banking laws in the phil

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BANKING LAWS

TABLE OF CONTENTS

A. The New Central Bank Act

Republic Act No. 7653

B. The General Banking Act


In General

Etablih!ent o" #o!etic Bank

$icening o" %oreign Bank

Co!!ercial Banking Corporation an& 'ni(eral Bank Thri"t Bank Act o" )**6

Republic Act No. 7*+6

Buil&ing an& $oan Aociation

Rural Bank Act o" )**,


C. An Act $iberali-ing the Entr o" %oreign Bank

Republic Act No. 77,)

#. /0hore Banking 1te! $aw

2re. #ecree No. )+3

E. %oreign Currenc #epoit Act

Republic Act No. 6,64 a a!en&e&

%. An Act Creating the 2#IC

Republic Act No. 353)

G. The Truth in $en&ing Act


. $aw on 1ecrec o" Bank #epoitRepublic Act No. )+5

Note e ha(e inclu&e& e(eral banking law which are not in the bar co(erage.

$ikewie4 we ha(e incorporate& e(eral law on non8bank 9nancial



2BANKING LAWS

inter!e&iarie. 1ince the are not co(ere& b the bar e:a!4 the re(iewee ha

the option o" not rea&ing the!.

BANKING

AND

FINANCE

IN

GENERAL

Two types of nancing

). e;uit

,. &ebt89nancing

• A cro8bree& o" the two !a alo occur.

Intermediaries

). Bank

,. Non8bank 9nancial inter!e&iarie

3. E:change

. /ther i.e. econ&ar !arket

Function of intermediaries

). “Brokering” or !atching in(etor with thoe in nee& o" 9nancing

,. elp in &i!inihing rik to in(etor

3. 2ro(i&e li;ui&it

BERCHOKE CACLES CCOMMERCIALOMMERCIAL LLAWAW MABUHAY EDITION 2000



3BANKING LAWS

NEW CENTRAL BANK ACT


Appro(e& ) <une )**3

IN GENERAL

Mandate

• The Bangko 1entral ng 2ilipina i the 1tate= central !onetar

authorit4 !an&ate& in the )*>7 Contitution4 which hall "unction an&

operate a an in&epen&ent an& accountable bo& corporate in the &icharge

o" it !an&ate& reponibilitie concerning !one4 banking an& cre&it.

?1ection )4 RA 7653@

• The Bangko 1entral hall eno 9cal an& a&!initrati(e autono!.

?1ection )4 RA 7653@

Objectives

). The pri!ar obecti(e o" the Bangko 1entral i to !aintain price tabilit

con&uci(e to a balance& an& utainable growth o" the econo!.

,. It hall alo pro!ote an& !aintain !onetar tabilit an& the con(ertibilit o"

the peo.

3. It hall alo pro(i&e polic &irection in the area o" !one4 banking an&

cre&it.

. It ha uper(iion o(er bank an& ha regulator power o(er the operation

o" 9nance co!panie an& non8bank 9nancial inter!e&iarie per"or!ing

;uai8banking "unction. ?1ection 34 RA 7653@

Typical functions of the Bangko entral

). 1uper(iion o(er bank an& regulation o" non8bank 9nancial inter!e&iarieengage& in ;uai8banking "unction

,. Bank o" iue a uch4 it ha the ole power an& authorit to iue currenc

3. Cuto&ian o" the nation= reer(e o" "oreign currenc




4BANKING LAWS

A uch4 it enure con(ertibilit o" the peo an& back up 2hilippine

currenc.

. It ha control o" cre&it

a. regulating !one uppl i.e. reer(e re;uire!ent "or bank

b. open !arket operation i.e. Tbill

c. controlling interet rate

5. $en&er o" lat reort

It ha a "rediscounting window,” allowing bank to ell their pro!ior note

to it.

6. Cuto&ian o" cah reer(e o" bank

7. Go(ern!ent banker4 agent an& a&(ior

>. Central clearance an& ettle!ent agenc

Fiscal policy v! monetary policy

• %ical polic i concerne& with re(enue generation an& e:pen&iture while

!onetar polic in(ol(e regulating !one uppl an& price tabilit.

• The Bangko 1entral will now concentrate on !onetar polic an& he& o0

9cal reponibilitie which in the pat ha& &itracte& it "ro! it pri!ar

"unction. ?1ection ),*4 RA 7653@

MONETARY BOARD AND GOVERNOR

Monetary Board

•

The power an& "unction o" the Bangko 1entral are e:ercie& b theonetar Boar&.

• The Boar& i co!poe& o" e(en 7D !e!ber appointe& b the 2rei&ent "or

a ter! o" i: 6D ear. No !e!ber !a be reappointe& !ore than once.

• The e(en !e!ber are




5BANKING LAWS

). The Go(ernor a Chair!an

,. A !e!ber o" the Cabinet &eignate& b the 2rei&ent an&

3. %i(e 5D !e!ber who hall co!e "ro! the pri(ate ector4 all o" who!

hall er(e "ull8ti!e.

"ualications of the members of the Monetary Board

). ut be natural born citi-en o" the 2hilippine

,. At leat thirt 9(e 35D ear o" age4 with the e:ception o" the Go(ernor who

houl& at leat be "ort +D ear ol&

3. Goo& !oral character

. /" un;uetionable integrit

5. /" known probit an& patrioti!

6. ith recogni-e& co!petence in ocial an& econo!ic &icipline

#is$ualications

• In a&&ition to the &i;uali9cation i!poe& b Republic Act No. 67)34 a

!e!ber o" the onetar Boar& i &i;uali9e& "ro! being a &irector4 oFcer4

e!ploee4 conultant4 lawer4 agent or tockhol&er o" an bank4 ;uai8bank

or an other intitution which i ubect to uper(iion or e:a!ination b the

Bangko 1entral4 in which cae uch !e!ber hall reign "ro!4 an& &i(et

hi!el" o" an an& all interet in uch intitution be"ore au!ption o" oFce

a !e!ber o" the onetar Boar&.

• The !e!ber o" the onetar Boar& co!ing "ro! the pri(ate ector hall not

hol& an other public oFce or public e!plo!ent &uring their tenure.

•

No peron hall be a !e!ber o" the onetar Boar& i" he ha beenconnecte& with an !ultilateral banking or 9nancial intitution or ha a

ubtantial interet in an pri(ate bank in the 2hilippine4 within one )D ear

prior to hi appoint!ent likewie4 no !e!ber o" the onetar Boar& hall be

e!ploe& in an uch intitution within two ,D ear a"ter the e:piration o"

hi ter! e:cept when he er(e a an oFcial repreentati(e o" the 2hilippine

Go(ern!ent to uch intitution.




6BANKING LAWS

"uorum in the Monetary Board

• The preence o" "our D !e!ber hall contitute a ;uoru!. owe(er4 in all

cae4 the Go(ernor or hi &ul &eignate& alternate hall be a!ong the "our.




BANKING LAWS

%ithdrawal of persons having a personal interest

• In a&&ition to the re;uire!ent o" Republic Act No. 67)34 an !e!ber o" the

onetar Boar& with peronal or pecuniar interet in an !atter in the

agen&a o" the onetar Boar& hall &icloe hi interet to the Boar& an&

hall retire "ro! the !eeting when the !atter i taken up. The &eciion taken

on the !atter hall be !a&e public. The !inute hall reect the &icloure

!a&e an& the retire!ent o" the !e!ber concerne& "ro! the !eeting.

&esponsibility and liability of the members of the Monetary Board

• e!ber o" the onetar Boar&4 oFcial4 e:a!iner4 an& e!ploee o" the

Bangko 1entral who will"ull (iolate RA 7653 or who are guilt o" negligence4

abue or act o" !al"eaance or !i"eaance or "ail to e:ercie

e:traor&inar &iligence in the per"or!ance o" hi &utie hall be hel& liable

"or an lo or inur u0ere& b the Bangko 1entral or other banking

intitution a a reult o" uch (iolation4 negligence4 abue4 !al"eaance4

!i"eaance or "ailure to e:ercie e:traor&inar &iligence.

• 1i!ilar reponibilit hall appl to !e!ber4 oFcer an& e!ploee o" the

Bangko 1entral "or

). The &icloure o" an in"or!ation o" a con9&ential nature4 or an

in"or!ation on the &icuion or reolution o" the onetar Boar&4 or

about the con9&ential operation o" the Bangko 1entral4 unle the

&icloure i in connection with the per"or!ance o" oFcial "unction

with the Bangko 1entral4 or i with prior authori-ation o" the onetar

Boar& or the Go(ernor or

,. The ue o" uch in"or!ation "or peronal gain or to the &etri!ent o"

the Go(ern!ent4 the Bangko 1entral or thir& partie.

• owe(er4 an &ata or in"or!ation re;uire& to be ub!itte& to the 2rei&ent

an&Hor Congre4 or to be publihe& un&er the pro(iion o" RA 7653 hall not

be coni&ere& con9&ential.

'uthority of (overnor to render opinions) decisions or rulings

• The Go(ernor o" the Bangko 1entral hall ha(e the power to ren&er opinion4

&eciion4 or ruling which hall be 9nal an& e:ecutor4 until re(ere& or

!o&i9e& b the onetar Boar&4 on !atter regar&ing application or

en"orce!ent o" law pertaining to intitution uper(ie& b the Bangko

1entral an& law pertaining to ;uai8bank4 a well a regulation4 policie or




!BANKING LAWS

intruction iue& b the onetar Boar&4 an& the i!ple!entation thereo".

?1ection )7eD4 RA 7653@

'uthority of the (overnor in emergencies

• In cae o" e!ergencie where ti!e i inuFcient to call a !eeting o" the

onetar Boar&4 the go(ernor with the concurrence o" two other !e!ber o"

the Boar& !a &eci&e an !atter or take an action within the authorit o" the

Boar&.

• e hall therea"ter ub!it a report to the 2rei&ent an& Congre within 7,

hour a"ter the action ha been taken.

• At the oonet poible ti!e4 the Go(ernor hall call a !eeting o" the onetar

boar& to ub!it hi action "or rati9cation. ?1ection )*4 RA 7653@

Outside interests of the (overnor and the full*time members of the Board

• The Go(ernor o" the Bangko 1entral an& the "ull8ti!e !e!ber o" the Boar&

hall li!it their pro"eional acti(itie to thoe pertaining &irectl to their

poition with the Bangko 1entral.

• The !a not accept an other e!plo!ent4 whether public or pri(ate4

re!unerate& or ad honorem.

• E:ception

). 2oition in elee!onar4 ci(ic4 cultural or religiou organi-ation

,. hene(er4 b &eignation o" the 2rei&ent4 the Go(ernor or the "ull8

ti!e !e!ber i take& to repreent the interet o" the Go(ern!ent or

other go(ern!ent agencie in !atter connecte& with or a0ecting the

econo! or the 9nancial te! o" the countr

CERTAIN O"ERATIONS OF THE BANGKO SENTRAL

upervision and e+amination

• The Bangko 1entral hall ha(e uper(iion o(er4 an& con&uct perio&ic or

pecial e:a!ination o"4 banking intitution an& ;uai8bank4 inclu&ing their

ubi&iarie an& aFliate engage& in allie& acti(itie.




#BANKING LAWS

• Thi power howe(er i ubect to the pro(iion o" e:iting law protecting or

a"eguar&ing the ecrec or con9&entialit o" bank &epoit a well a

in(et!ent o" peron4 natural or uri&ical4 in &ebt intru!ent iue& b the

Go(ern!ent. ?1ection ,54 RA 7653@

ubsidiary and a,liate

• A ubi&iar !ean a corporation !ore than 9"t percent 5+D o" the (oting

tock o" which i owne& b a bank or ;uai8bank an& an aFliate !ean a

corporation the (oting tock o" which4 to the e:tent o" 9"t percent 5+D or

le4 i owne& b a bank or ;uai8bank or which i relate& or linke& to uch

intitution or inter!e&iar through co!!on tockhol&er or uch other

"actor a !a be &eter!ine& b the onetar Boar&.

-o restraining order on power of e+amination

• No retraining or&er or inunction hall be iue& b the court enoining the

Bangko 1entral "ro! e:a!ining an intitution ubect to uper(iion or

e:a!ination b the Bangko 1entral4 unle there i con(incing proo" that the

action o" the Bangko 1entral i plainl arbitrar an& !a&e in ba& "aith an&

the petitioner or plainti0 9le with the clerk or u&ge o" the court in which the

action i pen&ing a bon& e:ecute& in "a(or o" the Bangko 1entral4 in an

a!ount to be 9:e& b the court. ?1ection ,54 RA 7653@

.rohibitions on personnel of the Bangko entral

• In a&&ition to the prohibition "oun& in RA 3+)* an& 67)34 peronnel o" the

Bangko 1entral are hereb prohibite& "ro!

). Being an oFcer4 &irector4 lawer or agent4 e!ploee4 conultant or

tockhol&er4 &irectl or in&irectl4 o" an intitution ubect to

uper(iion or e:a!ination b the Bangko 1entral4 e:cept non8tock

a(ing an& loan aociation an& pro(i&ent "un& organi-e&

e:clui(el "or e!ploee o" the Bangko 1entral4 an& e:cept a

otherwie pro(i&e& in RA 7653

,. #irectl or in&irectl re;ueting or recei(ing an gi"t4 preent orpecuniar or !aterial bene9t "or hi!el" or another4 "ro! an

intitution ubect to uper(iion or e:a!ination b the Bangko

1entral

3. Re(ealing in an !anner4 e:cept upon or&er o" the court4 the

Congre or an go(ern!ent oFce or agenc authori-e& b law4 or




$0BANKING LAWS

un&er uch con&ition a !a be precribe& b the onetar Boar&4

in"or!ation relating to the con&ition or buine o" an uch

intitution. Thi prohibition hall not appl to the gi(ing o" in"or!ation

to the onetar Boar or the Go(ernor o" the Bangko 1entral4 or to an

peron authori-e& b either o" the!4 in writing4 to recei(e uch

in"or!ation an&

. Borrowing "ro! an intitution ubect to uper(iion or e:a!ination

b the Bangko 1entral unle ai& borrowing are a&e;uatel ecure&4

"ull &icloe& to the onetar Boar4 an& hall be ubect to uch

"urther rule an& regulation a the onetar Boar& !a precribe.

CONSERVATORSHI" V% RECEIVERSHI"

CONSERVATOR

(rounds for appointment of conservator

• The onetar Boar& !a appoint a coner(ator whene(er it 9n& that a bank

or a ;uai8bank i in a tate o" continuing inabilit or unwillingne to

!aintain a con&ition o" li;ui&it &ee!e& a&e;uate to protect the interet o"

&epoitor an& cre&itor. ?1ection ,*4 RA 7653@

• The coner(ator houl& be co!petent an& knowle&geable in bank operation

an& !anage!ent. The coner(atorhip hall not e:cee& one )D ear.

.owers of conservator

). Take charge o" the aet4 liabilitie an& !anage!ent o" the bank or ;uai8

bank

,. Reorgani-e the !anage!ent

3. Collect all !onie an& &ebt &ue ai& intitution

. E:ercie all power necear to retore it (iabilit

/+tent of the power of the conservator

• The coner(ator ha the power to o(errule or re(oke the action o" the

pre(iou !anage!ent an& boar& o" &irector o" the bank or ;uai8bank.




$$BANKING LAWS

• owe(er4 the power cannot e:ten& to the post-facto repu&iation o" per"ecte&

tranaction4 otherwie the woul& in"ringe againt the non8i!pair!ent

claue o" the Contitution.

• 1ection ,>8A o" RA No. ,65 !erel gi(e the coner(ator the power to re(oke

contract that are &ee!e& to be &e"ecti(e un&er e:iting law i.e.4 (oi&4

(oi&able4 unen"orceable4 or reciibleD hence4 the coner(ator !erel take

the place o" a bank= boar& o" &irector. hat the boar& o" &irector cannot

&o4 uch a repu&iating a contract (ali&l entere& into un&er the &octrine o"

i!plie& authorit4 the coner(ator cannot &o either. [ First .hilippine

International Bank v! 0'4 ,5, 1CRA ,55 )*>6D@

Termination of conservatorship

• The onetar Boar& hall ter!inate the coner(atorhip when it i ati9e& that

the intitution can continue to operate on it own an& the coner(atorhip i

no longer necear.

• The coner(atorhip hall likewie be ter!inate& houl& the onetar Boar&

&eter!ine that the continuance in buine o" the intitution woul& in(ol(e

probable lo to it &epoitor or cre&itor4 in which cae procee&ing "or

recei(erhip an& li;ui&ation hall be purue&. ?1ection ,*4 RA 7653@

"ROCEEDINGS IN RECEIVERSHI" AND LI&UIDATION

(rounds for proceedings in receivership and li$uidation

• The onetar Boar& hall intitute procee&ing "or recei(erhip whene(er it

9n& that a bank or ;uai8bank

). I unable to pa it liabilitie a the beco!e &ue in the or&inar

coure o" buine pro(i&e& that thi hall not inclu&e inabilit to pa

caue& b e:traor&inar &e!an& in&uce& b 9nancial panic in the

banking co!!unit

,. a inuFcient reali-able aet to !eet it liabilitie

3. Cannot continue in buine without in(ol(ing probable lo to it

&epoitor or cre&itor or

. a will"ull (iolate& a ceae an& &eit or&er that ha beco!e 9nal4

in(ol(ing act or tranaction which a!ount to "rau& or a &iipation o"

the aet o" the intitution.




$2BANKING LAWS

-o need of prior notice and hearing

• In uch cae4 the onetar Boar& !a u!!aril an& without nee& "or prior

hearing4 "orbi& the intitution "ro! &oing buine in the 2hilippine an&

&eignate the 2hilippine #epoit Inurance Corporation a recei(er o" the

banking intitution. ?1ection 3+4 RA 7653@

%ho acts as receiver

• %or a bank4 the 2hilippine #epoit Inurance Corporation hall er(e a

recei(er "or a ;uai8bank4 an peron o" recogni-e& co!petence in banking

or 9nance !a be &eignate& a recei(er.

Tasks of the receiver

• The recei(er hall i!!e&iatel )D gather an& take charge o" all aet an&

liabilitie o" the intitution4 ,D a&!initer the a!e "or the bene9t o" it

cre&itor4 an& 3D e:ercie the general power o" a recei(er. D The recei(er

hall &eter!ine a oon a poible4 but not later than ninet *+D &a "ro!

takeo(er4 whether the intitution !a be rehabilitate& or otherwie place& in

uch a con&ition o that it !a be per!itte& to reu!e buine with a"et

to it &epoitor an& cre&itor an& the general public.

&esumption

• An &eter!ination "or the reu!ption o" buine o" the intitution hall be

ubect to prior appro(al o" the onetar Boar&.

1iguidation

• I" the recei(er &eter!ine that the intitution cannot be rehabilitate& or

per!itte& to reu!e buine4 the onetar Boar& hall noti" in writing the

boar& o" &irector o" it 9n&ing an& &irect the recei(er to procee& with the

li;ui&ation o" the intitution.

.rocedure for li$uidation

• The recei(er hall then

). %ile ex parte with the proper regional trial court4 an& without the

re;uire!ent o" prior notice or an other action4 a petition "or

aitance in the li;ui&ation o" the intitution puruant to a li;ui&ation




$3BANKING LAWS

plan a&opte& b the 2hilippine #epoit Inurance Corporation in the

cae o" a bank or b the onetar Boar& in the cae o" a ;uai8bank

,. 'pon ac;uiring uri&iction4 the court hall4 upon !otion b the

intitution4 ait the en"orce!ent o" in&i(i&ual liabilitie o" the

tockhol&er4 &irector an& oFcer4 an& &eci&e on other iue a !a

be !aterial to i!ple!ent the li;ui&ation plan a&opte& an&

3. Con(ert the aet o" the intitution to !one4 &ipoe o" the a!e to

cre&itor an& other partie4 "or the purpoe o" paing the &ebt o" uch

intitution in accor&ance with the rule on concurrence an& pre"erence

o" cre&it un&er the Ci(il Co&e o" the 2hilippine an& he !a4 in the

na!e o" the intitution4 intitute uch action a !a be necear to

collect an& reco(er account an& aet o"4 or &e"en& an action

againt4 the intitution.

0ustodia legis and e+emption from levy) attachment or e+ecution

• The aet o" an intitution un&er recei(erhip or li;ui&ation hall be &ee!e& in

custodia legis in the han& o" the recei(er an& hall4 "ro! the !o!ent the

intitution wa place& un&er uch recei(erhip or li;ui&ation4 be e:e!pt "ro!

an or&er o" garnih!ent4 le(4 attach!ent4 or e:ecution. ?1ection 3+4 RA

7653@

'ctions of Monetary Board nal and may be $uestioned only through

certiorari

• The action o" the onetar Boar& taken regar&ing the &eignation o" a

coner(ator an& appoint!ent o" a recei(er hall be 9nal an& e:ecutor an&

!a not be retraine& or et ai&e b the court e:cept on petition "or

certiorari on the groun& that the action taken wa in e:ce o" uri&iction or

with uch gra(e abue o" &icretion a to a!ount to lack or e:ce o"

uri&iction.

• The petition "or certiorari !a onl be 9le& b the tockhol&er o" recor&

repreenting the !aorit o" the capital tock within ten )+D &a "ro!

receipt b the boar& o" &irector o" the intitution o" the or&er &irectingrecei(erhip4 li;ui&ation or coner(atorhip.

#esignation of conservator not precondition to designation of receiver

• The &eignation o" a coner(ator or the appoint!ent o" a recei(er hall be

(ete& e:clui(el with the onetar Boar&.




$4BANKING LAWS

• The &eignation o" a coner(ator i not a precon&ition to the &eignation o" a

recei(er.

THE BANGKO SENTRAL AND THE MEANS OF "AYMENT

2nit of monetary value

• The unit o" !onetar (alue in the 2hilippine i the peo.

0urrency

• The wor& "currency" i hereb &e9ne& a !eaning all 2hilippine note an&

coin iue& or circulating in accor&ance with the pro(iion o" RA 7653.

Bank of issue

• The Bangko 1entral ha the ole power an& authorit to iue currenc within

the territor o" the 2hilippine ?1ection 5+4 RA 7653@

• Note an& coin iue& b the B12 hall be liabilitie o" the B12 an& !a be

iue& onl againt an& in a!ount not e:cee&ing4 the aet o" the B12.

1ai& note an& coin hall be a 9rt an& para!ount lien on all aet o" the

B12 ?1ection 5)4 RA 7653@

• All note an& coin iue& b the B12 are "ull guarantee& b the R2 an&

hall be legal ten&er in the 2hilippine "or all &ebt4 both public an& pri(ate.

?1ection 5,4 RA 7653@

#emand deposits

• "Demand deposits" !ean all thoe liabilitie o" the Bangko 1entral an& o"

other bank which are &eno!inate& in 2hilippine currenc an& are ubect to

pa!ent in legal ten&er upon &e!an& b the preentation o" check.

Issue of demand deposits

• /nl bank &ul authori-e& to &o o !a accept "un& or create liabilitie

paable in peo upon &e!an& b the preentation o" check4 an& uch

operation hall be ubect to the control o" the onetar Boar& in

accor&ance with the power grante& it with repect thereto un&er RA 7653.

1egal character of checks




$5BANKING LAWS

• Check repreenting &e!an& &epoit &o not ha(e legal ten&er power an&

their acceptance in the pa!ent o" &ebt4 both public an& pri(ate4 i at the

option o" the cre&itor. ?1ection 6+4 RA 7653@

• owe(er4 a check which ha been cleare& an& cre&ite& to the account o" the

cre&itor hall be e;ui(alent to a &eli(er to the cre&itor o" cah in an a!ount

e;ual to the a!ount cre&ite& to hi account. ?1ection 6+4 RA 7653@

DOMESTIC MONETARY STABILI'ATION

(uiding principle

• The onetar Boar& hall en&ea(or to control an e:panion or contraction in

!onetar aggregate which i preu&icial to the attain!ent or !aintenance

o" price tabilit.

'ction when abnormal movements occur in the monetary aggregates)

credit) or price level

• hene(er abnor!al !o(e!ent in the !onetar aggregate4 in cre&it4 or in

price en&anger the tabilit o" the 2hilippine econo! or i!portant ector

thereo"4 the onetar Boar& hall

). Take uch re!e&ial !eaure a are appropriate an& within the power

grante& to the onetar Boar& an& the Bangko 1entral

,. 1ub!it to the 2rei&ent o" the 2hilippine an& the Congre4 an& !ake

public4 a &etaile& report which hall inclu&e4 a a !ini!u!4 a

&ecription an& anali o"

a. The caue o" the rie or "all o" the !onetar aggregate4 o"

cre&it or o" price

b. The e:tent to which the change in the !onetar aggregate4 in

cre&it4 or in price ha(e been reecte& in change in the le(el o"

&o!etic output4 e!plo!ent4 wage4 an& econo!ic acti(it ingeneral an& the nature an& igni9cance o" an uch change

an&

c. The !eaure which the onetar Boar& ha taken an& the

other !onetar4 9cal or a&!initrati(e !eaure which it

reco!!en& to be a&opte&.




$6BANKING LAWS

INTERNATIONAL MONETARY STABILI'ATION

International monetary stabili3ation

• The Bangko 1entral hall e:ercie it power to preer(e the international

(alue o" the peo an& to !aintain it con(ertibilit into other "reel

con(ertible currencie pri!aril "or4 although not necearil li!ite& to4

current pa!ent "or "oreign tra&e an& in(iible. ?1ection 64 RA 7653@

International reserves

• In or&er to !aintain the international tabilit an& con(ertibilit o" the

2hilippine peo4 the Bangko 1entral hall !aintain international reer(e

a&e;uate to !eet an "oreeeable net &e!an& on the Bangko 1entral "or

"oreign currencie. ?1ection 654 RA 7653@

0omposition of the international reserves

). Gol&

,. Aet in "oreign currencie




$BANKING LAWS

'ction when international stability of the pesos is threatened

• hene(er the international reer(e o" the Bangko 1entral "all to a le(el

which the onetar Boar& coni&er ina&e;uate to !eet the propecti(e net

&e!an& on the Bangko "or "oreign currencie4 or whene(er the international

reer(e appear to be in i!!inent &anger o" "alling to uch a le(el4 or

whene(er the international reer(e i "alling a a reult o" pa!ent or

re!ittance abroa& which4 in the opinion o" the onetar Boar&4 are contrar

to the national wel"are4 the onetar Boar& hall

). Take uch re!e&ial !eaure a are appropriate an& within the power

grante& to the onetar Boar& an& the Bangko 1entral

,. 1ub!it to the 2rei&ent o" the 2hilippine an& the Congre4 an& !ake

public4 a &etaile& report which hall inclu&e4 a a !ini!u!4 a

&ecription an& anali o"

a. The nature an& caue o" the e:iting or i!!inent &ecline

b. The re!e&ial !eaure alrea& taken or to be taken b the

onetar Boar&

c. The !onetar4 9cal or a&!initrati(e !eaure "urther

propoe& an&

&. The character an& e:tent o" the cooperation re;uire& "ro! other

go(ern!ent agencie "or the ucce"ul e:ecution o" the policie

o" the onetar Boar&.

INSTRUMENTS OF BANGKO SENTRAL ACTION

Means of action

• In or&er to achie(e the pri!ar obecti(e o" price tabilit4 the onetar

Boar& hall rel on it !oral inuence an& the power grante& to it un&er RA

7653 "or the !anage!ent o" !onetar aggregate.

.urchases and sales of gold

• The Bangko 1entral !a bu an& ell gol& in an "or!.

.urchases and sales of foreign e+change




$!BANKING LAWS

• The Bangko entral !a bu an& ell "oreign note an& coin4 an& &ocu!ent

an& intru!ent o" tpe cuto!aril e!ploe& "or the international tran"e

ro" "un&.

• The Bangko 1entral !a engage in "uture e:change operation.

To whom can engage

• The Bangko 1entral !a engage in "oreign tranaction with the "ollowing

entitie or peron onl

). Banking intitution operating in the 2hilippine

,. The Go(ern!ent4 it political ub&i(iion an& intru!entalitie

3. %oreign or international 9nancial intitution

. %oreign go(ern!ent an& their intru!entalitie an&

5. /ther entitie or peron which the onetar Boar& i hereb

e!powere& to authori-e a "oreign e:change &ealer.

Foreign asset position of the Bangko entral

• The Bangko 1entral hall en&ea(or to !aintain at all ti!e a net poiti(e

"oreign aet poition o that it gro "oreign e:change aet will alwa

e:cee& it gro "oreign liabilitie.

/mergency restrictions on foreign e+change operations

• E!ergenc retriction on "oreign e:change operation inclu&e

). Te!poraril upen&ing or retricting ale o" "oreign e:change b the

Bangko 1entral

,. 1ubecting all tranaction in gol& an& "oreign e:change to licene b

the Bangko 1entral an&

3. Re;uiring that an "oreign e:change therea"ter obtaine& b an peron

rei&ing or entit operating in the 2hilippine be &eli(ere& to the

Bangko 1entral or to an bank or agent &eignate& b the Bangko

1entral "or the purpoe4 at the e0ecti(e e:change rate or rate.

?1ection 7,4 RA 7653@




$#BANKING LAWS

• E!ergenc retriction !a be i!poe& "or the "ollowing purpoe

). In or&er to achie(e the pri!ar obecti(e o" the Bangko 1entral

,. To protect the international reer(e o" the Bangko 1entral in the

i!!inence o"4 or &uring an e:change crii4 or in ti!e o" national

e!ergenc an&

3. To gi(e the onetar Boar& an& the Go(ern!ent ti!e in which to take

contructi(e !eaure to "oretall4 co!bat4 or o(erco!e uch a crii

or e!ergenc. ?1ection 7,4 RA 7653@

• 1uch !eaure !a be a&opte& with the concurrence o" at leat 9(e 5D

!e!ber o" the onetar Boar& an& with the appro(al o" the 2rei&ent o" the

2hilippine. ?1ection 7,4 RA 7653@

/+change rates

• The Bangko 1entral hall &eter!ine the e:change rate polic o" the countr.

Foreign e+change holdings of the banks

• In or&er that the Bangko 1entral !a at all ti!e ha(e "oreign e:change

reource uFcient to enable it to !aintain the international tabilit an&

con(ertibilit o" the peo4 or in or&er to pro!ote the &o!etic in(et!ent o"

bank reource4 the onetar Boar& !a re;uire the bank to ell to the

Bangko 1entral or to other bank all or part o" their urplu hol&ing o"

"oreign e:change. ?1ection 764 RA 7653@

LOANS TO BANKING AND OTHER FINANCIAL INSTITUTIONS

(uiding principles

• The re&icount4 &icount4 loan an& a&(ance4 which the Bangko 1entral i

authori-e& to e:ten& to banking intitution4 hall be ue& to inuence the

(olu!e o" cre&it conitent with the obecti(e o" price tabilit.

Types of credit operations

). Nor!al cre&it operation

,. 1pecial cre&it operation




20BANKING LAWS

3. E!ergenc cre&it operation

-ormal credit operations

). Co!!ercial cre&it

,. 2ro&uction cre&it

3. /ther cre&it

0ommercial credits

• The Bangko 1entral !a re&icount4 &icount4 bu an& ell bill4 acceptance4

pro!ior note an& other cre&it intru!ent with !aturitie o" not !ore

than one hun&re& eight )>+D &a "ro! the &ate o" their re&icount4

&icount or ac;uiition b the Bangko 1entral an& reulting "ro! tranaction

relate& to

). The i!portation4 e:portation4 purchae or ale o" rea&il aleable

goo& an& pro&uct4 or their tranportation within the 2hilippine or

,. The toring o" non8perihable goo& an& pro&uct which are &ul

inure& an& &epoite&4 un&er con&ition auring their preer(ation in

authori-e& bon&e& warehoue or in other place appro(e& b the

onetar Boar&.

.roduction credits

• The Bangko 1entral !a re&icount4 &icount4 bu an& ell bill4 acceptance4

pro!ior note an& other cre&it intru!ent ha(ing !aturitie o" not !ore

than three hun&re& i:t 36+D &a "ro! the &ate o" their re&icount4

&icount or ac;uiition b the Bangko 1entral an& reulting "ro! tranaction

relate& to the pro&uction or proceing o" agricultural4 ani!al4 !ineral4 or

in&utrial pro&uct.

Other credits

• 1pecial cre&it intru!ent not otherwie re&icountable un&er co!!ercial

an& pro&uction cre&it !a be eligible "or re&icounting in accor&ance with

the rule an& regulation which the Bangko 1entral hall precribe.

pecial credit operation




2$BANKING LAWS

). $oan "or li;ui&it purpoe

1oans for li$uidity purposes

• The Bangko 1entral !a e:ten& loan an& a&(ance to banking intitution

"or a perio& o" not !ore than e(en 7D &a without an collateral "or the

purpoe o" pro(i&ing li;ui&it to the banking te! in ti!e o" nee&.

?1ection >34 RA 7653@

/mergency loans and advances

• In perio& o" national an&Hor local e!ergenc or o" i!!inent 9nancial panic

which &irectl threaten !onetar an& banking tabilit4 the onetar Boar&

!a4 b a (ote o" at leat 9(e 5D o" it !e!ber4 authori-e the Bangko

1entral to grant e:traor&inar loan or a&(ance to banking intitution

ecure& b aet. ?1ection >4 RA 7653@

• The onetar Boar& !a4 at it &icretion4 likewie authori-e the Bangko

1entral to grant e!ergenc loan or a&(ance to banking intitution4 e(en

&uring nor!al perio&4 "or the purpoe o" aiting a bank in a precariou

9nancial con&ition or un&er eriou 9nancial preure brought b un"oreeen

e(ent4 or e(ent which4 though "oreeeable4 coul& not be pre(ente& b the

bank concerne&. Thi re;uire that the onetar Boar& ha acertaine& that

the bank i not inol(ent an& ha the aet to ecure the a&(ance an& that

the concurrent (ote o" at leat 9(e 5D !e!ber o" the onetar Boar& i

obtaine&. ?1ection >4 RA 7653@

O"EN MARKET O"ERATIONS FOR THE ACCOUNT OF THE BANGKO SENTRAL

.rinciple of open market operations

• The open !arket purchae an& ale o" ecuritie b the Bangko 1entral

hall be !a&e e:clui(el in accor&ance with it pri!ar obecti(e o"

achie(ing price tabilit.

•

In puruit o" thi principle4 the Bangko 1entral !a engage in the purchaean& ale o" go(ern!ent ecuritie a well a iue an& negotiate obligation

o" the Bangko 1entral.

BANK RESERVES

&eserve re$uirements




22BANKING LAWS

• In or&er to control the (olu!e o" !one create& b the cre&it operation o"

the banking te!4 all bank operating in the 2hilippine hall be re;uire& to

!aintain reer(e againt their &epoit liabilitie.

• The re;uire& reer(e o" each bank hall be proportional to the (olu!e o" it

&epoit liabilitie an& hall or&inaril take the "or! o" a &epoit in the Bangko

1entral. ?1ection *4 RA 7653@

-o interest on bank reserves

• 1ince the re;uire!ent to !aintain bank reer(e i i!poe& pri!aril to

control the (olu!e o" !one4 the Bangko 1entral hall not pa interet on the

reer(e !aintaine& with it unle the onetar Boar& &eci&e otherwie a

warrante& b circu!tance. ?1ection *4 RA 7653@

#eposit substitutes

• The ter! "deposit substitutes" i &e9ne& a an alternati(e "or! o" obtaining

"un& "ro! the public4 other than &epoit4 through the iuance4

en&ore!ent4 or acceptance o" &ebt intru!ent "or the borrowerJ own

account4 "or the purpoe o" re8len&ing or purchaing o" recei(able an& other

obligation.

&e$uired reserves against foreign currency

• The onetar Boar& i i!ilarl authori-e& to precribe an& !o&i" the

!ini!u! reer(e ratio authori-e& applicable to &epoit &eno!inate& in

"oreign currencie.

Increase in reserve re$uirements

• hene(er in the opinion o" the onetar Boar& it beco!e necear to

increae reer(e re;uire!ent againt e:iting liabilitie4 the increae hall

be !a&e in a gra&ual !anner an& hall not e:cee& "our percentage point in

an thirt8&a perio&.

• Bank an& other a0ecte& 9nancial intitution hall be noti9e& reaonabl in

a&(ance o" the &ate on which uch increae i to beco!e e0ecti(e.

/+emption from attachment and other purposes of reserves




23BANKING LAWS

• #epoit !aintaine& b bank with the Bangko 1entral a part o" their

reer(e re;uire!ent hall be e:e!pt "ro! attach!ent4 garnih!ent4 or an

other or&er or proce o" an court4 go(ern!ent agenc or an other

a&!initrati(e bo& iue& to ati" the clai! o" a part other than the

Go(ern!ent4 or it political ub&i(iion or intru!entalitie.

SELECTIVE REGULATION OF BANK O"ERATIONS

(uiding principle

• The onetar Boar& hall ue the power grante& to it un&er RA 7653 to

enure that the uppl4 a(ailabilit an& cot o" !one are in accor& with the

nee& o" the 2hilippine econo! an& that bank cre&it i not grante& "or

peculati(e purpoe preu&icial to the national interet.

• Regulation on bank operation hall be applie& to all bank o" the a!e

categor uni"or!l an& without &icri!ination.

Margin re$uirements against letters of credit

• The onetar Boar& !a at an ti!e precribe !ini!u! cah !argin "or

the opening o" letter o" cre&it4 an& !a relate& the i-e o" the re;uire&

!argin to the nature o" the tranaction to be 9nance&.

FUNCTIONS AS BANKER AND FINANCIAL ADVISOR OF THE GOVERNMENT

#esignation of Bangko entral as banker of the government

• The Bangko 1entral hall act a a banker o" the Go(ern!ent4 it political

ub&i(iion an& intru!entalitie.

• The Bangko 1entral hall repreent the go(ern!ent with the International

onetar %un& an& other 9nancial intitution.

O,cial deposits

•

The Bangko 1entral hall be the oFcial &epoitor o" the Go(ern!ent4 itpolitical ub&i(iion an& intru!entalitie a well a o" go(ern!ent8owne&

or controlle& corporation.

THE MARKETING AND STABILI'ATION OF SECURITIES FOR THE ACCOUNT OF THE

GOVERNMENT




24BANKING LAWS

Issue of government obligations

• The iue o" ecuritie repreenting obligation o" the Go(ern!ent4 it

political ub&i(iion or intru!entalitie !a be !a&e through the Bangko

1entral4 which !a act a agent o"4 an& "or the account o"4 the Go(ern!ent

or it repecti(e ub&i(iion or intru!entalit4 a the cae !a be.

• The Bangko 1entral hall not be a !e!ber o" an tock e:change or

n&icate4 but !a inter(ene therein "or the ole purpoe o" regulating their

operation in the placing o" go(ern!ent ecuritie. ?1ection ))>4 RA 7653@

ervicing and redemption of public debt

• The er(icing an& re&e!ption o" the public &ebt hall alo be e0ecte&

through the Bangko 1entral.




25BANKING LAWS

Financial advice on o,cial credit operations

• Be"ore un&ertaking an cre&it operation abroa&4 the Go(ern!ent4 through

the 1ecretar o" %inance4 hall re;uet the opinion4 in writing4 o" the onetar

Boar& on the !onetar i!plication o" the conte!plate& action. 1uch opinion

!ut i!ilarl be re;uete& b all political ub&i(iion an& intru!entalitie

o" the Go(ern!ent be"ore an cre&it operation abroa& i un&ertaken b

the!.

• hene(er the Go(ern!ent4 or an o" it political ub&i(iion or

intru!entalitie4 conte!plate borrowing within the 2hilippine4 the prior

opinion o" the onetar Boar& hall likewie be re;uete& in or&er that the

Boar& !a ren&er an opinion on the probable e0ect o" the propoe&

operation on !onetar aggregate4 the price le(el4 an& the balance o"

pa!ent.

• In or&er to aure e0ecti(e coor&ination between the econo!ic4 9nancial an&

9cal policie o" the go(ern!ent an& the !onetar4 cre&it an& e:change

policie o" the Bangko 1entral4 the #eput Go(ernor &eignate& b the

Go(ernor o" the Bangko 1entral hall be an ex ocio !e!ber o" the National

Econo!ic an& #e(elop!ent Authorit Boar&.

"ROHIBITIONS

.rohibitions

• The Bangko 1entral hall not ac;uire hare o" an kin& or accept the! a

coolateral4 an& hall not participate in the ownerhip or !anage!ent o" an

enterprie4 either &irectl or in&irectl.

• The Bangko 1entral hall not engage in &e(elop!ent banking or 9nancing.

TRANSITORY "ROVISIONS

.haseout of scal agency functions

•

'nle circu!tance warrant otherwie an& appro(e& b the Congre/(eright Co!!ittee4 the Bangko 1entral hall within a perio& o" three 3D

ear but in no cae longer than 9(e 5D ear "ro! the appro(al o" RA 76534

phae out all 9cal agenc "unction4 an& tran"er the a!e to the

#epart!ent o" %inance. ?1ection ),*4 RA 7653@




26BANKING LAWS

.haseout of regulatory powers over the operations of nance

corporations and other institutions performing similar functions

• The Bangko 1entral hall within a perio& o" 9(e 5D ear "ro! the e0ecti(it

o" RA 7653 phae out it regulator power o(er 9nance co!panie without

;uai8banking "unction an& other intitution per"or!ing i!ilar "unction4

the a!e to be au!e& b the 1ecuritie an& E:change Co!!iion.

?1ection )3+4 RA 7653@

GENERAL BANKING ACT

Republic Act No. 3374 a a!en&e&

An act regulating bank an& banking intitution an& "or other purpoe

Appro(e& ,3 %ebruar )**5

IN GENERAL

&ule on bank operations

• /nl entitie &ul authori-e& b the onetar Boar& o" the Bangko 1entral !a

engage in the len&ing o" "un& obtaine& "ro! the public through the receipt

o" &epoit o" an kin& an& all entitie regularl con&ucting uch operation

hall be coni&ere& a banking intitution.

Banks or banking institutions

• Entitie engage& in the len&ing o" "un& obtaine& "ro! the public through the

receipt o" &epoit o" an kin&4 an& all entitie regularl con&ucting uch

operation.

• Bank or banking intitution !ut be &ul authori-e& b the onetar Boar&

o" the Central Bank.

• 2ublic hall !ean twent or !ore len&er.

"uasi*banking functions

• “!uasi-banking functions” hall !ean borrowing "un&4 "or the borrower=

own account4 through the iuance4 en&ore!ent or acceptance o" &ebt

intru!ent o" an kin& other than &epoit4 or through the iuance o"




2BANKING LAWS

participation4 certi9cate o" aign!ent4 or i!ilar intru!ent with

recoure4 trut certi9cate4 or o" repurchae agree!ent4 "ro! twent or

!ore len&er at an one ti!e4 "or purpoe o" re8len&ing or purchaing o"

recei(able an& other obligation.

• owe(er4 co!!ercial4 in&utrial4 an& other non89nancial co!panie4 which

borrow "un& through an o" thee !ean "or the li!ite& purpoe o"

9nancing their own nee& or the nee& o" their agent or &ealer4 hall not be

coni&ere& a per"or!ing ;uai8banking "unction.

Financial intermediaries

• “inancial intermediaries” hall !ean peron or entitie whoe principal

"unction inclu&e the len&ing4 in(eting or place!ent o" "un& or e(i&ence o"

in&ebte&ne or e;uit &epoite& with the!4 ac;uire& b the! or otherwie

coure& through the!4 either "or their own account or "or the account o"

other.

-on*banking nancial institutions performing $uasi*banking functions

• The "ollowing entitie hall not be coni&ere& a banking intitution but hall

be ubect to regulation b the onetar Boar&

). Entitie regularl engage& in the len&ing o" "un& or purchaing o"

recei(able or other obligation with "un& obtaine& "ro! the public

through the iuance4 en&ore!ent or acceptance o" &ebt intru!ent

o" an kin& "or their own account4 or through the iuance o"

certi9cate o" aign!ent or i!ilar intru!ent with recoure4 trut

certi9cate4 or o" repurchae agree!ent4 whether an o" thee !ean

o" obtaining "un& "ro! the public i &one on a regular bai or

occaionall.

,. Entitie regularl engage& in the len&ing o" "un& which recei(e

&epoit occaionall.

3. Trut co!panie4 buil&ing an& loan aociation4 an& non8tock a(ing

an& loan aociation.

• Thee entitie will be ubect to regulation b the onetar Boar& which !a

inclu&e4 but nee& not be li!ite& to

). the i!poition o" net worth to rik aet ratio




2!BANKING LAWS

,. reer(e re;uire!ent

3. interet rate ceiling

. !etho& o" co!putation thereo"

5. precribing charge which !a be collecte&

6. !ini!u! capitali-ation an&

7. ub!iion o" tatitical report.

-on*bank nancial intermediaries

• The operation an& acti(itie o" non8bank 9nancial inter!e&iarie4 e:cept

inurance co!panie4 hall be ubect to regulation b the onetar Boar&

which !a inclu&e4 but nee& not be li!ite& to4 the i!poition o" contraint

co(ering the

). !ini!u! i-e o" "un& recei(e&

,. !etho& o" !arketing an& &itribution

3. ter! an& !aturitie o" "un& recei(e& an&

. ue o" "un&.

• I" uch entitie are authori-e& b the Central Bank to per"or! ;uai8banking

"unction4 the !a be "urther ubect to regulation a &icue& below. Note

1ec. )3+ o" the CB Act phaing out the regulation o" B o(er NB%C not

engage& in ;uai8banking "unction.

#etermination of functions

• The &eter!ination o" whether a peron or an entit i aD per"or!ing banking

or ;uai8banking "unction or bD engage& in other tpe o" 9nancial

inter!e&iation hall be &eci&e& b the onetar Boar&4 ubect to u&icialre(iew.

&egulation

• “#egulation” hall !ean the iuance o" rule o" con&uct or the

etablih!ent o" !o&e or tan&ar& o" operation "or uni"or! application to




2#BANKING LAWS

all intitution or "unction co(ere&4 taking into coni&eration in &eter!ining

uch co(erage the &itincti(e character o" the operation o" intitution an&

the ubtanti(e i!ilaritie o" peci9c "unction to which uch rule4 !o&e

or tan&ar& are to be applie&. In o!e intance4 thee entitie !a be

ubect to pecial e:a!ination.




30BANKING LAWS

upervision

• “$uper%ision” hall inclu&e not onl the iuance o" rule but alo the

o(ereeing to acertain that regulation are co!plie& with4 in(etigating or

e:a!ining to &eter!ine whether an intitution i con&ucting it buine on a

oun& 9nancial bai4 an& in;uiring into the ol(enc an& li;ui&it o" the

intitution.

&elationship between bank and depositor

• %i:e& a(ing an& current &epoit o" !one in bank an& i!ilar intitution

hall be go(erne& b the pro(iion concerning i!ple loan. In other wor&4

the relationhip between the bank an& the &epoitor i that o" a &ebtor an&

cre&itor.

• In the cae o" rent o" a"et &epoit bo:. The contract i a pecial kin& o"

&epoit an& cannot be characteri-e& a an or&inar contract o" leae becaue

the "ull an& abolute poeion an& control o" the &epoit bo: i not gi(en to

the renter. The pre(ailing rule i that the relation between the bank renting

out an& the renter i that o" bailer an& bailee the bail!ent being "or hire an&

!utual bene9it. ?0' 'gro*industrial #ev! 0orp! v! 0'( ,)* 1CRA ,6

)*>3D@

Types of deposits

). Ti!e #epoit8Interet rate tipulate& &epen&ing on the nu!ber o" &a.

#uring thi perio&4 the !one &epoite& cannot be with&rawn. The bank

ue thi !one to len& to other. That i wh in thee account4 the

&epoitor i pai& higher rate o" interet "or the ue o" the !one.

,. 1a(ing &epoit8Interet 9:e& un&er the 9ne print4 i" one &epoit to&a4 he

cannot with&raw the a!ount not until 6+ &a later. The bank can len& out

uch "un& that i wh it pa interet on uch &epoit.

3. #e!an& &epoit or current account8 No interet i 9:e& b the bank becaue

the &epoitor can take out hi "un& an ti!e. It i calle& &e!an& &epoit

becaue the &epoitor can with&raw the !one &epoite& on the (er a!e&a when he &epoite& it. Note A a general rule4 onl co!!ercial bank

can accept &e!an& &epoit on checking account. B wa o" e:ception4

a(ing bank an& e(en rural bank4 are allowe& b the CB to accept

checking account becaue their capitali-aition !a be large.




3$BANKING LAWS

Money market transactions

• one !arket i a !arket &ealing in tan&ar&i-e& hort8ter! cre&it intru!ent

in(ol(ing large a!ountD where len&er an& borrower &o not &eal &irectl

with each other but through a !e&iator or &ealer in the open !arket.

• It in(ol(e “commercial papers” which are intru!ent “e%idencing

indebtedness of any person or entity& which are issued, endorsed, sold or

transferred or in any manner con%eyed to another person or entity, with or

without recourse'”

• The "un&a!ental "unction o" the !one !arket &e(ie in it operation i to

!atch an& bring together in a !ot i!peronal !anner both the “fund

users” an& the “fund suppliers'”

• The !one !arket i an Ki!peronal !arketL "ree "ro! peronal coni&eration.

The !arket !echani! i inten&e& to pro(i&e ;uick !obilit o" !one an&

ecuritie.

The (eneral Banking 'ct discriminates against banks in two aspects

). 2erio&8 'n&er the Ci(il Co&e4 a perio& i preu!e& to be "or the bene9t o"

both partie. Ino"ar a bank are concerne&4 the perio& i alwa "or the

bene9t o" the &ebtor i" the bank i the cre&itor. The &ebtor can co!pel the

cre&itor bank to accept pa!ent o" a &ebt be"ore it i &ue4 an& reco(er

interet &e&ucte& in a&(ance.

,. %orecloure o" !ortgage8

• The general rule i that there i no right o" re&e!ption in u&icial

"orecloure o" !ortgage. There i onl *+ &a e;uit re&e!ption

perio&.

• The e:ception i with the bank ai&e "ro! the *+8&a e;uit

re&e!ption perio&4 bank are re;uire& to gi(e a one8ear re&e!ption

perio&.

'lien bank mortgage

• An alien bank can bi& in a public auction o" !ortgage& propert i" uch propert

wa !ortgage to it in the coure o" an or&inar banking tranaction. I" the

!ortgage wa not within the nor!al banking tranaction4 it !ut be

prohibite& "ro! bi&&ing.




32BANKING LAWS

Mortgage loans

• $oan againt real etate ecurit hall not e:cee& 7+ o" the appraie&

(alue o" the real etate ecurit4 plu 7+ o" the appraie& (alue o" the

i!pro(e!ent with title to the propert being with the !ortgagor.

• $oan on the ecurit o" chattel hall not e:cee& 5+ o" the appraie& (alue

o" the ecurit.

0lassication of banks

). Co!!ercial bank

,. Thri"t bank

a. 1a(ing an& !ortgage bank

b. 1tock a(ing an& loan aociation

c. 2ri(ate &e(elop!ent bank

3. Rural bank

Indispensable to the national interest

• The banking in&utr i hereb &eclare& a in&ipenable to the national

interet an&4 notwithtan&ing the pro(iion o" an law to the contrar4 an

trike or lockout in(ol(ing bank4 i" unettle& a"ter e(en 7D calen&ar &a4

hall be reporte& b the Central Bank to the 2rei&e who hall i!!e&iatel

certi" the a!e to the appropriate court4 go(ern!ent agenc or co!!iion

"or reolution.

ESTABLISHMENT OF DOMESTIC BANKS

Form of organi3ation

• #o!etic banking intitution4 e:cept buil&ing an& loan aociation4 hall be

organi-e& in the "or! o" tock corporation.

• No banking intitution hall iue no8par (alue tock.




33BANKING LAWS

• The 1ecuritie an& E:change Co!!iion hall not regiter the article o"

incorporation o" an bank4 or an a!en&!ent thereto4 unle acco!panie&

b a certi9cate o" authorit iue& b the onetar Boar&4 un&er it oFcial

eal.

• At leat two thir& o" the !e!ber o" the boar& o" &irector o" an bank or

banking intitution which !a be etablihe& a"ter the appro(al o" thi Act

hall be %ilipino citi-en.

&e$uisites for issuance of certicate of authority

• 1uch certi9cate hall not iue unle the onetar Boar& i ati9e& "ro!

the e(i&ence ub!itte& to it

). that all the re;uire!ent o" e:iting law an& regulation to engage in

the buine "or which the applicant i propoe& to be incorporate&

ha(e been co!plie& with

,. that the public interet an& econo!ic con&ition4 both general an&

local4 uti" the authori-ation an&

3. that the a!ount o" capital4 the 9nancing organi-ation4 &irection an&

a&!initration4 a well a the integrit an& reponibilit o" the

organi-er an& a&!initrator reaonabl aure the a"et o" the

interet which the public !a entrut to the!.

&eceipt and disposition of deposits

• No bank which !a be etablihe& an& licene& to &o buine in the

2hilippine hall recei(e &epoit4 unle incorporate& un&er the law o" the

Republic o" the 2hilippine.

• Thi prohibition4 howe(er4 hall not appl to branche an& agencie o" "oreign

bank which4 at the ti!e o" appro(al o" the General Banking Act4 are actuall

recei(ing &epoit.

•

A"ter appro(al o" the Act4 all &epoit o recei(e& b uch branche an&agencie o" "oreign bank hall not be in(ete& in an !anner outi&e the

territorial li!it o" the Republic o" the 2hilippine.

4oting stock re$uirements




34BANKING LAWS

• At leat e(ent percent 7+D o" the (oting tock o" an banking intitution

which !a be etablihe& a"ter the appro(al o" the Act hall be owne& b

citi-en o" the 2hilippine4 e:cept where a new bank i etablihe& a a reult

o" aD the local incorporation o" an o" the e:iting branche or agencie o"

"oreign bank in the 2hilippine or bD the conoli&ation o" e:iting bank in

an o" which there are "oreign owne& (oting tock at the ti!e o"

conoli&ation.

• The onetar Boar& !a4 with the appro(al o" the 2rei&ent4 increae the

percentage o" "oreign8owne& (oting tock in an &o!etic bank "ro! thirt

percent 3+D to "ort percent +D.

• The percentage o" "oreign8owne& (oting tock in a bank hall be &eter!ine&

b the citi-enhip o" the in&i(i&ual tockhol&er in that bank. In the cae o"

corporation owning bank hare4 the citi-enhip o" each tockhol&er in that

corporation hall be the bai o" co!puting the percentage.

Ownership of stocks in banks by corporations

• The total (oting tock which an corporation4 inclu&ing it wholl or !aorit

owne& ubi&iarie4 !a own in an bank hall not e:cee& thirt percent

3+D o" the (oting tock o" that bank.

• In the cae o" a corporation which i wholl owne&4 or the !aorit o" the

(oting tock o" which i owne&4 b an one peron or b peron relate& to

each other within the thir& &egree o" conanguinit or aFnit4 that

corporation !a own not !ore than twent percent ,+D o" the (oting tock

o" an bank.

LICENSING OF FOREIGN BANKS

1icense to conduct business

• No "oreign bank or banking corporation "or!e&4 organi-e& or e:iting un&er

an law other than thoe o" the 2hilippine hall be per!itte& to tranact

buine in the 2hilippine4 or !aintain b itel" or aignee an uit "or the

reco(er o" an &ebt4 clai!4 or &e!an& whatoe(er4 until a"ter it hall ha(eobtaine&4 upon or&er o" the onetar Boar&4 a licene "or that purpoe "ro!

the 1ecuritie an& E:change Co!!iion.

• No "oreign buil&ing an& loan aociation or buil&ing an& loan aociation not

"or!e&4 organi-e&4 or e:iting un&er the law o" the 2hilippine hall be

per!itte& to tranact buine in the 2hilippine.




35BANKING LAWS

&e$uisites for issuance of license

). 2ublic an& econo!ic con&ition4 both general an& local4 uti" the iuance

o" uch or&er.

,. The "oreign bank or banking corporation i ol(ent an& in oun& 9nancial

con&ition.

3. A &ul appointe& agent in the 2hilippine ha been authori-e& to accept

u!!on an& legal procee.




36BANKING LAWS

Investment rights

). %oreign banking intitution without branche in the 2hilippine4 inclu&ing

their wholl or !aorit owne& ubi&iarie an& their hol&ing co!panie

ha(ing !aorit hol&ing in uch "oreign banking intitution4 !a in(et4 with

prior appro(al o" the onetar Boar&4 in e;uitie o" local co!panie engage&

in 9nancial allie& un&ertaking. owe(er4 the hall !aintain !inorit

participation in uch enterprie.

,. ith prior appro(al o" the Central Bank4 thee "oreign entitie !a alo

purchae e;uitie in &o!etic bank4 ubect to retriction.

&evocation of license

). The "oreign bank i in i!!inent &anger o" inol(enc.

,. It continuance in buine will in(ol(e probable lo to thoe tranacting

buine with it.

CLASSIFICATION OF "RIVATE BANKS

COMMERCIAL BANKING COR"ORATIONS AND UNIVERSAL BANKS

0ommercial bank

• A co!!ercial banking corporation4 in a&&ition to the general power inci&ent

to corporation4 hall ha(e all uch power a hall be necear to carr on

the buine o" co!!ercial banking

). b accepting &ra"t an& iuing letter o" cre&it4 b &icounting an&

negotiating pro!ior note4 &ra"t4 bill o" e:change4 an& other

e(i&ence o" &ebt

,. b recei(ing &epoit

3. b buing an& elling "oreign e:change an& gol& or il(er bullion an&

. b len&ing !one againt peronal ecurit or againt ecuritie

coniting o" peronal propert o" !ortgage on i!pro(e& real etate

an& the inure& i!pro(e!ent thereon.

• A co!!ercial bank !a alo accept or create &e!an& &epoit ubect to

with&rawal b check.




3BANKING LAWS

• A co!!ercial bank !a o0er N/ account pecial tpe o" a(ing &epoit

which can be with&rawn b !ean o" a Negotiable /r&er o" ith&rawal an& i

o0ere& onl to natural peronD.

• A co!!ercial bank !a likewie ac;uire rea&il !arketable bon& an& other

&ebt ecuritie ubect to uch rule a the onetar Boar& !a pro!ulgate.

• A co!!ercial bank4 9nall4 !a in(et to the e:tent allowe& un&er applicable

law an& regulation in e;uitie o" allie& un&ertaking4 whether 9nancial or

non89nancial.

Investment in allied undertakings

• Co!!ercial bank4 inclu&ing Go(ern!ent bank an& "oreign bank with

e:iting local branche4 !a in(et in e;uitie o" allie& un&ertaking.

• E;uit in(et!ent hall not be per!itte& in non8relate& acti(itie.

• $i!itation on in(et!ent in allie& un&ertaking

). The total in(et!ent in e;uitie hall not e:cee& twent 9(e percent

,5D o" the net worth o" the bank.

,. The e;uit in(et!ent in an one enterprie hall not e:cee& 9"teen

percent )5D o" the net worth o" the bank

3. The total e;uit in(et!ent o" the bank in an ingle enterprie hall

re!ain a !inorit hol&ing in that enterprie an&

. The e;uit in(et!ent in other bank hall be &e&ucte& "ro! the

in(eting bank= net worth "or purpoe o" co!puting the precribe&

ratio o" net worth to rik aet.

• %inancial allie& un&ertaking

). $eaing co!panie

,. Bank

3. In(et!ent houe

. %inancing co!panie




3!BANKING LAWS

5. Cre&it car& operation

6. %inancial intitution catering to !all an& !e&iu! cale enterprie

• Non89nancial allie& un&ertaking

). arehouing co!panie

,. 1torage co!panie

3. 1a"e &epoit bo: co!panie

. Co!panie engage& in the !anage!ent o" !utual "un& but not in the

!utual "un& the!el(e

5. anage!ent corporation engage& or to be engage& in acti(it i!ilar

to the engage!ent o" !utual "un&

6. Co!panie engage& in the pro(iion o" co!puter er(ice

7. Inurance agencie

>. Co!panie engage& in ho!e buil&ing an& ho!e &e(elop!ent

*. Co!panie pro(i&ing &ring an&Hor !illing "acilitie "or agricultural

crop

2niversal bank or e+panded commercial banking authority

• The onetar Boar& !a authori-e 88 to "urther national &e(elop!ent

obecti(e or upport national priorit proect 88 a co!!ercial bank4 a bank

authori-e& to pro(i&e co!!ercial banking er(ice4 a well a a go(ern!ent

owne& an& controlle& bank4 to operate un&er an e:pan&e& co!!ercial

banking authorit.

•

B (irtue o" uch e:pan&e& power4 the uni(eral bank !a4 in a&&ition topower authori-e& "or co!!ercial bank

). e:ercie the power o" an In(et!ent oue a pro(i&e& in 2# ),*

,. in(et in the e;uit o" a non8allie& un&ertaking or




3#BANKING LAWS

3. own a !aorit or all o" the e;uit in a 9nancial inter!e&iar other

than a co!!ercial bank or a bank authori-e& to pro(i&e co!!ercial

banking er(ice.




40BANKING LAWS

1imitations on e+ercise of power as investment house

• 'ni(eral bank !a per"or! the "unction o" an in(et!ent houe either

&irectl /R in&irectl through a ubi&iar in(et!ent houe it cannot

per"or! uch "unction both &irectl an& in&irectlD.

• I" per"or!e& &irectl4 uch "unction hall be un&ertaken b a eparate an&

&itinct &epart!ent in the bank.

• I" per"or!e& in&irectl through an in(et!ent houe4 uni(eral bank !a not

&irectl e:ercie uch power a are e:clui(el reer(e& to in(et!ent

houe.

1imitations on e$uity investment of a universal bank

). The total in(et!ent in e;uitie hall not e:cee& 9"t percent 5+D o" the

net worth o" the bank.

,. The e;uit in(et!ent in an one enterprie whether allie& or non8allie& hall

not e:cee& 9"teen percent )5D o" the net worth o" the bank.

3. The e;uit in(et!ent o" the bank4 or o" it wholl8 or !aorit8owne&

ubi&iar4 in a ingle non8allie& un&ertaking hall not e:cee& thirt 9(e

percent 35D o" the total e;uit in the enterprie nor hall it e:cee& thirt

9(e percent 35D o" the (oting tock in that enterprie.

. The e;uit in(et!ent in other bank hall be &e&ucte& "ro! the in(eting

bank= net worth "or purpoe o" co!puting the precribe& ratio o" net worth

to rik aet.

0apitali3ation

Co!!ercial bank 8 2 , billion

'ni(eral bank 8 2 .5 billion

Ownership in a thrift bank or rural bank

• A co!!ercial bank or an bank authori-e& to pro(i&e co!!ercial banking

er(ice4 or to operate un&er an e:pan&e& co!!ercial banking authorit

!a own !ore than thirt percent 3+D o" the (oting tock o" a thri"t bank

or a rural bank up to a !aorit or all o" the e;uit thereo".




4$BANKING LAWS

• 1ubect to the prior appro(al o" the onetar Boar&.

0ombined capital accounts

• The co!bine& capital account o" each co!!ercial bank hall not be le

than an a!ount e;ual to ten percent )+D o" it rik aet

• Rik aet i &e9ne& a it total aet !inu the "ollowing aet

). Cah on han&

,. A!ount &ue "ro! the Central Bank

3. E(i&ence o" in&ebte&ne o" the 2hilippine Go(ern!ent or Central

Bank or an other e(i&ence o" in&ebte&ne "ull guarantee& b the

2hilippine Go(ern!ent

. $oan to the e:ten& co(ere& b hol&8out on4 or aign!ent o"4 &epoit

!aintaine& in the len&ing bank an& hel& in the 2hilippine

5. $oan or acceptance un&er letter o" cre&it to the e:ten& co(ere& b

!arginal &epoit an&

6. /ther non8rik ite! which the onetar Boar& !a4 "ro! ti!e to

ti!e4 authori-e to be &e&ucte& "ro! total aet.

.urchase) holding or conveyance of real estate

• An co!!ercial bank !a purchae4 hol&4 an& con(e real etate "or the

"ollowing purpoe

). 1uch a hall be necear "or it i!!e&iate acco!!o&ation in the

tranaction o" it buine

,. 1uch a hall be !ortgage& to it in goo& "aith b wa o" ecurit "or

&ebt

3. 1uch a hall be con(ee& to it in ati"action o" &ebt pre(ioul

contracte& in the coure o" it &ealing an&

. 1uch a it hall purchae at ale un&er u&g!ent4 &ecree4

!ortgage4 or trut &ee& hel& b it an& uch a it hall purchae to

ecure &ebt &ue to it.




42BANKING LAWS

• owe(er4 no uch bank hall hol& the poeion o" an real etate un&er

!ortgage or trut &ee&4 or the title an& poeion o" an real etate

purchae& to ecure an &ebt &ue to it4 "or a longer perio& than 9(e ear.

/stablishment of branches

• An co!!ercial bank organi-e& un&er 2hilippine law !a4 with the prior

appro(al o" the onetar Boar&4 etablih branche in the 2hilippine or

branche an& agencie outi&e the 2hilippine4 an& the bank hall be

reponible "or all buine con&ucte& in uch branche to the a!e e:tent

an& in the a!e !anner a though uch buine ha& all been con&ucte& in

the hea& oFce.

• A bank an& it branche hall be treate& a a unit.

THRIFT BANKS

Thrift banks

• KThri"t bankL hall inclu&e a(ing an& !ortgage bank4 pri(ate

&e(elop!ent bank4 an& tock a(ing an& loan aociation organi-e& un&er

e:iting law an& an banking corporation that !a be organi-e& "or the

"ollowing purpoe

). Accu!ulating the a(ing o" &epoitor an& in(eting the! together

with capital loan ecure& b bon&4 !ortgage in real etate an&

inure& i!pro(e!ent thereon4 chattel !ortgage4 bon&4 an& other

"or! o" ecurit or in loan "or peronal an& houehol& 9nance4

whether ecure& or unecure&4 or in 9nancing "or ho!e buil&ing an&

ho!e &e(elop!ent4 in rea&il !arketable an& &ebt ecuritie in

co!!ercial paper4 an& account recei(able4 &ra"t4 bill o" e:change4

acceptance or note ariing out o" co!!ercial tranaction an& in

uch other in(et!ent an& loan which the onetar Boar& will

&eter!ine a necear in the "urtherance o" national econo!ic

obecti(e

,. 2ro(i&ing hort ter! working capital4 or !e&iu!8 an& long8ter!

9nancing to buinee engage& in agriculture4 er(ice4 in&utr an&

houing an&




43BANKING LAWS

3. 2ro(i&ing &i(eri9e& 9nancial an& allie& er(ice "or it choen !arket

an& contituencie epeciall "or !all an& !e&iu! enterprie an&

in&i(i&ual.

cope of authority

• Thri"t bank !a

). Accept a(ing an& ti!e &epoit

,. Act a correpon&ent "or other 9nancial intitution

3. 2urchae4 hol& an& con(e real etate

. /pen letter o" cre&it

5. e:ten& cre&it "acilitie to pri(ate an& go(ern!ent e!ploee

6. E:ten& cre&it againt the ecurit o" ewelr4 preciou tone an&

i!ilar article

7. Accept "oreign currenc &epoit

>. In(et in e;uit o" allie& un&ertaking

*. Re&icount paper with the 2NB4 $B24 #B24 an& other G/CC

)+. Iue &o!etic letter o" cre&it

)). In(et in !arketable bon& an& other &ebt ecuritie

),. Grant loan4 ecure& or not ecure& an&

)3. ith prior appro(al o" the onetar Boar&

a. /pen current or checking account

b. Act a collection agent "or go(ern!ent entitie

c. Act a oFcial &epoitor o" national agencie an& !unicipal4 cit

or pro(incial "un& where the bank i locate&

&. Iue !ortgage an& chattel certi9cate




44BANKING LAWS

e. Engage in ;uai8banking an& !one !arket operation an&

". /0er N/ account.

• Thri"t bank !a per"or! er(ice i!ilar to thoe o0ere& b co!!ercial

bank un&er an e:pan&e& authorit when per!itte& b the Bangko 1entral

ng 2ilipina.

0apitali3ation

• Capitali-ation !a (ar accor&ing to the location o" the hea& oFce

ithin etro anila 8 2,5+ !illion

/uti&e etro anila 8 2 + !illion

Incentives and e+emptions

). Reer(e re;uire!ent &i0erential

,. $iberali-e& branching rule

3. Notice o" tate!ent o" con&ition

. Ta: e:e!ption

5. E:e!ption "ro! publication re;uire!ent

6. E:e!ption "ro! notarial charge

7. E:e!ption "ro! regitration "ee

/$uity ownership

• At leat + o" the (oting tock o" a thri"t bank hall be owne& b %ilipino

citi-en.

• E:ception In cae o" !erger or conoli&ation o" e:iting Thri"t Bank with

"oreign hol&ing4 the reulting hol&ing hall not be increae& but !a be

re&uce& an&4 once re&uce&4 hall not be increae& therea"ter beon& 6+ o"

the (oting tock o" the Thri"t Bank.

Minors as depositors




45BANKING LAWS

• inor in their own right an& in their own na!e !a !ake &epoit an&

with&raw the a!e4 an& !a recei(e &i(i&en& an& interet.

• I" the guar&ian hall gi(e notice in writing to an thri"t bank not to !ake

pa!ent o" &epoit4 &i(i&en& or interet to the !inor o" who! he i the

guar&ian4 then uch pa!ent hall be !a&e onl to the guar&ian.

BUILDING AND LOAN ASSOCIATIONS

Building and loan associations

• Buil&ing an& loan aociation are corporation whoe capital tock i

re;uire& or i per!itte& to be pai& in b the tockhol&er in regular4 e;ual

perio&ical pa!ent an& whoe purpoe i

). to accu!ulate the a(ing o" it tockhol&er

,. to repa to ai& tockhol&er their accu!ulate& a(ing an& pro9t

upon urren&er o" their hare

3. to encourage in&utr4 "rugalit4 an& ho!e buil&ing a!ong it

tockhol&er an&

. to loan it "un&4 an& "un& borrowe& "or the purpoe4 to tockhol&er

on the ecurit o" unencu!bere& real etate an& with the ple&ge o"hare o" the capital tock owne& b uch tockhol&er a collateral

ecurit.

.rohibition

• It hall be unlaw"ul "or an buil&ing an& loan aociation to !ake an loan

upon propert that i uitable "or u onl a theatre4 public hall4 church4

con(ent4 chool4 club4 hotel4 garage4 or other public buil&ing. onetar Boar&

!a grant e:e!ption in cae o" public hall4 chool4 hotel an& other public

buil&ing to "acilitate the in(et!ent o" i&le "un&.

Investment in bonds

• ith the appro(al o" the onetar Boar&4 a buil&ing an& loan aociation !a

alo in(et uch o" it "un& a !a otherwie re!ain i&le in bon& an&




46BANKING LAWS

obligation o" the Republic o" the 2hilippine or an o" it ub&i(iion4 or

G/CC.

0apital stock

• The capital tock o" uch aociation hall be pai& in b the tockhol&er in

regular4 e;ual4 perio&ical pa!ent known a &ue4 at uch ti!e an& in uch

a!ount a hall be pro(i&e& in their b law.

• The &ue on each hare o" tock ubcribe& "or b a tockhol&er hall

continue to be pai& b the tockhol&er to the aociation until the hare ha

been &ul with&rawn4 cancelle&4 or "or"eite& or until the hare ha reache& it

!ature& (alue.

• ature& (alue i when the &ue pai& on each hare an& the net earning

thereo"4 in accor&ance with the b law4 hall a!ount to the !ature& o" the

hare.

0erticates of stock

• Certi9cate o" tock hall be iue& to each tockhol&er upon the pa!ent o"

the !e!berhip "ee an& 9rt intall!ent o" the &ue.

Installment shares v! paid*up shares

• hile till being pai&4 the hare are calle& intall!ent hare. A"ter the are

"ull pai&4 the are calle& pai&8up hare.

• /nce pai&8up4 relationhip between the aociation an& tockhol&er i

change& into that o" &ebtor an& cre&itor.

Free shares and pledged shares

• 1hare which ha(e not been ple&ge& a ecurit "or the pa!ent o" a loan

hall be calle& “free” shares,” an& hare which ha(e been o ple&ge& hall

be calle& “pledged shares'”

urrender of shares

• 1tockhol&er !a urren&er their hare an& with&raw "ro! the aociation

a"ter paing twel(e ),D !onthl intall!ent o" &ue upon gi(ing i:t 6+D

&a= notice in writing to the boar& o" &irector an& the with&rawal (alue

hall be the total u! o" the &ue pai& thereon plu not le than ninet




4BANKING LAWS

percent *+D o" all &i(i&en& earne& b uch hare up to the en& o" the lat

prece&ing 9cal perio& plu uch interet "or the ti!e elape& ince the en&

o" the perio& a hall be allowe& b the boar& o" &irector.

• 1tockhol&er who ha(e not pai& twel(e ),D !onthl intall!ent o" &ue

!a4 a"ter gi(ing i:t 6+D &a= notice to the boar&4 urren&er their hare

an& with&raw "ro! the aociation4 an& the with&rawal (alue hall be the

total u! o" the &ue pai& thereon plu uch &i(i&en& or interet a !a be

allowe& b the boar& o" &irector.

RURAL BANKS

cope of authority

• A rural bank !a per"or! an or all o" the "ollowing er(ice

). E:ten& loan an& a&(ance pri!aril "or the purpoe o" !eeting the

nor!al an& cre&it nee& o" "ar!er4 9her!en4 or "ar! "a!ilie a well

a cooperati(e4 !erchant4 pri(ate an& public e!ploee

,. Accept a(ing an& ti!e &epoit

3. Ac a correpon&ent bank o" other 9nancial intitution

. Re&icount paper with the $B24 #B24 or an other bank4 inclu&ing it

branche an& agencie.

5. Act a a collection agent

6. /0er other banking er(ice a pro(i&e& in 1ection 77, o" RA 3374 a

a!en&e&

7. E:ten& 9nancial aitance to pri(ate an& public e!ploee in

accor&ance with RA 377*4 a a!en&e& an&

>. ith prior appro(al o" the onetar Boar&

a. Accept current or checking account

b. Accept N/ account

c. Act a trutee o(er etate or propertie o" "ar!er an&

!erchant




4!BANKING LAWS

&. Act a oFcial go(ern!ent &epoitor

e. 1ell &o!etic &ra"t an&

". In(et in allie& un&ertaking.

&ationale

• The rationale behin& rural banking te! i the nee& to pro!ote

co!preheni(e rural &e(elop!ent with the en& in (iew o" the "ollowing

). A !ore e;uitable &itribution o" opportunitie4 inco!e an& wealth

,. A utaine& increae o" goo& an& er(ice pro&uce& b the nation "or

the bene9t o" the people an&

3. An e:pan&ing pro&ucti(it a a ke to raiing the ;ualit o" li"e "or all.

• Thi can be achie(e& b !aking cre&it a(ailable an& rea&il acceible in the

rural area.

0apital stock

• ith the e:ception o" harehol&ing o" corporation organi-e& pri!aril to

hol& e;uitie in rural bank4 an& o" %ilipino8controlle& &o!etic bank4 the

capital tock o" an rural bank hall be "ull8owne& an& hel& b 2hilippine

citi-en or entitie ;uali9e& un&er 2hil. law to own an& hol& uch capital

tock.

Board

• All !e!ber o" the B/# hall be %ilipino citi-en.

• owe(er4 there i no prohibition againt an appointi(e or electi(e public

oFcial "ro! er(ing a &irector4 oFcer4 conultant or in an capacit in the

bank.

Incentives

• %orecloure o" !ortgage e:e!pt "ro! newpaper publication re;uire!ent i"

the loan4 e:clu&ing interet &ue an& unpai&4 &oe not e:cee& 2)++4+++.




4#BANKING LAWS

• E:e!pt "ro! pa!ent o" all ta:e4 "ee an& charge o" whate(er nautre an&

&ecription4 e:cept corporate inco!e ta:e an& local ta:e4 "ee an& charge

"or aperio& o" 9(e ear "ro! the &ate o" co!!ence!ent o" operation.

• %ree "ro! notari-ation "ee

• %ree "ro! regitration "ee an& #1T in R#.

ACT LIBERALI'ING ENTRY OF FOREIGN BANKS

Republic Act No. 77,)

An act liberali-ing the entr an& cope o" operation o" "oreign bank in the

2hilippine an& "or other purpoe

#eclaration of policy

• The 1tate hall

). #e(elop a el"8reliant an& in&epen&ent national econo! e0ecti(el

controlle& b %ilipino an&

,. Encourage4 pro!ote an& !aintain a table4 co!petiti(e4 eFcient an&

&na!ic banking an& 9nancial te!.

•

2uruant to thi polic4 the 2hilippine banking an& 9nancial te! i herebliberali-e& to create a !ore co!petiti(e en(iron!ent an& encourage greater

"oreign participation through increae in ownerhip in &o!etic bank b

"oreign bank an& the entr o" new "oreign bank branche.

• In allowing increae& "oreign participation in the 9nancial te!4 it hall be

the polic o" the 1tate that the 9nancial te! hall re!ain e0ecti(el

controlle& b %ilipino.

Three 567 modes of entry for foreign banks

•

The onetar Boar& !a authori-e "oreign bank to operate in the 2hilippinebanking te! through an o" the "ollowing !o&e o" entr

). b ac;uiring4 purchaing or owning up to i:t percent 6+D o" the

(oting tock o" an e:iting bank




50BANKING LAWS

,. b in(eting in up to i:t percent 6+D o" the (oting tock o" a new

banking ubi&iar incorporate& un&er 2hilippine law or

3. b etablihing branche with "ull banking authorit.

• A "oreign bank or a 2hilippine corporation4 howe(er4 !a own up to i:t

percent 6+D o" the (oting tock o" onl one &o!etic bank or new banking

ubi&iar.

(uidelines for entry

• In appro(ing entr application o" "oreign bank4 the onetar Boar& hall

). enure geographic repreentation an& co!ple!entation

,. coni&er trategic tra&e an& in(et!ent relationhip between the

2hilippine an& the countr o" incorporation o" the "oreign bank

3. tu& the &e!ontrate& capacit4 global reputation "or 9nancial

inno(ation an& tabilit in a co!petiti(e en(iron!ent o" the

applicant

. ee to it that reciprocit right are enoe& b 2hilippine bank in the

applicant= countr an&

5. coni&er willingne to "ull hare their technolog.

• /nl thoe a!ong the top one hun&re& 9"t )5+D "oreign bank in the worl&

or the top 9(e 5D bank in their countr o" origin a o" the &ate o" application

hall be allowe& entr in bD an& cD o" !o&e o" entr.

• In appro(ing entr4 onetar Boar& hall a&opt uch !eaure a !a be

necear

). to enure that4 at all ti!e4 the control o" e(ent 7+D o" the

reource or aet o" the entire banking te! i hel& b &o!etic

bank which are at leat !aorit8owne& b %ilipino

,. pre(ent a &o!inant !arket poition b one bank or the concentration

o" econo!ic power in one or !ore 9nancial intitution4 or in

corporation4 partnerhip4 group or in&i(i&ual with relate& interet

an&




5$BANKING LAWS

3. ecure the liting in the 2hilippine 1tock E:change o" the hare o"

tock o" banking corporation etablihe& un&er aD an& bD !o&e o"

entr.

• To ;uali" to etablih a branch or ubi&iar4 the "oreign bank applicant !ut

be wi&el8owne& an& publicl8lite& in it countr o" origin4 unle the "oreign

bank applicant i owne& b the go(ern!ent o" it countr o" origin.

0apital re$uirements

• $ocall incorporate& ubi&iarie hall ha(e the a!e !ini!u! capital

re;uire!ent a &o!etic bank o" the a!e categor.

• %or "oreign bank branche4 the hall per!anentl aign capital o" not le

than the '.1. &ollar e;ui(alent o" 2,)+4+++4+++.++ at the e:change rate on

the &ate o" e0ecti(it o" thi law.

• The per!anentl aigne& capital hall be inwar&l re!itte& an& con(erte&

into 2hilippine currenc.

Branches

• A "oreign bank hall be entitle& to three 3D branche upon re!ittance o"

!ini!u! capital re;uire!ent.

• A "oreign bank !a open three 3D a&&itional branche in location

&eignate& b the onetar Boar& b inwar&l re!itting an& con(erting into

2hilippine currenc a per!anentl aigne& capital the '.1. &ollar e;ui(alent

o" 2354+++4+++.++ per a&&itional branch at the e:change rate on the &ate o"

e0ecti(it o" thi law.

• Total nu!ber o" branche "or each new "oreign bank entrant hall not e:cee&

i: 6D.




52BANKING LAWS

8ead o,ce guarantee

• The hea& oFce o" "oreign bank branche hall guarantee pro!pt pa!ent o"

all liabilitie o" it 2hilippine branche.

/$ual treatment

• %oreign bank authori-e& to operate un&er the law hall per"or! the a!e

"unction4 eno the a!e pri(ilege4 an& be ubect to the a!e li!itation

i!poe& upon a 2hilippine bank o" the a!e categor.

• Thee li!it inclu&e4 a!ong other4 the ingle borrower= li!it an& capital to

rik aet ratio a well a the capitali-ation re;uire& "or e:pan&e&

co!!ercial banking acti(itie un&er the General Banking Act an& other

relate& law o" the 2hilippine.

OFFSHORE BANKING S YSTEM LAW

2rei&ential #ecree No. )+3

Authori-ing the etablih!ent o" an o0hore banking te! in the 2hilippine

Appro(e& 3+ 1epte!ber )*76

O9shore banking

•

/0hore banking hall re"er to the con&uct o" banking tranaction in "oreigncurrencie in(ol(ing the receipt o" "un& "ro! e:ternal ource an& the

utili-ation o" uch "un& in tranaction with non8rei&ent or other o0hore

banking unit.

O9shore banking unit

• /0hore banking unit hall !ean a branch4 ubi&iar or aFliate o" a "oreign

banking corporation which i &ul authori-e& b the Central Bank to tranact

o0hore banking buine in the 2hilippine.

#eposits

• #epoit hall !ean "un& in "oreign currencie which are accepte& an& hel&

b an o0hore banking unit in the regular coure o" buine4 with the

obligation to return an e;ui(alent a!ount to the owner thereo"4 with or

without interet.




53BANKING LAWS




54BANKING LAWS

%ho are $ualied to operate an o9shore banking unit:

• /nl bank which are organi-e& un&er an law other than thoe o" the

Republic o" the 2hilippine4 their branche4 ubi&iarie or aFliate4 hall be

;uali9e& to operate o0hore banking unit in the 2hilippine.

• $ocal branche o" "oreign bank alrea& authori-e& to accept "oreign currenc

&epoit un&er RA 6,6 !a opt to appl "or authorit to operate an o0hore

banking unit un&er 2# )+3. owe(er4 upon their receipt o" a correpon&ing

certi9cate o" authorit to operate a an o0hore banking unit4 the licene to

tranact buine un&er RA 6,6 hall be &ee!e& auto!aticall with&rawn.

0erticate of authority to operate

• The onetar Boar& i authori-e& to iue certi9cate o" authorit to operate

o0hore banking unit.

• In iuing uch certi9cate4 the onetar Boar& hall take into coni&eration

the applicant=

). li;ui&it an& ol(enc poition

,. net worth an& reource

3. !anage!ent

. international banking e:pertie

5. contribution to the 2hilippine econo! an&

6. other rele(ant "actor uch a participation in e;uit o" local

co!!ercial bank an& appropriate geographic repreentation.

• The Central Bank i authori-e& to collect a "ee o" not le than '1 M,+4+++

upon iuing an certi9cate o" authorit to operate an& annuall therea"ter

on the anni(erar &ate o" uch certi9cate.

0orporate undertaking

• No application to operate a an o0hore banking unit hall be coni&ere&

unle the applicant hall ha(e 9rt ub!itte& to the Central Bank a worn

un&ertaking o" it hea& oFce or parent or hol&ing co!pan4 &ul upporte&




55BANKING LAWS

b an appropriate reolution o" it boar& o" &irector4 that4 a!ong other

thing

). it will4 on &e!an&4 pro(i&e the necear peci9e& currencie to co(er

li;ui&it nee& that !a arie or other hort"all that it o0hore

banking unit !a incur

,. the operation o" it o0hore banking unit hall be !anage& oun&l

an& with pru&ence

3. it will train an& continuall e&ucate a peci9c nu!ber o" %ilipino in

international banking an& "oreign e:change tra&ing with a (iew to

re&ucing the nu!ber o" e:patriate

. it will pro(i&e an& !aintain in it o0hore banking unit net oFce "un&

in the !ini!u! a!ount o" '1 M )4+++4+++ an&

5. it will tart operation o" it o0hore banking unit within )>+ &a "ro!

receipt o" it certi9cate o" authorit to operate uch unit.

Transactions of o9shore banking units

• Tranaction o" o0hore banking unit with non8rei&ent or with other

o0hore banking unit hall be "reel allowe&4 but a"eguar& will be

etablihe& to pre(ent circu!(ention o" "oreign e:change regulation.

• Tranaction o" o0hore banking unit with rei&ent o" the 2hilippine4

inclu&ing thoe with local co!!ercial bank an& local branche o" "oreign

bank authori-e& to recei(e "oreign currenc &epoit un&er RA 6,64 hall

be ubect to applicable law an& regulation.

Ta+ and other incentives

• The pro(iion o" an law to the contrar notwithtan&ing4 the tranaction o"

o0hore banking unit with non8rei&ent an& other o0hore banking unit

hall be ubect to a 9(e percent 5D ta: on the net inco!e "ro! uch

tranaction which hall be in lieu o" all ta:e on the ai& tranaction.

• The tranaction o" o0hore banking unit with local co!!ercial bank4

inclu&ing branche o" "oreign bank that !a be authori-e& b the Central

Bank to tranact buine with o0hore banking unit4 hall likewie be

ubect to the a!e ta:4 e:cept net inco!e "ro! uch tranaction a !a be




56BANKING LAWS

peci9e& b the 1ecretar o" %inance4 upon reco!!en&ation o" the onetar

Boar&4 to be ubect to the uual inco!e ta: paable b bank.

• An inco!e o" non8rei&ent "ro! tranaction with ai& o0hore banking

unit hall be e:e!pt "ro! an ta:.

• In the cae o" tranaction with rei&ent other than other o0hore banking

unit or local co!!ercial bank inclu&ing local branche o" "oreign bank that

!a be authori-e& b the Central Bank to tranact buine with o0hore

banking unitD4 interet inco!e "ro! loan grante& to uch rei&ent hall be

ubect onl to a ten percent )+D withhol&ing ta: a 9nal ta:.

/9ect of certain laws

• The 'ur $aw4 'ni"or! Currenc $aw4 an& 2#IC law hall not appl to

tranaction an&Hor &epoit in o0hore banking unit in the 2hilippine.

• The pro(iion o" RA )+5 or the $aw on 1ecrec o" Bank #epoit hall appl

to &epoit in o0hore banking unit.

FOREIGN CURRENCY DE"OSIT ACT

Republic Act No. 6,64 a a!en&e&

An act intituting a "oreign currenc &epoit te! in the 2hilippine an& "or other

purpoeAppro(e& + April )*7

'uthority to deposit foreign currencies

• An peron4 natural or uri&ical4 !a &epoit with uch 2hilippine bank in

goo& tan&ing4 a !a upon application be &eignate& b the Central Bank

"or the purpoe4 "oreign currencie which are acceptable a part o" the

international reer(e.

/+ception

• %oreign currencie which are re;uire& b the Central Bank to be urren&ere&

in accor&ance with the pro(iion o" RA 7653 !a not be &epoite&.

'uthority of the banks to accept foreign currency deposits




5BANKING LAWS

• The bank &eignate& b the Central Bank hall ha(e the authorit

). To accept &epoit an& to accept "oreign currencie in trut

,. To iue certi9cate to e(i&ence uch &epoit

3. To &icount ai& certi9cate

. To accept ai& &epoit a collateral "or loan ubect to uch rule

an& regulation a !a be pro!ulgate& b the Central Bank an&

5. To pa interet in "oreign currenc on uch &epoit.

Foreign currency cover re$uirements

• #epoitar bank hall !aintain at all ti!e a one hun&re& percent )++D

"oreign currenc co(er "or their liabilitie4 e:cept a the onetar Boar& !a

otherwie precribe or allow.

• At leat 9"teen percent )5D o" uch co(er hall be in the "or! o" "oreign

currenc &epoit with the Central Bank an& the balance in the "or! o" "oreign

currenc loan or ecuritie4 which loan or ecuritie hall be o" hort ter!

!aturitie an& rea&il !arketable.

• %oreign currenc co(er hall be in the a!e currenc a that o" the

correpon&ing "oreign currenc &epoit liabilit4 unle the onetar Boar&

!a otherwie precribe or allow.

• The Central Bank !a pa interet on the "oreign currenc &epoit4 an& i"

re;uete&4 hall e:change the "oreign currenc note an& coin into "oreign

currenc intru!ent &rawn on it &epoitar bank.

• Central Bank !a e:e!pt "ro! the )5 "oreign currenc co(er in the "or! o"

"oreign currenc &epoit with the Central Bank in cae o" &epoitor bank

which4 on account o" their net worth4 reource4 pat per"or!ance4 or other

pertinent criteria4 ha(e been ;uali9e& b the onetar Boar& to "unction

un&er an e:pan&e& "oreign currenc &epoit te!.

• 1ai& bank !a alo be e:e!pt "ro! the li!itation on the !aturit perio&

"or loan an& ecuritie ubect to prior appro(al b the Central Bank.

%ithdrawability and transferability of deposits




5!BANKING LAWS

• There hall be no retriction on the with&rawal b the &epoitor o" hi &epoit

or on the tran"erabilit o" the a!e abroa& e:cept thoe ariing "ro! the

contract between the &epoitor an& the bank.




5#BANKING LAWS

Ta+ e+emption

• All "oreign currenc &epoit !a&e un&er RA 6,64 a a!en&e&4 a well a

"oreign currenc &epoit authori-e& un&er 2# )3+4 inclu&ing interet an&

all other inco!e or earning o" uch &epoit4 are hereb e:e!pte& "ro! an

an& all ta:e whatoe(er irrepecti(e o" whether or not thee &epoit are

!a&e b rei&ent or non8rei&ent o long a the &epoit are eligible or

allowe& un&er the ai& law an&4 in the cae o" non8rei&ent4 irrepecti(e o"

whether or not the are engage& in tra&e or buine in the 2hilippine.

ecrecy of foreign currency deposits

• All "oreign currenc &epoit authori-e& un&er RA 6,64 a a!en&e& b 2#

)3+54 a well a "oreign currenc &epoit authori-e& un&er 2# )+34 are

hereb &eclare& a an& coni&ere& o" an abolutel con9&ential nature an&4

e:cept upon the written per!iion o" the &epoitor4 in no intance hall

"oreign currenc &epoit be e:a!ine&4 in;uire& or looke& into b an

peron4 go(ern!ent oFcial4 bureau or entit whether public or pri(ate.

• 'nlike the $aw on 1ecrec o" Bank #epoit Act4 there i onl one e:ception

"or "oreign currenc &epoit an& that i when there i a written per!iion

"ro! the &epoitor.

/+emption from attachment) garnishment and other process

• %oreign currenc &epoit hall be e:e!pt "ro! attach!ent4 garnih!ent4 or

an other or&er or proce o" an court4 legilati(e bo&4 go(ern!ent agenc4

or an a&!initrati(e bo& whatoe(er.

alvacion v! 0entral Bank of the .hilippines

,7> 1CRA ,7

FACTS

Greg Bartelli4 an A!erican tourit4 wa arrete& "or co!!itting "our count o" rape

an& eriou illegal &etention againt aren 1al(acion. 2olice reco(ere& "ro! hi! e(eral

&ollar check an& a &ollar account in the China Banking Corp. e wa4 howe(er4 able toecape "ro! prion. In a ci(il cae 9le& againt hi!4 the trial court awar&e& 1al(acion

!oral4 e:e!plar an& attorne= "ee a!ounting to al!ot 2)4+++4+++.++.

1al(acion trie& to e:ecute the u&g!ent on the &ollar &epoit o" Bartelli with the

China Banking Corp. but the latter re"ue& arguing that 1ection )) o" Central Bank Circular

No. *6+ e:e!pt "oreign currenc &epoit "ro! attach!ent4 garnih!ent4 or an other




60BANKING LAWS

or&er or proce o" an court4 legilati(e bo&4 go(ern!ent agenc or an a&!initrati(e

bo& whatoe(er.

1al(acion there"ore 9le& thi action "or &eclarator relie" in the 1upre!e Court.

ISSUE 1houl& 1ection ))3 o" Central Bank Circular No. *6+ an& 1ection > o" Republic Act

No. 6,64 a a!en&e& b 2# ),64 otherwie known a the %oreign Currenc #epoit Act be

!a&e applicable to a "oreign tranientO

HELDThe pro(iion o" 1ection ))3 o" Central Bank Circular No. *6+ an& 2# No. ),64

ino"ar a it a!en& 1ection > o" Republic Act No. 6,64 are hereb hel& to be

INA22$ICAB$E to thi cae becaue o" it peculiar circu!tance. Repon&ent are hereb

re;uire& to co!pl with the writ o" e:ecution iue& in the ci(il cae an& to releae to

petitioner the &ollar &epoit o" Bartelli in uch a!ount a woul& ati" the u&g!ent.

RATIO

1upre!e Court rule& that the ;uetione& law !ake "utile the "a(orable u&g!ent

an& awar& o" &a!age that 1al(acion an& her parent "ull &eer(e. It then procee&e& to

how that the econo!ic bai "or the enact!ent o" RA No. 6,6 i not an!ore preent

an& e(en i" it till e:it4 the ;uetione& law till &enie thoe entitle& to &ue proce o" law

"or being unreaonable an& opprei(e. The intention o" the law !a be goo& when

enacte&. The law "aile& to anticipate the ini;uitou e0ect pro&ucing outright inutice an&

ine;ualit uch a the cae be"ore u.

The 1C a&opte& the co!!ent o" the 1olicitor General who argue& that the /0hore

Banking 1te! an& the %oreign Currenc #epoit 1te! were &eigne& to &raw &epoit

"ro! "oreign len&er an& in(etor an&4 ube;uentl4 to gi(e the latter protection.

owe(er4 the "oreign currenc &epoit !a&e b a tranient or a tourit i not the kin& o"

&epoit encourage& b 2# No. )+3 an& )+35 an& gi(en incenti(e an& protection b ai&

law becaue uch &epoitor ta onl "or a "ew &a in the countr an&4 there"ore4 will

!aintain hi &epoit in the bank onl "or a hort ti!e. Coni&ering that Bartelli i ut a

tourit or a tranient4 he i not entitle& to the protection o" 1ection ))3 o" Central Bank

Circular No. *6+ an& 2# No. ),6 againt attach!ent4 garnih!ent or other court

procee.

%urther4 the 1C ai& KIn 9ne4 the application o" the law &epen& on the e:tent o" it utice. E(entuall4 i" we rule that the ;uetione& 1ection ))3 o" Central Bank Circular No.

*6+ which e:e!pt "ro! attach!ent4 garnih!ent4 or an other or&er or proce o" an

court4 legilati(e bo&4 go(ern!ent agenc or an a&!initrati(e bo& whatoe(er4 i

applicable to a "oreign tranient4 inutice woul& reult epeciall to a citi-en aggrie(e& b a

"oreign guet like accue& Greg Bartelli. Thi woul& negate Article )+ o" the New Ci(il Co&e




6$BANKING LAWS

which pro(i&e that Kin cae o" &oubt in the interpretation or application o" law4 it i

preu!e& that the law!aking bo& inten&e& right an& utice to pre(ail.LL

#eposit insurance coverage

• The &epoit un&er RA 6,6 hall be inure& un&er the pro(iion o" RA 35*)4

a a!en&e&4 or the Charter o" the 2hilippine #epoit Inurance Corporation.

• Inurance pa!ent hall be in the a!e currenc in which the inure&

&epoit are &eno!inate&.

ACT CREATING THE "HILI""INE DE"OSIT INSURANCE COR"ORATION

Republic Act No. 35*)An act etablihing the 2hilippine #epoit Inurance Corporation4 &e9ning it power

an& &utie an& "or other purpoe

,, <une )*63

0reation of .#I0

• There i hereb create& a 2hilippine #epoit Inurance 1te! which hall

inure the &epoit o" all bank which are entitle& to the bene9t o" inurance

un&er RA 35*).

• 2#IC !a alo be appointe& a recei(er o" a banking intitution.

#eposit

• The ter! “deposit” !ean the unpai& balance o" !one or it e;ui(alent

recei(e& b a bank in the uual coure o" buine an& "or which it ha gi(en

or i oblige& to gi(e cre&it to a co!!ercial4 checking4 a(ing4 ti!e or thri"t

account or which i e(i&ence& b a pabook4 check an&Hor certi9cate o"

&epoit4 printe& or iue in accor&ance with Central Bank rule an&

regulation an& other applicable law4 together with uch other obligation o"

the bank which4 conitent with banking uage an& practice4 the Boar& o"

#irector hall &eter!ine an& precribe b regulation to be &epoit liabilitieo" the bank.

• 2ro(i&e& that an obligation o" a bank which i paable at the oFce o" the

bank locate& outi&e o" the 2hilippine hall not be a &epoit "or an o" the




62BANKING LAWS

purpoe o" thi Act or inclu&e& a part o" the total &epoit or o" inure&

&epoit.

• 2ro(i&e& "urther4 that4 ubect to the appro(al o" the Boar& o" #irector4 an

inure& bank which i incorporate& un&er the law o" the 2hilippine which

!aintain a branch outi&e the 2hilippine !a elect to inclu&e "or inurance

it &epoit obligation paable onl at uch branch.




63BANKING LAWS

Insured deposit

• The ter! “insured deposit” !ean the net a!ount &ue to an &epoitor "or

&epoit in an inure& bank a"ter &e&ucting o0etD le an part thereo"

which i in e:ce o" one hun&re& thouan& peo 2)++4+++D. There"ore4 the

!a:i!u! a!ount o" inure& &epoit "or e(er &epoitor i onl 2)++4+++.

• All thee tpe o" &epoit are co(ere& &e!an&4 a(ing an& ti!e &epoit

i" a &epoitor ha all three tpe o" account4 he can onl reco(er up to

2)++4+++. e i coni&ere& a one &epoitor.

• In &eter!ining uch a!ount &ue to an &epoitor4 there hall be a&&e&

together all &epoit in the bank !aintaine& in the a!e capacit an& the

a!e right "or hi bene9t either in hi own na!e or in the na!e o" other.

Bank an& it branche coni&ere& a one unit.

• The pro(iion o" an law to the contrar notwithtan&ing4 an ownerHhol&er o"

an negotiable certi9cate o" &epoit hall be recogni-e& a a &epoitor

entitle& to the right pro(i&e& in thi Act unle hi na!e i regitere& a

ownerHhol&er thereo" in the book o" the iuing bank.

Insurance of deposits in foreign currency

• #epoit obligation in "oreign currenc o" an inure& bank are likewie

inure&.

• #epoit inurance co(erage an& pa!ent "or inure& &epoit !aintaine& in

"oreign currencie in a cloe& inure& bank hall be &eter!ine& in accor&ance

with the "ollowing rule

). The &epoit in "oreign currenc hall be con(erte& into it e;ui(alent

a!ount in 2hilippine peo at the interbank rate obtaining on the &ate

the bank wa cloe& or on inol(enc4 an& the inurance co(erage

hall e:ten& to uch co!pute& a!ount4 but in no cae to e:cee&

2+4+++ "or each &epoitor an&

,. The liabilit o" 2#IC to each &epoitor hall be paable in 2hilippinepeo in the a!ount o" inurance co(erage a co!pute& abo(e.

Trust funds




64BANKING LAWS

• The ter! !ean "un& hel& b an inure& bank in a 9&uciar capacit an&

inclu&e4 without being li!ite& to4 "un& a trutee4 e:ecutor4 a&!initrator4

guar&ian or agent.

• Trut "un& are not coni&ere& a inure& &epoit.

#eposit insurance coverage

• The &epoit liabilitie o" an bank or banking intitution4 which i engage& in

the buine o" recei(ing &epoit4 hall be inure& with the 2#IC.

• Co(erage i co!pulor.

Termination of insured status

• Two intance when it "ail or re"ue to pa ae!ent an& when it

beco!e inol(ent.

• 1houl& an bank "ail or re"ue to pa an ae!ent re;uire& to be pai& b

uch bank4 an& houl& the bank not correct uch "ailure or re"ual within 3+

&a a"ter written notice ha been gi(en b the 2#IC4 the inure& tatu o"

uch bank hall be ter!inate& b the Boar& o" #irector.

• The bank hall gi(e written notice o" uch ter!ination to each o" the

&epoitor an& the 2#IC hall publih the notice o" the ter!ination o" the

inure& tatu o" the bank.

• A"ter the ter!ination o" the inure& tatu o" the bank4 &epoit o" each

&epoitor in the bank4 le all ube;uent with&rawal "ro! an &epoit o"

uch &epoitor4 hall continue to be inure& "or a perio& o" *+ &a.

2nsafe or unsound practices

• Thee re"er to an action or lack o" action which i contrar to generall

accepte& tan&ar& o" pru&ent operation4 the poible cone;uence o"

which4 i" continue&4 woul& reult in abnor!al rik o" lo or &a!age to a

bank4 &epoitor an& it harehol&er or e(en the &epletion o" the Inurance%un& a&!initere& b the 2#IC.

0ease and desist order 50#O7

• A ceae an& &eit or&er hall re"er to the /r&er iue& b 2#IC4 through it

Boar& o" #irector4 to a !e!ber inure& bank4 or it &irector or agent to




65BANKING LAWS

correct aD una"e or unoun& practice in con&ucting the buine o" the

bank4 bD (iolation o" an law or regulation to which the inure& bank i

ubect4 or cD (iolation o" the pro(iion o" RA 35*)4 a a!en&e& or an

or&er4 rule or intruction iue& b the 2#IC or an written con&ition i!poe&

b 2#IC in connection with an tranaction with or grant b the 2#IC.

• The obect o" the C#/ i to protect &epoitor an& the 2#IC againt e:iting

or potential rik e:poure "ro! ai& practice or (iolation.

.ayment of insured deposit

• An inure& bank hall be &ee!e& cloe& on account o" inol(enc when

or&ere& cloe& b the onetar Boar&.

• hene(er an inure& bank hall ha(e been cloe& on account o" inol(enc4

pa!ent o" inure& &epoit in uch bank hall be !a&e b 2#IC a oon a

poible either )D b cah or ,D !aking a(ailable to each &epoitor a

tran"erre& &epoit in another inure& bank in an a!ount e;ual to the

inure& &epoit o" uch &epoitor.

• 2roo" o" clai! !a be re;uire& b 2#IC be"ore pa!ent. I" it i not ati9e&4

2#IC !a re;uire the 9nal &eter!ination o" a court o" co!petent uri&iction

be"ore paing uch clai!.

• #epoitor hall retain hi clai! againt the bank "or an uninure& portion o"

hi &epoit.

Bar of claim by depositor

• I"4 a"ter the 2#IC hall ha(e gi(en at leat three !onth= notice to the

&epoitor b !ailing a cop thereo" to hi lat known a&&re appearing on

the recor& o" the cloe& bank4 the &epoitor in the cloe& bank hall "ail to

9le a clai! "or hi inure& &epoit "ro! the 2#IC within eighteen )>D !onth

a"ter the onetar Boar& hall ha(e or&ere& the cloure o" ai& bank4 all

right o" the &epoitor againt the 2#IC with repect to the inure& &epoit

hall be barre&4 an& all right o" the &epoitor againt the cloe& bank an& it

harehol&er or the recei(erhip etate to which the 2#IC !a ha(e beco!eubrogate&4 hall thereupon re(ert to the &epoitor.

• 2ro(i&e&4 that the clai!ant hall en"orce hi &ul 9le& clai! againt the 2#IC

within one ear a"ter the eighteen8!onth perio& hereto"ore !entione&.

ubrogation




66BANKING LAWS

• The 2#IC4 upon pa!ent4 hall be ubrogate& to all right o" the &epoitor

againt the cloe& bank to the e:tent o" uch pa!ent.

• 2a!ent !a&e b 2#IC hall be coni&ere& a a pre"erre& cre&it i!ilar to

ta:e.




6BANKING LAWS

#ischarge of the .#I0

• The 2#IC hall be &icharge& "ro! it obligation to a &epoitor upon pa!ent

o" an inure& &epoit b itel" or upon pa!ent o" a tran"erre& &epoit to

an peron b the new bank or b an inure& bank in which a tran"erre&

&epoit ha been !a&e a(ailable.

Other powers of .#I0

). 2ro(i&e 9nancial aitance to an inure& bank in &anger o" cloing.

,. Borrow "ro! the Central Bank an& "ro! an bank &eignate& a &epoitor or

9cal agent o" the 2hilippine Go(ern!ent.

3. Iue bon&4 &ebenture an& other obligation with the appro(al o" the

2rei&ent o" the 2hilippine.

. Act a recei(er o" an banking corporation.

&eceiver

• Recei(er inclu&e a recei(er4 co!!iion4 peron4 or other agenc charge&

b law with the &ut to take charge o" the aet an& liabilitie o" a bank

which ha been "orbi&&en "ro! &oing buine in the 2hilippine4 a well a

the &ut to gather4 preer(e4 an& a&!initer uch aet an& liabilitie "or the

bene9t o" the &epoitor an& cre&itor o" ai& bank4 an& to continue into

li;ui&ation whene(er authori-e& un&er RA 35*)4 a a!en&e&4 or other law4

an& to &ipoe o" the aet an& to win& up the a0air o" uch bank.

THE TRUTH IN LENDING ACT


An act to re;uire the &icloure o" 9nance charge in connection with e:tenion o"

cre&it

Appro(e& ,, <une )*63


• It i hereb &eclare& to be the polic o" the 1tate to protect it citi-en "ro! a

lack o" awarene o" the true cot o" cre&it to the uer b auring a "ull




6!BANKING LAWS

&icloure o" uch cot with a (iew o" pre(enting the unin"or!e& ue o" cre&it

to the &etri!ent o" the national econo!.

Finance charge

• “inance charge” inclu&e interet4 "ee4 er(ice charge &icount4 an& uch

other charge inci&ent to the e:tenion o" cre&it.

0redit

• “(redit” !ean an loan4 !ortgage4 &ee& o" trut4 a&(ance4 or &icount an

con&itional ale contract an contract to ell4 or ale or contract o" ale o"

propert or er(ice4 either "or preent or "uture &eli(er4 un&er which part or

all o" the price i paable ube;uent to the !aking o" uch ale or contract

an rental purchae contract an contract or arrange!ent "or the hire4

bail!ent4 or leaing o" propert an option4 &e!an&4 lien4 ple&ge o" other

clai! againt4 or "or the &eli(er o"4 propert or !one an purchae4 or

other ac;uiition o"4 or an cre&it upon the ecurit o"4 an obligation or

clai! ariing out o" an o" the "oregoing an& an tranaction or erie o"

tranaction ha(ing a i!ilar purpoe or e0ect.

0reditor

• “(reditor” !ean an peron engage& in the buine o" e:ten&ing cre&it

inclu&ing an peron who4 a a regular buine practice4 !ake loan or

ell or rent propert or er(ice on a ti!e4 cre&it4 or intall!ent bai4

either a principal or a agentD who re;uire a an inci&ent to the e:tenion

o" cre&it the pa!ent o" a 9nance charge.

#isclosure of nance charges

• An cre&itor hall "urnih to each peron to who! cre&it i e:ten&e&4 prior to

the conu!!ation o" tranaction4 a clear tate!ent in writing etting "orth

the "ollowing in"or!ation

). the cah price or &eli(ere& price o" the propert or er(ice to be

ac;uire&

,. the a!ount4 i" an4 to be cre&ite& a &ownpa!ent an&Hor tra&e in

3. the &i0erence between the a!ount et "orth un&er claue )D an&

,D




6#BANKING LAWS

. the charge4 in&i(i&uall ite!i-e&4 which are pai& or to be pai& b uch

peron in connection with the tranaction but which are not inci&ent to

the e:tenion o" cre&it

5. the total a!ount to be 9nance&

6. the 9nance charge e:pree& in ter! o" peo an& centa(o an&

7. the percentage that the 9nance charge bear to the total a!ount to be

9nance& e:pree& a a i!ple annual rate on the outtan&ing unpai&

balance o" the obligation.

.enalty for failure to disclose prescribed information

• An cre&itor who4 in connection with an cre&it tranaction4 "ail to &icloe

to an peron an in"or!ation in (iolation o" Republic Act No. 3765 or an

regulation iue& puruant thereto hall be liable to uch peron in the

a!ount o" 2)++ or in an a!ount e;ual to twice the 9nance charge re;uire&

b uch cre&itor in connection with uch tranaction4 whiche(er i greater4

e:cept that uch liabilit hall not e:cee& 2,+++ on an cre&it tranaction.

'ction to recover such penalty

• Action to reco(er uch penalt !a be brought b uch peron within one

ear "ro! the &ate o" occurrence o" the (iolation in an court o" co!petent

uri&iction.

• In an uch action in which an peron i entitle& to a reco(er4 the cre&itor

hall be liable "or reaonable attorne= "ee an& court cot a &eter!ine&

b the court.

/9ect of non*disclosure on contract or transaction

• It hall not a0ect the (ali&it or en"orceabilit o" an contract or tranaction.

%illful violation of the law

• An peron who will"ull (iolate an pro(iion o" thi Act or an regulation

e:ten&e& thereto hall be 9ne& b not le than 2)+++ nor !ore than 25+++4

or i!prion!ent "or not le than i: 6D !onth nor !ore than one ear4 or

both.

0onsolidated Bank and Trust 0orporation v! 0ourt of 'ppeals




0BANKING LAWS

G.R. No. *)*4 ) <ul )**5

Bank are allowe& to collect han&ling charge on loan o(er 25++4+++ with a

!aturit o" 73+ &a or le. owe(er4 in the cae at bar4 Conoli&ate& Bank wa not

allowe& to collect "ro! the pri(ate repon&ent han&ling charge becaue it "aile& to

con"or! to the Truth in $en&ing Act.

All bank an& non8bank 9nancial inter!e&iarie authori-e& to engage in ;uai8

banking "unction are re;uire& to trictl a&here to the pro(iion o" Republic Act No. 37654

otherwie known a the Truth in $en&ing Act4 an& hall !ake the true an& e0ecti(e cot o"

borrowing an integral part o" e(er loan contract. The pro!ior note igne& b pri(ate

repon&ent &o not contain an tipulation on the pa!ent o" han&ling charge. 2etitioner

bank4 there"ore4 cannot charge pri(ate repon&ent uch han&ling charge.

International 8arvester Macleod) Inc! v! Medina

G.R. No. 336,34 ,, arch )**+

ariano e&ina4 <r. purchae on intall!ent , truck engine "ro! International

ar(eter acleo&4 Inc. IID. The latter i!poe& an& collecte& the total u! o" 23,545*6

a 9nance charge on the intall!ent ale a e(i&ence& b a Retail Note Anali an&

co(ering tran!ittal letter4 which were prepare& b II4 &eli(ere& to4 an& igne& b

e&ina. In the Retail Note Anali4 II ue& the work K%inance Inco!e 'nearne&4L

K%inance Rate4L KRate per ear4L KTotal A!ount %inance4L an& K#ate %inance Begun4L to

&enote certain entrie therein.

The trial court rule& that II i!poe& an& collecte& the a!ount o" 23,545*6 purel

a 9nancing charge an& thi i conclui(e o" the "act that it engage& in the buine o" a

9nancing co!pan without authorit "ro! the 1ecuritie an& E:change Co!!iion in

gro (iolation o" Republic Act No. 5*>+ or the %inance Co!pan Act.

The 1upre!e Court re(ere&4 ruling that II i not engage& in the buine o" a

9nancing co!pan.

E(i&entl4 the 9nancing tranaction that i regulate& b Republic Act No. 5*>+

in(ol(e the buing4 &icounting or "actoring o" pro!ior note an& ale on cre&it or

intall!ent. II &i& not purchae "ro! itel" the Retail Note Anali e:ecute& b e&ina.

II onl e:ten&e& cre&it to e&ina b allowing hi! to pa "or the , truck engine inintall!ent. hile the increae& price o" the ale inclu&e& a K9nancing charge4L that charge

wa i!pl another na!e "or the interet to be pai& b the intall!ent buer on the

&e"erre& pa!ent o" the purchae price o" the (ehicle ol& an& &eli(ere& to hi! b II.

The ue o" the wor& K9nance charge4L K9nancing4L or K9nance operationL in the

&ocu!ent prepare& an& letter ent b II to e&ina wa in co!pliance with the Truth in




$BANKING LAWS

$en&ing Act which re;uire a cre&itor or ellerD to "ull &icloe to the &ebtor or buerD the

true cot o" cre&it Kwith a (iew o" pre(enting the unin"or!e& ue o" cre&it to the &etri!ent

o" the national econo!.L

II ue& the wor& K9nance chargeL intea& o" KinteretL in the Retail Note

Anali which it &eli(ere& to e&ina becaue that i the ter! ue& in the Truth in $en&ing

Act.

II correctl pointe& out that it tranaction with e&ina &i0er "ro! a 9nancing

tranaction un&er Republic Act No. 5*>+ in that there were onl two partie in it

tranaction with e&ina4 na!el II an& e&ina while in a 9nancing tranaction un&er

Republic Act No. 5*>+4 there are three partie in(ol(e&4 na!el )D the intall!ent buer

,D the eller an& 3D the 9nancing co!pan. The buer e:ecute a note or note "or the

unpai& balance o" the price o" the thing purchae& b hi! on intall!ent. The eller aign

the note or &icount the! with a 9nancing co!pan which i ubrogate& in the place o"

the eller a cre&itor o" the intall!ent buer.

The tranaction between II an& e&ina &i& not in(ol(e an &icounting4 "actoring

or aign!ent o" II= cre&it againt e&ina to a 9nance co!pan. The tranaction wa

bilateral4 not trilateral. No 9nancing co!pan teppe& into the hoe o" II a aignee or

purchaer o" II= cre&it againt e&ina. e&ina hi!el"4 not a 9nancing co!pan4 pai&

II "or the truck engine. e&ina !a&e hi intall!ent pa!ent or a!orti-ation to II

an& not to a 9nancing co!pan.

1ince II= buine o" elling truck in intall!ent i not the buine o" a

9nancing co!pan un&er Republic Act No. 5*>+4 it &i& not nee& 1EC authori-ation to

engage in it.

LAW ON SECRECY OF BANK DE"OSITS

Republic Act No. )+54 a a!en&e&

An act prohibiting &icloure o" or in;uir into4 &epoit with an banking intitution

an& pro(i&ing penalt there"or

.olicy of the law

• It i hereb &eclare& to be the polic o" the Go(ern!ent to gi(e

encourage!ent to the people to &epoit their !one in banking intitution

an& to &icourage pri(ate hoar&ing o that the a!e !a be properl utili-e&

b bank in authori-e& loan to ait in the econo!ic &e(elop!ent o" the

countr. ?1ection )4 RA )+5@




2BANKING LAWS

(eneral rule

• All &epoit o" whate(er nature with bank or banking intitution in the

2hilippine inclu&ing in(et!ent in bon& iue& b the Go(ern!ent o" the

2hilippine4 it political ub&i(iion an& it intru!entalitie4 are hereb

coni&ere& a o" an abolutel con9&ential nature an& !a not be e:a!ine&4

in;uire& or looke& into b an peron4 go(ern!ent oFcial4 bureau or oFce.

?1ection ,4 RA )+5@

It hall be unlaw"ul "or an oFcial or e!ploee o" a bank to &icloe to an

peron4 other than thoe !entione& in 1ection , hereo"4 an in"or!ation

concerning ai& &epoit. ?1ection 34 RA )+5@

/+ceptions

). 'pon written per!iion o" the &epoitor4 inclu&ing

a. in &eter!ining etate o" a &ece&ent an&

b. ta: co!pro!ie cae

,. In cae o" i!peach!ent

3. 'pon or&er o" a co!petent court in cae o" briber or &ereliction o" &ut o"

public oFcial

. In cae where the !one &epoite& or in(ete& i the ubect !atter o" the

litigation an&

5. Cae o" une:plaine& wealth un&er Republic Act No. 3+)* or the Anti8Gra"t

an& Corrupt 2ractice Act.

.enalty for violation of law

• An (iolation o" thi law will ubect o0en&er upon con(iction to an

i!prion!ent o" not !ore than 9(e 5D ear or a 9ne o" not !ore thantwent thouan& peo 2,+4+++D or both4 in the &icretion o" the court.

?1ection 54 RA )+5@

Tatalon Barrio 0ouncil v! 0hief 'ccountant) et! al!

GR No. )>36+4 3) <anuar )*63




3BANKING LAWS

In thi cae4 the 1upre!e Court rule& that a(ing an& current account are pri(ilege&

&ocu!ent which "all within the protection o" Republic Act No. )+54 an& their &icloure

can onl be uti9e& un&er an o" the cae enu!erate& in 1ection , o" the Act4 which &o

not inclu&e the proecution o" cri!inal action "or (iolation o" the pro(iion o" the Anti8

Gra"t an& Corrupt 2ractice Act an& o" Article ,)6 o" the Re(ie& 2enal Co&e. Thi ha ince

been o(erturne& b the cae o" )*B %' +ancayco'

.hilippine -ational Bank v! (ancayco

GR No. )>334 3+ 1epte!ber )*65

FACTS

E!ilio Gancaco an& %lorentino %lor4 a pecial proecutor o" the #epart!ent o"

<utice4 re;uire& the 2hilippine National Bank to pro&uce at a hearing the recor& o" the

bank &epoit o" Erneto <i!ene-4 "or!er a&!initrator o" the Agricultural Cre&it an&

Cooperati(e A&!initration4 who wa then un&er in(etigation "or une:plaine& wealth.

2NB re"ue& to &icloe hi bank &epoit4 in(oking 1ection , o" Republic Act No.

)+5. /n the other han&4 the proecutor cite& the Anti8Gra"t an& Corrupt 2ractice Act4

particularl 1ection > therewith4 to wit

K1ection >. #i!ial &ue to une:plaine& wealth. 8 I" in accor&ance with the

pro(iion o" RA )37*4 a public oFcial ha been "oun& to ha(e ac;uire&

&uring hi incu!benc4 whether in hi na!e or in the na!e o" other peron4

an a!ount o" propert an&Hor !one !ani"etl out o" proportion to hi

alar an& to hi other law"ul inco!e4 that "act hall be a groun& "or &i!ial

or re!o(al. 2ropertie in the na!e o" the poue an& un!arrie& chil&ren o"

uch public oFcial4 !a be taken into coni&eration4 when their ac;uiition

through legiti!ate !ean cannot be ati"actoril hown. Bank deposits shall

be taken into consideration in the enforcement of this section,

notwithstanding any pro%ision of law to the contrary'”

2NB then 9le& an action "or &eclarator u&g!ent in the C%I o" anila which rule&

that 1ection > o" the Anti8Gra"t an& Corrupt 2ractice Act clearl inten&e& to pro(i&e an

a&&itional groun& "or the e:a!ination o" bank &epoit. ence4 thi appeal.

ISSUE hether or not a bank can be co!pelle& to &icloe the recor& o" account o" a&epoitor who i un&er in(etigation "or une:plaine& wealthO

HELD Pe. Republic Act No. 3+)* pro(i&e& another e:ception to 1ection , o" Republic Act

No. )+5.

RATIO




4BANKING LAWS

No reconciliation i poible between Republic Act No. )+5 an& Republic Act No.

3+)* a the two law are o repugnant to each other. Thu4 while 1ection , o" Republic Act

No. )+5 pro(i&e that bank &epoit are Kabolutel con9&ential Q an&4 there"ore4 !a

not be e:a!ine&4 in;uire& or looke& into4L e:cept in thoe cae enu!erate& therein4

1ection > o" Republic Act No. 3+)* Anti8gra"t lawD &irect in !an&ator ter! that bank

&epoit Khall be taken into coni&eration in the en"orce!ent o" thi ection4

notwithtan&ing an pro(iion o" law to the contrar.L The onl concluion poible i that

1ection > o" the Anti8Gra"t $aw i inten&e& to a!en& 1ection , o" Republic Act No. )+5 b

pro(i&ing an a&&itional e:ception to the rule againt the &icloure o" bank &epoit.

ith regar& to the clai! that &icloure woul& be contrar to the polic !aking bank

&epoit con9&ential4 it i enough to point out that while 1ection , o" Republic Act No. )+5

&eclare bank &epoit to be Kabolutel con9&ential4L it ne(erthele allow uch

&icloure in the "ollowing intance )D 'pon written per!iion o" the &epoitor ,D In

cae o" i!peach!ent 3D 'pon or&er o" a co!petent court in cae o" briber or

&ereliction o" &ut o" public oFcial D In cae where the !one &epoite& i the ubect

o" the litigation.

Cae o" une:plaine& wealth are i!ilar to cae o" briber or &ereliction o" &ut an&

no reaon i een wh thee two clae o" cae cannot be e:cepte& "ro! the rule !aking

bank &epoit con9&ential. The polic a to one cannot be &i0erent "ro! the polic a to

the other. Thi polic e:pree the notion that a public oFce i a public trut an& an

peron who enter upon it &icharge &oe o with the "ull knowle&ge that hi li"e4 o "ar a

rele(ant to hi &ut4 i open to public crutin.

Banco Filipino avings and Mortgage Bank v! .urisima

GR No. 56,*4 ,> a )*>>

The Bureau o" Internal Re(enue accue& Cuto! pecial agent anuel Caturla

be"ore the Tano&baan o" ha(ing illegal ac;uire& propert !ani"etl out o" proportion to

hi alar an& other law"ul inco!e. #uring the preli!inar in(etigation4 the Tano&baan

iue& a ubpoena &uce tecu! to the Banco %ilipino 1a(ing an& ortgage Bank4

co!!an&ing it repreentati(e to appear at a peci9e& ti!e at the /Fce o" the

Tano&baan an& "urnih the latter with &ul certi9e& copie o" the recor& in all it branche

an& e:tenion oFce o" the loan4 a(ing an& ti!e &epoit an& other banking

tranaction4 in the na!e o" Caturla4 hi wi"e4 2urita4 their chil&ren4 an&Hor 2e&ro Ecuo.

Caturla !o(e& to ;uah the ubpoena "or (iolating 1ection , an& 3 o" RA )+5

which wa &enie& b the Tano&baan. In "act4 the Tano&baan iue& another ubpoena

which e:pan&e& it cope inclu&ing the pro&uction o" bank recor& not onl o" the peron

enu!erate& abo(e but o" a&&itional peron an& entitie a well.




5BANKING LAWS

The Banco %ilipino 9le& an action "or &eclarator relie" with the C%I o" anila which

wa &enie& b the lower court. Thu thi pecial ci(il action o" certiorari in the 1C.

The iue here i whether or not the $aw on 1ecrec o" Bank #epoit preclu&e

pro&uction b subpoena duces tecum o" bank recor& o" tranaction b or in the na!e o"

the wi"e4 chil&ren an& "rien& o" a pecial agent o" the Bureau o" Cuto! accue& be"ore

the Tano&baan o" ha(ing allege&l ac;uire& propert !ani"etl out o" proportion to hi

alar an& other law"ul inco!e in (iolation o" RA 3+)*O

The 1upre!e Court rule& in the negati(e.

In )*B %' +ancayco4 we rule& that “while $ection of #epublic ct *o' ./01

pro%ides that bank deposits are “absolutely con2dential & and, therefore, may not be

examined, in3uired or looked into,” except in those cases enumerated therein, $ection 4 of

#epublic ct *o' 50.6 7nti-graft law8 directs in mandatory terms that bank deposits “shall

be taken into consideration in the enforcement of this section, notwithstanding any

pro%ision of law to the contrary'” 9he only conclusion possible is that $ection 4 of the nti-

+raft :aw is intended to amend $ection of #epublic ct *o' ./01 by pro%iding an

additional exception to the rule against the disclosure of bank deposits'”

The in;uir into illegall ac;uire& propert 8 or propert not legiti!atel ac;uire& 8

e:ten& to cae where uch propert i conceale& b being hel& b or recor&e& in the

na!e o" other peron. Thi propoition i !a&e clear b RA 3+)* which ;uite categoricall

tate that the ter! Klegiti!atel ac;uire& propert o" a public oFcer or e!ploee hall not

inclu&e Q propert unlaw"ull ac;uire& b the repon&ent4 but it ownerhip i conceale&

b it being recor&e& in the na!e o"4 o" hel& b4 repon&ent= poue4 acen&ant4

&ecen&ant4 relati(e or an other peron.

To utain the petitioner= theor4 an& retrict the in;uir onl to propert hel& b or

in the na!e o" the go(ern!ent oFcial or e!ploee4 or hi poue an& un!arrie& chil&ren

i unwarrante& in the light o" the pro(iion o" the tatute in ;uetion4 an& woul& !ake

a(ailable to peron in go(ern!ent who illegall ac;uire propert an ea an& "ool8proo"

!ean o" e(a&ing in(etigation an& proecution all the ha(e to &o woul& be to i!pl

place the propert in the poeion or na!e o" peron other than their poue an&

un!arrie& chil&ren. Thi i an abur&it that we will not acribe to the law!aker.

.hilippine 0ommercial ; Industrial Bank) et! al! v! 0ourt of 'ppeals) et! al!GR no. >5,64 ,> <anuar )**)

A group o" laborer obtaine& a "a(orable u&g!ent againt the arin&u;ue ining

an& In&utrial Corporation "or the pa!ent o" backwage a!ounting to 2,+54>53 be"ore the

National $abor Relation Co!!iion. A writ o" e:ecution wa iue& an& the #eput 1heri0

er(e& the writ4 but it wa unati9e&. The heri0 prepare& on hi own a Notice o"




6BANKING LAWS

Garnih!ent a&&ree& to i: bank in Bacolo& Cit4 inclu&ing petitioner 2CIB4 &irecting the

bank concerne& to iue a check in ati"action o" the u&g!ent.

hile the in houe lawer o" the Corporation warne& the 2CIB to withhol& an

releae o" it &epoit with the bank4 the bank iue& a !anager= check in the a!ount o"

237466 which wa the e:act balance o" the pri(ate repon&ent= account a o" that &a.

The ai& check wa alo encahe& b the heri0 the ne:t &a.

arin&u;ue ining thu 9le& a co!plaint be"ore the RTC o" anila againt 2CIB an&

the &eput heri04 alleging that it current &epoit with the petitioner bank wa le(ie&

upon4 garnihe&4 an& with un&ue hate unlaw"ull allowe& to be with&rawn4 an&

notwithtan&ing the allege& unauthori-e& &icloure o" the ai& current &epoit an&

unlaw"ul releae thereo"4 the latter ha(e "aile& an& re"ue& to retore the a!ount o"

237466 to the "or!er= account &epite repeate& &e!an&.

Trial court ren&ere& u&g!ent in "a(or o" arin&u;ue ining Corporation. /n appeal4

the Court o" Appeal initiall re(ere& the trial court= or&er but later aFr!e& it. Thu4 thi

petition to the 1C.

The iue i whether or not the petitioner (iolate& RA )+54 otherwie known a the

1ecrec o" Bank #epoit Act4 when the allowe& the heri0 to garnih the &epoit o"

arin&u;ue ining CorporationO 1C hel& no.

The 1C 9rt rule& that the releae o" the &epoit b the bank wa not &one in un&ue

an& in&ecent hate. e 9n& the i!!e&iate releae o" the "un& b the petitioner bank on

the trength o" the notice o" garnih!ent an& writ o" e:ecution4 whoe iuance4 abent an

patent &e"ect4 eno the preu!ption o" regularit.

The 1C likewie &i& not 9n& an (iolation whatoe(er b the petitioner o" RA )+54

otherwie known a the 1ecrec o" Bank #epoit Act. The Court4 in (hina Banking

(orporation %' ;rtega4 ha& the occaion to &ipoe o" thi iue when it tate&4 to wit

“<t is clear from the discussion of the conference committee report on $enate

Bill *o' 51. and =ouse Bill *o' 56>>, which later became #epublic ct *o'

./01, that the prohibition against examination of or in3uiry into a bank

deposit under #epublic ct *o' ./01 does not preclude its being garnished to

insure satisfaction of a ?udgment' <ndeed, there is no real in3uiry in such acase, and if existence of the deposit is disclosed, the disclosure is purely

incidental to the execution process' <t is hard to concei%e that it was e%er

within the intention of (ongress to enable debtors to e%ade payment of their

?ust debts, e%en if ordered by the (ourt, through the expedient of con%erting

their assets into cash and depositing the same in a bank'”




BANKING LAWS

1ince there i no e(i&ence that the petitioner the!el(e &i(ulge& the in"or!ation

that the pri(ate repon&ent ha& an account with the petitioner bank an& it i un&ipute&

that the ai& account wa properl the obect o" the notice o" garnih!ent an& writ o"

e:ecution carrie& out b the &eput heri04 a &ul authori-e& oFcer o" the court4 we cannot

there"ore hol& the petitioner liable un&er RA )+5.

Mellon Bank v! Magsino et! al!

GR No. 7)7*4 )> /ctober )**+

Thi cae in(ol(e the erroneou tran"er o" '1 M)4+++4+++ to ictoria <a(ier intea&

o" '1 M)4+++ onl. #olore entoa re;uete& the tran"er o" M)+++ "ro! the %irt National

Bank o" et irginia4 '1A to ictoria <a(ier in anila through the 2ru&ential Bank.

Accor&ingl4 the %irt National Bank re;uete& the petitioner4 ellon Bank4 to e0ect the

tran"er. 'n"ortunatel4 the wire ent b ellon Bank to anu"acturer ano(er Bank4 a

correpon&ent o" 2ru&ential Bank4 in&icate& the a!ount tran"erre& a K'1 M)4+++4+++.++L

intea& o" '1 M)4+++.++. ence4 anu"acturer ano(er Bank tran"erre& one !illion

&ollar le bank charge o" M6.3+ to the 2ru&ential Bank "or the account o" ictoria <a(ier.

<a(ier opene& a new &ollar account in 2ru&ential Bank an& &epoite& M***4*3.

I!!e&iatel4 therea"ter4 <a(ier an& her huban& !a&e with&rawal "ro! the account4

&epoite& the! in e(eral bank onl to with&raw the! later in an apparent plan to

conceal4 laun&er an& &iipate the erroneoul ent a!ount. /ne o" the thing the bought

wa real propert in Cali"ornia4 '1A which wa the ubect o" an action "or reco(er b

ellon Bank. $ater4 it 9le& a cae in the 2hilippine "or the reco(er o" the whole a!ount4

inclu&ing the purchae price o" the real propert locate& in the '1.

A!ong other thing4 pri(ate repon&ent raie& the iue o" whether or not4 b

(irtue o" the principle o" election o" re!e&ie4 an action 9le& in Cali"ornia4 '1A4 to reco(er

real propert locate& therein an& to contitute a contructi(e trut on ai& propert

preclu&e the 9ling in our uri&iction o" an action to reco(er the purchae price o" ai& real

propert. 1C rule& that the 9ling o" a reco(er uit in the '1 &oe not preclu&e the 9ling o"

an action in the 2hilippine "or the reco(er o" the purchae price.

ith regar& to our ubect !atter4 Erlin&a Baloi o" the 2hilippine eteran= Bank

an& 2ilologo Re&4 <r. o" ongkong an& 1hanghai Banking Corporation were re;uire& to gi(e

teti!onie with regar& to the &epoit an& check iue& b the pri(ate repon&ent

<a(ier4 et. al.. Thee teti!onie were ;uetione& "or being i!!aterial an& irrele(ant a wella co(ere& b RA )+5 on con9&entialit.

1C ai& 2ri(ate repon&ent= protetation that to allow the ;uetione& teti!onie

to re!ain on recor& woul& be in (iolation o" the pro(iion o" RA )+5 on the ecrec o"

bank &epoit i un"oun&e&. 1ection , o" ai& law allow the &icloure o" bank &epoit in

cae where the !one &epoite& i the ubect !atter o" the litigation. Ina!uch a the




!BANKING LAWS

ci(il cae i ai!e& at reco(ering the a!ount con(erte& b the <a(ier "or their own bene9t4

necearil4 an in;uir into the whereabout o" the illegall ac;uire& a!ount e:ten& to

whate(er i conceale& b being hel& or recor&e& in the na!e o" peron other than the one

reponible "or the illegal ac;uiition.




#BANKING LAWS

NON)BANK FINANCIAL INTERMEDIARIES

NON)BANK FINANCIAL INTERMEDIARIES

). The In(et!ent oue $aw

2re. #ecree ),*

,. In(et!ent Co!pan Act

Republic Act No. ,6,*

3. %inancing Co!pan Act

Republic Act No. 55>+4 a a!en&e&

. 2awnhop

2re. #ecree No. ))

5. Trut Corporation

Chapter II4 General Banking Act

THE INVESTMENT HOUSES LAW

2rei&ential #ecree No. ),*

Go(erning the etablih!ent4 operation an& regulation o" In(et!ent oue)5 %ebruar )*73

Investment houses

• An in(et!ent houe i an enterprie which engage in the un&erwriting o"

ecuritie o" other corporation.

• 'n&er it Rule an& Regulation4 an in(et!ent houe i &e9ne& an Kan

enterprie which engage or purport to engage4 whether regularl or on an

iolate& bai4 in the un&erwriting o" ecuritie o" another peron or

enterprie4 inclu&ing ecuritie o" the Go(ern!ent an& it intru!entalitie.

2nderwriting




!0BANKING LAWS

• 'n&erwriting i the act or proce o" guaranteeing the &itribution an& ale

within the 2hilippine o" ecuritie o" an kin& iue& b another corporation.

The &itribution an& ale !a be on public or pri(ate place!ent bai.

.rivate placement

• Re"er to the un&erwritten ale o" ecuritie to le than ,+ peron or

enterprie.

.ublic placement

• Re"er to the un&erwritten ale o" ecuritie to at leat ,+ peron or

enterprie.

Organi3ation and citi3enship re$uirements

• In(et!ent oue hall be organi-e& in the "or! o" tock corporation.

• At leat "ort percent +D o" the (oting tock o" an In(et!ent oue hall

be owne& b citi-en o" the 2hilippine.

• In &eter!ining the percentage o" "oreign8owne& (oting tock in In(et!ent

oue4 the bai "or the co!putation hall be the citi-enhip o" each

tockhol&er4 an&4 i" the tockhol&er i a corporation4 the citi-enhip o" the

in&i(i&ual tockhol&er hol&ing (oting right in that corporation.

• In appro(ing "oreign e;uit application in In(et!ent oue4 the 1EC hall

appro(e uch application onl i" the a!e or i!ilar right are enoe& b

2hilippine national in the applicant= countr.

• %oreign national !a beco!e !e!ber o" the boar& o" &irector to the

e:tent o" the "oreign participation in the e;uit o" ai& enterprie.

0apital re$uirements

• In the cae o" newl8organi-e& In(et!ent oue4 the !ini!u! pai&8in

capital hall be three hun&re& !illion peo 23++4+++4+++D.

• The onetar Boar& !a precribe a higher !ini!u! capitali-ation in or&er

to pro!ote an& enure the tabilit o" the 2hilippine capital !arket an& the

co!petiti(ene o" the in(et!ent houe in&utr in line with the national

econo!ic goal.




!$BANKING LAWS

&e$uirements for registration

• The 1ecuritie an& E:change Co!!iion hall not regiter the article o"

incorporation o" an In(et!ent oue4 or an a!en&!ent thereto4 unle it

i ati9e& "ro! the e(i&ence ub!itte& to it

a. That all the re;uire!ent o" the 2# ),* an& o" e:iting law or

regulation to engage in the buine ha(e been co!plie& with

b. That the propoe& enterprie will not be in conict with public interet

an& econo!ic growth an&

c. That the a!ount o" capital4 the propoe& organi-ation4 &irection an&

a&!initration4 a well a the integrit4 e:perience an& e:pertie o" the

organi-er an& the propoe& !anagerial ta04 pro(i&e reaonable

aurance that the enterprie will be con&ucte& with 9nancial

pru&ence.

.rohibition

• No In(et!ent oue hall engage in banking operation a &e9ne& in

1ection , o" Republic Act No. 3374 a a!en&e&.

.owers of investment houses

• In a&&ition to the power grante& to corporation in general4 an In(et!ent

oue i authori-e& to &o the "ollowing

). Arrange to &itribute on a guarantee& bai ecuritie o" other

corporation an& o" the Go(ern!ent or it intru!entalitie.

,. 2articipate in a n&icate un&ertaking to purchae an& ell4 &itribute

or arrange to &itribute on a guarantee& bai ecuritie o" other

corporation an& o" the Go(ern!ent or it intru!entalitie.

3. Arrange to &itribute or participate in a n&icate un&ertaking to

purchae an& ell on a bet8e0ort bai ecuritie o" othercorporation an& o" the Go(ern!ent or it intru!entalitie.

. 2articipate a oliciting &ealer or elling group !e!ber in ten&er

o0er4 block ale4 or e:change o0ering o" ecuritie &eal in option4

right or warrant relating to ecuritie an& uch other power which a

&ealer !a e:ercie un&er the 1ecuritie Act.




!2BANKING LAWS

5. 2ro!ote4 ponor4 or otherwie ait an& i!ple!ent (enture4

proect an& progra! that contribute to the econo!= &e(elop!ent.

6. Act a 9nancial conultant4 in(et!ent a&(ier4 or broker.

7. Act a port"olio !anager an&Hor 9nancial agent.

>. 1ubect to prior appro(al b the onetar Boar&4 the pro(iion o"

Chapter I o" the Central Bank Charter4 an& uch rule an& regulation

a !a be iue& b the onetar Boar&4 engage in "oreign e:change

operation.

*. Act a trutee o" a trut "un& or trut propert4 ubect to the

pro(iion o" the General Banking Act.

0onversion into a commercial bank

• An In(et!ent oue !a be con(erte& into a co!!ercial bank authori-e&

to operate un&er an e:pan&e& co!!ercial banking authorit4 ubect to

applicable law an& regulation an& with prior appro(al o" the onetar

Boar&.

0entral Bank regulatory powers

• In(et!ent oue hall be ubect to uch regulation o" the Central Bank

on non8bank 9nancial inter!e&iarie a !a be pro!ulgate&.

• The regulation which !a inclu&e4 but nee& not be li!ite& to aD !ini!u!

i-e o" "un& acceptance or receipt4 bD !etho& o" !arketing an& &itribution4

cD ter! o" place!ent an& !aturitie4 an& &D ue o" "un& !a be !o&i9e&

b the onetar Boar& ino"ar a the appl to In(et!ent oue.

"uasi*banking powers

• The onetar Boar& !a4 at it &icretion4 &eter!ine whether In(et!ent

oue !a be per!itte& to per"or! ;uai8banking "unction.

• I" the onetar Boar& &eci&e to per!it In(et!ent oue to engage in

;uai8banking "unction4 the Boar& !a re;uire a a con&ition prece&ent the

obtaining o" a certi9cate o" authorit "or the purpoe "ro! the onetar

Boar&.




!3BANKING LAWS

• hene(er the onetar Boar& authori-e an In(et!ent oue to engage in

;uai8banking "unction4 it !a ubect ai& In(et!ent oue to "urther

regulation4 which !a inclu&e but nee& not necearil be li!ite& to aD

li;ui&it reer(e re;uire!ent bD capital8to8rik aet ratio cD interet rate

ceiling an& &D uch other contraint a the Boar& !a &ee! necear.

#ealer or broker

• An In(et!ent oue !a engage in the buine o" a &ealer or a broker

un&er the 1ecuritie Act without obtaining a eparate licene "or the purpoe.

2se of the term <Investment 8ouse=

• No peron4 aociation4 partnerhip or corporation other than thoe &ul

licene& a an In(et!ent oue hall a&(ertie or hol& itel" out a being

engage& in the buine o" an In(et!ent oue.

INVESTMENT COM"ANY ACT

Republic Act No. ,6,*

Appro(e& )> <une )*6+

Investment company

• An iuer which i or hol& itel" out a being engage& pri!aril in the

buine o" in(eting4 rein(eting4 or tra&ing in ecuritie.

-ature and purpose

• In(et!ent co!panie are 9nancial intitution that raie "un& b elling

their own iue o" ecuritie to in&i(i&ual in(etor. The "un& obtaine& will

be ue& to in(et in ecuritie o" other enterprie.

• The obecti(e o" an in(et!ent co!pan i to pro(i&e in&i(i&ual in(etor

with a"e an& pro9table ue o" their a(ing an& to relie(e the! o" the

bur&en o" &irect reponibilit o" !anaging their own a(ing.

Types of investment companies

). /pen8en& co!pan 8 alo calle& !utual "un&

,. Cloe&8en& co!pan




!4BANKING LAWS

.owers and functions

). /0er "or ale4 ell4 or &eli(er a"ter ale4 within the 2hilippine4 an ecurit or

an interet in an ecurit4 whether the iuer o" uch ecurit i the

in(et!ent co!pan or another peron.

,. 2urchae4 re&ee!4 retire4 or otherwie ac;uire or atte!pt to ac;uire4 within

the 2hilippine4 an ecurit4 or an interet in an ecurit4 whether the

iuer o" uch ecurit i uch in(et!ent co!pan or another peron.

ecurity

• An note4 tock4 treaur tock4 bon&4 &ebenture4 e(i&ence o" in&ebte&ne4

certi9cate o" interet or participation in an pro9t8haring agree!ent4

collateral trut certi9cate4 pre8organi-ation certi9cate or ubcription4

in(et!ent contract4 (oting trut certi9cate4 certi9cate o" &epoit "or a

ecurit4 "ractional un&i(i&e& interet in oil4 ga4 or other !ineral right4 or4 in

general4 an interet or intru!ent co!!onl known a a “security” or an

certi9cate o" interet or participation in4 te!porar or interi! certi9cate "or4

receipt "or4 guarantee o"4 or warrant or right to ubcribe to or purchae4 an

o" the "oregoing. 1ection 3bbD4 RA ,6,*D.

• Note that there i an e:pan&e& &e9nition un&er the Re(ie& 1ecuritie Act.

Form

• All hare o" it capital tock hall be co!!on an& (oting hare.

0apitali3ation

• No public o0ering !a be !a&e unle the in(et!ent co!pan ha a pai&

up capital o" at leat 25++4+++ 1ection )3)D4 RA ,6,*D. owe(er4 Rule ,.)

pro(i&e that the !ini!u! ubcribe& an& pai& in capital houl& be at leat

5+ !illion.

FINANCING COM"ANY ACT

Republic Act No. 5*>+4 a a!en&e&

An Act Regulating the /rgani-ation an& /peration o" %inancing Co!panie





!5BANKING LAWS

• It i hereb &eclare& to be the polic o" the 1tate to regulate the acti(itie o"

9nancing an& leaing co!panie

). to place their operation on a oun&4 co!petiti(e4 table an& eFcient

bai a other 9nancial intitution

,. to recogni-e an& trengthen their critical role in pro(i&ing !e&iu! an&

long8ter! cre&it "or in(et!ent in capital goo& an& e;uip!ent

epeciall b !all an& !e&iu! enterprie particularl in the

countri&e an&

3. to curtail an& pre(ent act or practice preu&icial to the public

interet.

• A uch4 the !a be in a better poition to e:ten& eFcient er(ice in a "air

!anner to the general public an& to in&utr4 co!!erce an& agriculture an&

thereb !ore "ull contribute to the oun& &e(elop!ent o" the national

econo!.

Financing companies

• %inancing co!panie are corporation4 e:cept bank4 in(et!ent houe4

a(ing an& loan aociation4 inurance co!panie4 cooperati(e4 an&

other 9nancial intitution organi-e& or operating un&er pecial law4 which

are pri!aril organi-e& "or the purpoe o" e:ten&ing cre&it "acilitie to

conu!er an& to in&utrial4 co!!ercial4 or agricultural enterprie.

• It !a e:ten& uch cre&it

). b &irect len&ing or

,. b &icounting or "actoring co!!ercial paper or account recei(able

or

3. b buing an& elling contract4 leae4 chattel !ortgage4 or other

e(i&ence o" in&ebte&ne or

. b 9nancial leaing o" !o(able a well a i!!o(able propert.

Financial leasing




!6BANKING LAWS

• %inancial leaing i a !o&e o" e:ten&ing cre&it through a non8cancelable

leae contract un&er which the leor purchae or ac;uire4 at the intance

o" the leee4 !achiner4 e;uip!ent4 !otor (ehicle4 appliance4 buine

an& oFce !achine4 an& other !o(able or i!!o(able propert in

coni&eration o" the perio&ic pa!ent b the leee o" a 9:e& a!ount o"

!one uFcient to a!orti-e at leat e(ent percent 7+D o" the purchae

price or ac;uiition cot4 inclu&ing an inci&ental e:pene an& a !argin o"

pro9t o(er an obligator perio& o" not le than two ,D ear.

• #uring the two8ear perio&4 the leee ha the right to hol& an& ue the

leae& propert with the right to e:pene the leae rental pai& to the leor.

$eee alo bear the cot o" repair4 !aintenance4 inurance an&

preer(ation o" the leae& propert.

• owe(er4 leee ha no obligation or option to purchae the leae& propert

"ro! the owner8leor at the en& o" the leae contract.




!BANKING LAWS

1iability of lessors

• %inancing co!panie hall not be liable "or lo4 &a!age or inur caue& b

a !otor (ehicle4 aircra"t4 (eel4 e;uip!ent4 !achiner or other propert

leae& to a thir& peron or entit e:cept where the !otor (ehicle4 aircra"t4

(eel4 e;uip!ent4 !achiner or other propert i operate& b the 9nancing

co!pan4 it e!ploee or agent at the ti!e o" the lo4 &a!age or inur.

&ights and powers of nancing companies

• %inancing co!panie hall ha(e the "ollowing power4 in a&&ition to thoe

grante& b thi Act an& b other law

). Engage in ;uai8banking an& !one !arket operation with the prior

appro(al o" the Bangko 1entral.

,. Engage in trut operation ubect to the pro(iion o" the General

Banking Act upon prior appro(al o" the Bangko 1entral.

3. Iue bon& an& other capital intru!ent ubect to pertinent rule

an& regulation o" the Bangko 1entral.

. Re&icount their paper with go(ern!ental 9nancial intitution ubect

to rele(ant law4 rule an& regulation.

5. 2articipate in pecial loan or cre&it progra! ponore& b or !a&e

a(ailable through go(ern!ental 9nancial intitution.

6. 2ro(i&e "oreign currenc loan an& leae to enterprie who earn

"oreign currenc b e:port or other !ean4 ubect to e:iting law

an& rule an& regulation o" the Bangko 1entral.

Form of organi3ation and capital re$uirements

• %inancing co!panie hall be organi-e& in the "or! o" tock corporation at

leat "ort percent +D o" the (oting tock o" which i owne& b citi-en o"

the 2hilippine.

• The hall ha(e pai&8up capital o" not le than ten !illion peo

2)+4+++4+++D in cae the 9nancing co!pan i locate& in etro anila an&

9rt cla citie4 9(e !illion peo 254+++4+++D in other clae o" citie4 an&

two !illion 9(e hun&re& thouan& peo 2,45++4+++D in !unicipalitie.




!!BANKING LAWS

• No "oreign national !a be allowe& to own tock in an 9nancing co!pan

unle the countr o" which he i a national accor& the a!e reciprocal

right to %ilipino in the ownerhip o" 9nancing co!panie or their

counterpart entitie in uch countr.

&e$uirements for registration

• Ai&e "ro! re;uiring co!pliance with the pro(iion o" the Corporation Co&e4

the 1EC hall not regiter the article o" incorporation o" an 9nancing

co!pan unle it oFce i ati9e& on the e(i&ence ub!itte& to it4 that

). All the re;uire!ent o" e:iting law to engage in the buine "or

which the applicant i propoe& to be incorporate& or organi-e& ha(e

been co!plie& with

,. The organi-ation4 &irection an& a&!initration4 a well a the integrit

an& reponibilit o" the organi-er an& a&!initrator reaonabl

aure the protection o" the interet o" the general public an&

3. All the re;uire!ent o" RA 5*>+ ha(e been co!plie& with.

&evocation and suspension of registration

). %inancing co!pan i inol(ent

,. It (iolate& an pro(iion o" the law

upervision and regulation

• The 1EC i e!powere& to en"orce the pro(iion o" RA 5*>+4 a a!en&e&4

an& iue i!ple!enting regulation e:cept ino"ar a the Bangko 1entral

!a ha(e uper(ior authorit "or 9nancing co!panie licene& to per"or!

;uai8banking "unction4 an& ino"ar a the onetar Boar& ha authorit to

precribe 9nancing co!pan rate an& charge.

.rohibited acts

• The Act i!poe a 9ne o" not le than 2)+4+++ but not !ore than 2)++4+++4

or i!prion!ent o" not !ore than i:6D!onth or both4 at the &icretion o"

the court4 on Speron4 aociation4 partnerhip or corporation4 inclu&ing

!anaging oFcer thereo"4S upon the "ollowing unlaw"ul act




!#BANKING LAWS

). Engaging in the buine o" 9nance co!panie without authorit "ro!

the 1EC through a&(ertie!ent in whate(er "ro!4 or through other

repreentation without authorit.

,. 'ing tra&e or 9r! na!e containing the wor& S9nancing co!panS or

Sleaing co!panS or S9nance an& leaing co!panS or S9nance an&

in(et!ent co!panS or an other &eignation that woul& gi(e the

public the i!preion that it i engage& in the buine o" a 9nancing

co!pan or leaing co!pan without authorit.

3. ol&ing the!el(e out to be 9nancing co!panie without authorit

"ro! the 1EC.

. An oFcer4 e!ploee4 or agent o" a 9nancing co!pan who hall

knowingl an& willingl !ake an tate!ent in an application4 report

or &ocu!ent re;uire& to be 9le& un&er the Act4 which i "ale or

!ilea&ing with repect to an !aterial "act4 or o(er(alue or ai& in

o(er(aluing an ecuritie "or the purpoe o" inuencing in an wa

the action o" the co!pan on an loan4 or &icounting.

5. An oFcer4 e!ploee or e:a!iner o" the 1EC &irectl charge& with the

i!ple!entation o" the Act who hall co!!it4 conni(e4 ai& or ait in

the co!!iion o" act enu!erate& abo(e.

"AWNSHO"S

2rei&ential #ecree ))

in relation to CB Circular No. 37

.awnshop

• A pawnhop i a peron ingle proprietorhipD or entit

corporationHpartnerhipD engage& in the buine o" len&ing !one on

peronal propert &eli(ere& a ecurit "or loan.

.urpose of the law

• To regulate the etablihe!ent o" pawnhop an& to place their operation on

an oun& an& table bai

). To &eri(e !a:i!u! bene9t a ource o" cre&it




#0BANKING LAWS

,. To pre(ent an& !itigate practice preu&icial to the public an&

3. To precribe !ini!u! re;uire!ent

&e$uirements for establishing a pawnshop

). Regitration

a. ith #TI i" ingle proprietorhip

b. ith 1EC i" corporation or partnerhip

c. In all cae4 with the B12

&. ith the Boar& o" In(et!ent i" there i "oreign e;uit participation

,. 1ecure a licene to operate "ro! the $G' concerne&

3. ini!u! pai& in capital o" 2)++4+++

. Citi-enhip

a. I" ingle proprietor4 !ut be a %ilipino

b. I" partnerhip4 7+ o" capital owne& b %ilipino

c. I" corporation4 7+ o" (oting capital houl& be owne& b %ilipino

&. I" no (oting tock4 7+ o" !e!ber entitle& to (ote houl& be %ilipino

(eneral re$uirements as to operation

• /wner who ha other buinee not &irectl relate& or inci&ental to hi

pawnhop buine !ut keep the latter eparate "ro! hi other buinee.

• aintain a&e;uate ecurit i.e. 9re an& burglar proo" a"e where

pawnHrecor& are kept.

• Inure place o" buine an& pawn againt 9re an& burglar.

• Accountable oFcerHe!ploee hall be bon&e&.

• Accounting recor&




#$BANKING LAWS

• $oan cannot be le than 3+ o" the appraie& (alue o" the peronal

propert unle the borrower tipulate& in writing that he i borrowing a

leer a!ount.

• In a&&ition to interet charge4 pawnhop !a i!poe a !a:i!u! er(ice

charge o" 25.++ but in no cae to e:cee& ) o" the principal loan.

No other charge4 "ee4 an& co!!iion hall be collecte& b pawnhop in

connection with the loan tranaction or pa!ent thereo". Borrower hall not

pa inurance pre!iu!.

0onduct of business

). Borrower o0er to ple&ge peronal propert a ecurit "or loan.

,. 2ropert i appraie&.

3. $oan agree!ent i entere& into.

. 2awnhop iue receipt pawn ticketD.

5. 2awnhop len& !one to pawner.

6. 2awner pa charge not to e:cee& 25.++.

7. 2awne& propert i place& in (aultHa"e.

>. I" upon !aturit4 borrower "ail to pa4 pawnhop will wait "or *+ &a a"ter

!aturit be"ore it can ell the thing ple&ge& at a public auction.

*. 2awnhop ha to co!pl with notice re;uire!ent4 to wit

a. Be"ore the *+8&a perio& e:pire4 notice to the borrower that the pawn

will be ol& i" not re&ee!e& within *+ &a "ro! !aturit peci"ing

ti!e4 &ate4 an& place o" auction ale.

b. I" there i no re&e!ption4 pawnhop will ell the pawn a"ter publihing

a notice o" ale in at leat two newpaper in the citH!unicipalit o"

operation i: 6D &a be"ore the &ate o" ale. In re!ote area where

there i no newpaper4 b poting at Cit all or unicipal Buil&ing

an& two other conpicuou public place where pawnhop operate.




#2BANKING LAWS

c. 1ale o" pawn b auctioneerHnotar public to higher bi&&er.




#3BANKING LAWS

upervisory powers of the Bangko entral

• B12 oFcial in charge o" non8bank 9nancial inter!e&iarie or authori-e& agent

!a inpect4 e:a!ine4 an& in(etigate the recor& o" pawnhop to enure

co!pliance with 2# )).

• 1ai& oFcial or agent !ake reco!!en&ation to the onetar Boar&.

• I!poe penaltie "or (iolation o" 2# )).

TRUST COR"ORATIONS

Chapter II

General Banking Act

Trust corporation

• A trut corporation i an corporation "or!e& or organi-e& "or the purpoe o"

acting a trutee4 a&!initering an trut or hol&ing propert in trut or on

&epoit "or the ue4 bene9t or behoo" o" other.

• A corporation or a bank !a engage in the buine o" a trut corporation.

tandard of care

• A trut co!pan or an bank authori-e& to engage& in the buine o" a trut

co!pan hall a&!initer the "un& or propert un&er it cuto& with the

kill4 care4 pru&ence an& &iligence necear un&er the circu!tance then

pre(ailing that a pru&ent !an4 acting un&er like capacit an& "a!iliar with

uch !atter4 woul& e:ercie in the con&uct o" an enterprie o" a like

character an& with i!ilar ai!.

• No trut co!pan or bank engage& in the buine o" a trut co!pan hall4

"or the account o" the trutor or the bene9ciar o" the trut4 purchae or

ac;uire propert "ro!4 or ell4 tran"er4 aign or len& !one or propert to4

or purchae &ebt intru!ent o" an o" the &epart!ent4 &irector4 oFcer4tockhol&er4 or e!ploee o" the trut co!pan or bank4 or relati(e within

the 9rt &egree o" conanguinit or aFnit4 or the relate& interet4 o" uch

&irector4 oFcer4 an& tockhol&er4 unle the tranaction i peci9call

authori-e& b the trutor an& the relationhip o" the trutee an& the other

part in(ol(e& in the tranaction i "ull &icloe& to the trutor or bene9ciar

o" the trut prior to the tranaction.




#4BANKING LAWS




#5BANKING LAWS

.owers 5in addition to general powers incident to corporations7

). To act a trutee on an !ortgage or bon& iue& b an !unicipalit4

corporation4 or an bo& politic an& to accept an& e:ecute an other

!unicipal or corporate trut not inconitent with law.

,. To act un&er the or&er or appoint!ent o" an court o" recor& a guar&ian4

recei(er4 trutee or &epoitor o" the etate o" an !inor4 inane peron4

i&iot4 habitual &runkar&4 or other inco!petent or irreponible peron4 an& a

recei(er an& &epoitor o" an !one pai& into court b partie to an legal

procee&ing an& o" propert o" an kin& which !a be brought un&er the

uri&iction o" the court b propert legal procee&ing.

3. To act a the e:ecutor o" an lat will or teta!ent when it i na!e& in the

lat will an& teta!ent a the e:ecutor thereo".

. To act un&er appoint!ent o" a court o" co!petent uri&iction a

a&!initrator o" the etate o" an &eceae& peron4 with the will anne:e&4 or

a a&!initrator o" the etate o" an &eceae& peron when there i no will4

an& when in either cae there i no peron ;uali9e&4 co!petent4 willing4 able

an& entitle& to accept uch a&!initration.

5. To accept an& e:ecute an legal trut con9&e& to it b an court o" recor& or

b an peron or corporation "or the hol&ing4 !anage!ent4 an&

a&!initration o" an etate4 real or peronal4 an& the rent4 iue4 an&

pro9t thereo".

6. To etablih an& !anage co!!on trut "un&4 ubect to uch rule an&

regulation a !a be precribe& b the onetar Boar&.

0ommercial banking activity

• A trut co!pan !a4 with the appro(al o" the onetar Boar&4 &o a

co!!ercial banking buine4 but uch buine !ut be kept eparate an&

&itinct "ro! it trut buine.

• An banking corporation !a4 with the appro(al o" the onetar Boar&4 be

authori-e& to engage in the buine o" a trut co!pan4 but it hall be

ubect to the pro(iion on trut operation.

Bond>security re$uirements and paid in capital




#6BANKING LAWS

• E:cept a !a otherwie be pro(i&e& in thi Act4 no bon& or other ecurit

hall be re;uire& "ro! an trut co!pan "or the "aith"ul per"or!ance o" it

&utie a trutee4 e:ecutor4 a&!initrator4 guar&ian4 recei(er or &epoitar.

• owe(er4 the court oFcer appointing uch co!pan a trutee4 e:ecutor4

a&!initrator4 guar&ian4 recei(er or &epoitar !a4 upon proper application4

howing pecial caue there"or4 re;uire an corporation which hall eek to

be or hall ha(e been o appointe& to gi(e a&e;uate ecurit "or the

protection o" the "un& or propert con9&e& to the corporation an&4 upon

"ailure o" uch corporation to gi(e the ecurit re;uire&4 it appoint!ent a

trutee4 e:ecutor4 a&!initrator4 guar&ian4 recei(er or &epoitar hall be

re(oke&.

• 1ection 654 howe(er4 pro(i&e KA ecurit "or the "aith"ul per"or!ance o" it

trut &utie4 e(er trut co!pan4 be"ore tranacting trut buine4 hall

carr on &epoit with the Central Bank4 cah or ecuritie appro(e& b the

onetar Boar& in an a!ount e;ual to not le than two hun&re& an& 9"t

thouan& peo 2,5+4+++D. Thi !a be increae& b the Central Bank.

• 2ai& in capital an& urplu o" the co!pan !ut be at leat e;ual to the

a!ount re;uire& to be &epoite& with the central Bank.

eparation of trust funds and property

• All !one4 propertie4 or ecuritie recei(e& b an trut co!pan hall be

kept eparate an& &itinct "ro! all other "un&4 propertie an& aet o" it

general buine.

• The account o" all uch !one4 propertie or ecuritie hall likewie be

kept eparate an& &itinct "ro! the account o" it general buine.

0apital stock may be invested

• The capital tock an& "un& o" a trut co!pan !a be loane& or otherwie

in(ete& a it b law precribe i" it &oe a co!!ercial banking buine in

a&&ition to it trut buine4 the in(et!ent o" it "un& other than trut

"un& hall be go(erne& b the rele(ant pro(iion o" the General BankingAct.

urplus and dividend

• E(er trut co!pan4 be"ore the &itribution o" a &i(i&en&4 hall carr to

urplu )+ o" it net pro9t accruing ince the lat prece&ing &i(i&en& until




#BANKING LAWS

the urplu hall a!ount to ,+ o" it authori-e& capital tock an& no part o"

the urplu hall at an ti!e be pai& out in &i(i&en&4 but loe accruing in

the coure o" it buine !a be charge& againt the urplu.

banking laws in the phil

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