBA governs. as determined by BSP. quasi-banks. NCBA: MB action under Secs. Judicial Review – Sec. close bank and designate PDIC as receiver: a. par.38 6. MB finds that bank – i. NCBA: a. NCBA 1. 2 and last par.. When MB satisfied that bank can continue to operate on its won and conservatorship no longer necessary. 30 and 36. 355 SCRA 489 (2001) 7. in which case. 37 of NCBA. Whenever. and may not be restrained. and since it has substantially different provisions for involuntary dissolution and liquidation under Corporation Code. involving acts or transactions amounting to fraud or dissipation of assets of bank . to meet its liabilities iii. on basis of report of conservator or its own findings. VOLUNTARY LIQUIDATION – Sec. Effect: Bank cannot be compelled to pay same bonuses to employees – xProducers Bank of the Philippines v. Bureau of Internal Revenue. has willfully violated final CDO under Sec. except on petition for certiorari on ground of grave abuse of discretion amounting to lack or excess of jurisdiction. Is unable to pay liabilities as they become due in ordinary course of business (not include inability to pay caused by extraordinary demands induced by financial panic in banking community) ii. cannot continue in business without involving probable losses to its depositors or creditors iv.. determines that continuance in business of bank will involve probable loss to depositors or creditors. Sec. If MB.
in 1993. (c) otherwise. Arca. 204 SCRA 767 (1991). 265). Monetary Board. 29 of Central Bank Act (R.A. Hon. Monetary Board. 204 SCRA 767 (1991): Under Sec. (d) MB shall find statements of department head to be true.. 516 SCRA 154 (2007): Under NCBA. administer the same for benefit of creditors. 15 SCRA 66 (1965). Duties of Receiver – Sec.E. not “examination conducted by head”. v. hence. Bangko Sentral ng Pilipinas. 440 SCRA 34 (2004): bank cannot do new business (grant new loans or accept new deposits) but receiver obliged to collect pre-existing debts and foreclose. Liquidation a. purpose to make closure of bank summary 3. Who May Be Receiver – Sec. Inc. v. par. 220 SCRA 536 (1993): No prior notice and hearing required. 1 st and 2nd pars. 30. which was repealed by NCBA. if bank may be rehabilitated or otherwise placed in condition that it may be permitted (by MB) to resume business with safety to its depositors. Larrobis. 162 SCRA 288 (1988). any person of recognized competence in banking or finance for quasi-banks 4. liquidate bank. As opposed to rehabilitation – Philippine Veterans Bank Employees Union-N. Monetary Board. Court of Appeals. closure premature. 3. Court of Appeals. 30. v. Inc. v. only report of head of SED is necessary. Benjamin Vega. NCBA: (a) immediately gather and take charge of all assets and liabilities of bank. Banco Filipino Savings and Mortgage Bank v. but the following are mandatory requirements: (a) examination of condition of bank conducted by head of appropriate SED or his examiners or agents. 220 SCRA 536 (1993) . (b) examination discloses that grounds exist. Whenever bank persists in carrying on its business in unlawful or unsafe manner c. (c) department head concerned shall inform MB in writing of facts.39 b. and may only be annulled if resolution determined by trial court to be arbitrary and issued in bad faith 6. Whenever bank notifies BSP or publicly announces bank holiday. Philippine Veterans Bank. MB may order closure and receivership of bank upon finding of insolvency or when continuance in business will involve probable loss to depositors and creditors. but shall not (except for administrative expenses) pay. Rural Bank of Lucena. “Close Now-Hear Later Doctrine”63 – Central Bank of the Philippines v.B. Jr. NCBA: PDIC for banks. but may make nonspeculative investments. Central Bank of the Philippines v. if necessary 5. or transfer or dispose of assets. Rural Bank of San Miguel. Court of Appeals. exercise general powers of receiver under Rules of Court. valid exercise of police power. here. No. or in any manner suspends payment of deposit liabilities continuously for more than 30 days Banco Filipino Savings and Mortgage Bank v. no showing of insolvency. 360 SCRA 33 (2001): 63 Rural Bank of Buhi v.U. not later than 90 days. (b) determine ASAP.
exempt from order of garnishment. GBL: subject to penal provisions of NCBA c. will prejudice other depositors and creditors d. 455 SCRA 97 (2005): receiver only has authority to administer bank assets for benefit of creditors (granting exclusive option to purchase not administrative) b. otherwise. 33. The Manila Banking Corporation. NCBA: after payment of costs of liquidation proceeding (including reasonable expenses and fees of receiver). 31 and 32. v. Effects of Receivership and Liquidation a. attachment. levy on attachment or execution – Sec. 154 SCRA 257 (1987): stay of execution warranted. Court of Appeals. concepts are diametrically opposed b. 253 SCRA 105 (1996): all claims (no need for prior pending action) against insolvent bank should be filed in liquidation proceeding to avoid multiplicity of suits. 222 SCRA 125 (1993): stoppage only for new business . 70. Penalties for transaction after Bank becomes insolvent – Sec. Court of Appeals. All claims filed in liquidation court – Ong v. Inc. rehabilitation connotes reopening or reorganization. NCBA: MB shall notify in writing bank’s Board of Directors of findings and direct receiver to proceed with liquidation: (i) file ex-parte petition for liquidation pursuant to liquidation plan adopted by PDIC (for banks) or MB (for quasi-banks). 366 SCRA 752 (2001): does not cover reverse situation where insolvent bank is claimant. e. How assets are distributed – Secs. (ii) convert assets to money. Court of Appeals. NCBA: assets deemed in custodia legis and from moment bank placed under receivership or liquidation. using the assets of bank as well as revenues and earnings realized during winding up process d. Stoppage of business – Provident Savings Bank v. such that receivership is equivalent to injunction (if bank became insolvent before its acceptance of offer came to knowledge of offeror. pay debts of bank in accordance with rule on concurrence preference of credits. Disposition of banking franchise – Sec. Development Bank of Rizal. Actions to take – Sec. or execution Lipana v. Court of Appeals. Restriction on capacity to act – Villanueva v. and dispose in favor of creditors in accordance with concurrence and preference of credits c. then offer became ineffective. levy. Abacus Real Estate Development Center. 30. Effect on garnishment.40 Liquidation connotes winding up or settling with creditors and debtors. Manalo v. NCBA: BSP may award to another institution 7. 30. 244 SCRA 395 (1995): appointment of receiver suspends authority of bank and its directors and officers over its property and effects.
Cenzon. because prohibited from doing business. 106 SCRA 143 (1981): bank officers pressured into relinquishing management and control of bank by INK which had no intention to restore bank to original condition. 22. PDIC FINANCIAL ASSISTANCE – Sec. 12(c). Dela Cruz. 204 SCRA 767 (1991): no basis for finding of insolvency (see above) c. 208 SCRA 652 (1992) e. Court of Appeals. Liability of the MB and PDIC – Miranda v. Judicial Review a. Who may question – Central Bank of the Philippines v. 191 SCRA 346 (1990): only upon convincing proof that action is plainly arbitrary and made in bad faith (under Sec. NCBA: Petition for certiorari may only be filed by stockholders of record representing majority of capital stock within 10 days from receipt by Board of order directing receivership. v. Interest on deposits64 – Fidelity Savings and Mortgage Bank v. PDIC Charter 64 Integrated Realty Corporation v. Jurisdiction – Sec. 30. 30. Court of Appeals. not receiver. Injunction – Central Bank of the Philippines v. 501 SCRA 288 (2006): BSP and PDIC not solidarily liable with bank for the latter’s obligations E. liquidation or conservatorship b. Philippine Deposit Insurance Corporation. The Overseas Bank of Manila v. not to collect existing loans and foreclose e. Philippine National Bank. Rule 65. Court of Appeals. 4. Rules of Court d. Effect of Filing Petition for Review – Banco Filipino Savings and Mortgage Bank v. SCRA (2004): does not diminish authority of designated receiver or liquidator to administer bank g. Court of Appeals. 174 SCRA 295 (1989). Ybañez. Availability of remedy – Sec. 184 SCRA 141 (1990): insolvent bank closed by BSP not liable to pay interest on bank deposits. now GADALEJ (under Sec. Central Bank Act).41 (grant new loans and accept new deposits). 220 SCRA 537 (1993): only stockholders. Catalina. Banco Filipino Savings and Mortgage Bank v. Actions of the MB final and executory. BSP in promissory estoppel for committing to support bank to restore it but failing to do so. bank was declared in default and therefore could not modify judgment ordering it to pay interest and penalties 8. 435 SCRA 183 (2004): here. Sec. Inc. 29. Monetary Board. Land Bank of the Philippines. Ground: grave abuse of discretion – Central Bank v. NCBA). xCentral Bank of the Philippines v. 105 SCRA 49 (1981) and 113 SCRA 778 (1982) . PDIC Charter: only CA (not RTC) can enjoin PDIC f. But See Rural Bank of Sta.
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