ATENEO DE MANILA LAW SCHOOL

BANKING LAW I OUTLINE1

ATTY. ALEXANDER C.

DY
FIRST SEMESTER, SY 2009-2010
2009

FRIDAY, 19 JUNE

I. GENERAL CONCEPTS
A. CONCEPT OF BANKING
1. Definition Sec. 3.1, GBL2
2. Elements Republic v. Security Credit and Acceptance Corporation,
19 SCRA 58 (1967); Central Bank v. Morfe, 20 SCRA 507 (1967);
Baas v. Asia Pacific Finance Corporation, 343 SCRA 527 (2000)
a. Engaged in lending of funds
b. Obtained in the form of deposits
c. From the public, which shall mean 20 or more persons Sec. 8.2, GBL

B. BANKING DISTINGUISHED FROM QUASI-BANKING

1. Elements of Quasi-Banking Sec. 4, par. 3, GBL; xSec. X234, MRB3
a. Borrowing of funds for borrowers own account
b. From 20 or more lenders at any one time
c. Through issuance, endorsement or assignment with recourse or
acceptance of deposit substitutes Sec. 95, NCBA4
d. For purposes of relending or purchasing of receivables and other
obligations
2. Requirement of Separate License Sec. 6, par. 1, GBL

C. BANKS DISTINGUISHED FROM OTHER FINANCIAL INSTITUTIONS

1

The Outline presents the manner by which Banking Law I will be taken up in class. The
x's and those footnoted in the Outline represent cases or topics which need no extended
discussions, either because the essence of the rulings are already summarized in the
Outline or they contain similar rulings or doctrines as other cases to be discussed.
2
Republic Act No. 8791 (General Banking Law of 2000), which repealed Republic Act No. 337
(General Banking Act)
3
Manual for Regulation of Banks
4
Republic Act No. 7653 (New Central Bank Act), which repealed Republic Act No. 265 (Central
Bank Act)

2
1. Investment Houses xSecs. 2 and 3, Investment Houses Law5
2. Financing Companies xSec. 3(a), Financing Company Act6
3. Investment Companies xSec. 4, Investment Company Act7
4. Non-Stock Savings and Loans Associations xSec. 3, Revised NonStock Savings and Loans Association Act of 1997 8
5. Cooperatives xArt. 3, Cooperative Code9; But See xArt. 100,
Cooperative Code
6. Insurance Companies xSec. 2, Insurance Code10
D. NATURE OF BANKING BUSINESS Sec. 2, GBL
1. Vital Role in Economy11 Simex International (Manila) Inc. v. Court of
Appeals, 183 SCRA 360 (1990)
a. Subject to reasonable regulation by the State Central Bank of the
Philippines v. Court of Appeals, 208 SCRA 652 (1992)
b. Strikes and Lockouts Sec. 22, GBL; xBSP12 Circular No. 299 (Series
of 2001); Article 263(g), Labor Code
2. Fiduciary Nature of Banking Business
a. Degree of diligence required13 Simex International (Manila) Inc. v.
Court of Appeals, 183 SCRA 360 (1990); Bank of the Philippine
Islands v. Intermediate Appellate Court, 206 SCRA 408 (1992)
b. When utmost diligence required

(i)

In dealing with accounts of depositors 14 Philippine Banking

Corporation v. Court of Appeals, 419 SCRA 487 (2004); Bank
of the Philippine Islands v. Casa Montessori Internationale,
430 SCRA 261 (2004)

(ii)

In selection and supervision of employees 15 Philippine

Commercial and International Bank v. Court of Appeals, 350

Presidential Decree No. 129, as amended

Republic Act No. 59080, as amended by Republic Act No. 8556
7
Republic Act No. 2629
8
Republic Act No. 8367
9
Republic Act No. 6938
10
Presidential Decree No. 612, as amended
11
Prudential Bank v. Lim, 474 SCRA 485 (2005)
12
Bangko Sentral ng Pilipinas
13
Solidbank Corporation/Metropolitan Bank and Trust Company v. Tan, 520 SCRA123 (2007)
14
Simex International (Manila) Incorporated v. Court of Appeals, 183 SCRA 360 (1990); Bank of
the Philippine Islands v. Court of Appeals, 326 SCRA 641 (2000); Philippine Commercial
International Bank v. Court of Appeals, 350 SCRA 446 (2001); Firestone Tire & Rubber Company
of the Philippines v. Court of Appeals, 353 SCRA 601 (2001); Westmont Bank v. Ong, 375 SCRA
212 (2002); Traders Royal Bank v. Radio Philippines Network, Inc., 390 SCRA 608 (2002);
Consolidated Bank and Trust Corporation v. Court of Appeals, 410 SCRA 562 (2003)
6

3
SCRA 446 (2001); Philippine National Bank v. Pike, 470 SCRA
328 (2005)
(iii) To be mortgagees in good faith 16 Cruz v. Bancom Finance
Corporation, 379 SCRA 490 (2002)
(iv) In the custody of documents; integrity of records 17 Heirs of
Eduardo Manlapat v. Court of Appeals, 459 SCRA 412 (2005)
(v)

Exception: does not cover transactions outside bank deposits

Reyes v. Court of Appeals, 363 SCRA 51 (2001)

c. Applicability to government financial institutions xGovernment

Service Insurance System v. Santiago, 414 SCRA 563 (2003)
d. Liability for negligence
(i)

Rules on determination of negligence Philippine Bank of

Commerce v. Court of Appeals, 269 SCRA 695 (1997);
Consolidated Bank and Trust Corporation v. Court of
Appeals, 410 SCRA 562 (2003)

(ii)

Award of actual, moral, compensatory or temperate damages

Araneta v. Bank of America, 40 SCRA 144 (1970); Prudential
Bank v. Court of Appeals, 328 SCRA 264 (2000); Citytrust
Banking Corporation v. Villanueva, 361 SCRA 446 (2001)

(iii) Right to recover against erring employee xPacific Banking

Corporation v. Court of Appeals, 173 SCRA 102 (1989)

E. AUTHORITY TO OPERATE
1. Incorporation Secs. 17 and 46, Corporation Code; Sec. 14, GBL
2. Operation Sec. 6, GBL
a. Authority required Sec. 6, par. 1, GBL
b. MB18 determination Sec. 6, par. 2, GBL
c. Unauthorized advertisement/ business representation Sec. 64, GBL
d. Change in name xP.C. Javier & Sons, Inc. v. Court of Appeals, 462
SCRA 36 (2005)
15

Metropolitan Bank and Trust Company v. Cabilzo, 510 SCRA 259 (2006); But See Go v.
Intermediate Appellate Court, 197 SCRA 22 (1991)
16
Development Bank of the Philippines v. Court of Appeals, 331 SCRA 267 (2000); Canlas v.
Court of Appeals, 326 SCRA 425 (2000); Premiere Development Bank v. Court of Appeals, 453
SCRA 630 (2005); Private Development Corporation of the Philippines v. Court of Appeals, 475
SCRA 591 (2005); Citibank, N.A. v. Cabamongan, 488 SCRA 517 (2006); Metropolitan Bank and
Trust Company, Inc. v. SLGT Holdings, Inc., 536 SCRA 517 (2007); Omengan v. Philippine
National Bank, 512 SCRA 305 (2007)
17
See Also United Coconut Planters Bank v. Basco, 437 SCRA 325 (2004)
18
Monetary Board

4
e. Sanctions for operating without authority Sec. 6, par. 4, in rel. to
Sec. 66, GBL; Republic v. Security Credit and Acceptance
Corporation, 19 SCRA 58 (1967); Central Bank v. Morfe, 20 SCRA
507 (1967); xPerez v. Monetary Board, 20 SCRA 502 (1957)

II. CLASSIFICATION OF BANKS

A. UNIVERSAL BANKS (UB) Sec. 3.2(a), GBL
1. Governing Law xGBL
2. Powers Sec. 23, GBL; xSec. X101(b)(1), MRB
a. Commercial Bank (KB) powers xSec. 29, GBL; xSec. X101(b)(2),
MRB
b. Investment House powers xSec. 7, Investment Houses Law; xSEC
Omnibus Rules and Regulations for Investment Houses and Universal
Banks Registered as Underwriter of Securities
(i)

Definition/function of investment house any enterprise which

engages or purports to engage, whether regularly or on an
isolated basis, in the underwriting (i.e., guaranteeing distribution
and sale) of securities of any kind issued by another corporation
xSec. 3, Investment Houses Law; xSec. 2(a), IRR of Investment
Houses Law19

(iI)

Limitations on UBs exercise of investment house powers xSec.

101(b)(1), MRB:
(a)
(b)
(c)

subject to pertinent laws and SEC regulations

if investment house functions performed directly by UB, such
functions shall be undertaken by separate department/unit
UB cannot perform functions of investment house both
directly (i.e., through a separate department/unit) and
indirectly (i.e., through a subsidiary)

c. To invest in equity of non-allied enterprises xSec. 27, GBL; xSec.

1381, MRB
B. COMMERCIAL BANKS (KB) Sec. 3.2(b), GBL
1. Governing Law xGBL
2. Powers xSec. X101(b)(2), MRB
a. KB powers Sec. 29, GBL
(i)
(ii)
19

Accepting drafts
Issuing letters of credit (L/Cs)

Rules and Regulations to Implement the Provisions of Presidential Decree No. 129

5
(iii) Discounting and negotiating promissory notes (PNs), drafts, bills
of exchange, and other evidences of debt
(iv) Accepting or creating demand deposits
(i) Receiving other types of deposits and deposit substitutes
(ii) Buying and selling foreign exchange and gold or silver bullion
(iii) Acquiring marketable bonds and other debt securities
(iv) Extending credit
b. Engage in quasi-banking functions xSec. 6, par. 1, GBL
c. To invest in equity of allied enterprises xSecs. 31 and 32, GBL
d. To purchase, hold and convey real estate xSecs. 51 and 52, GBL
e. Other services xSec. 53, GBL
(i)
(ii)

Receive in custody funds, documents and valuable objects

Act as financial agent and buy and sell, by order of and for the
account of customers, shares, evidences of indebtedness and all
types of securities
(iii) Make collections and payments for the account of others and
perform such other services for their customers as are not
incompatible with banking business
(iv) Upon prior MB approval, act as managing agent, adviser,
consultant or administrator of investment management/advisory/
consultancy accounts
(v) Rent out safety deposit boxes
f. To issue guarantees See xSec. 74, General Banking Act
C. THRIFT BANKS (TB) Secs. 3.2(c), GBL
1
2 1. Governing Law Sec. 71, pars. 1 and 3, GBL
a. Organization, ownership, capital requirements, powers, supervision,
and general conduct of business xThrift Banks Act20
b. Net worth to risk assets ratio xSec. 71, par. 3, in rel. to Sec. 33, GBL
c. Other matters: GBL of suppletory application
3

2. Declaration of Policy Sec. 2, Thrift Banks Act

3. Definition/Purpose Sec. 3.2(c), GBL; Sec. 3(a), Thrift Banks Act

a. Composed of:
(i) Savings and mortgage banks
(ii) Stock savings and loans associations; and
(iii) Private development banks
b. For purposes of:

20

Republic Act No. 7906

6
(i)

Accumulating savings of depositors and investing them in

marketable bonds and other debt securities, commercial papers
and accounts receivable, drafts, bills of exchange, acceptances,
or notes arising out of commercial transactions
(ii) Providing short-term working capital, medium- and long-term
financing, to businesses engaged in agriculture, services, industry
and housing
(iii) Providing diversified financial and allied services for its chosen
market and constituencies specially for small and medium
enterprises and individuals
4. Powers Sec. 10, Thrift Banks Act; xSec. X101(b)(3), MRB
D. RURAL BANKS (RB) Sec. 3.2(d), GBL
5
6 1. Governing Law Sec. 71, pars. 1 and 3, GBL;
a. Organization, ownership, capital requirements, powers, supervision,
and general conduct of business xRural Banks Act21
b. Other matters: GBL of suppletory application
7

2. Declaration of Policy Sec. 2, Rural Banks Act

3. Powers Sec. 12, Rural Banks Act; xSec. X101(b)(4), MRB

E. COOPERATIVE BANKS (Coop Banks) Sec. 3.2(e), GBL

8
9 1. Governing Law Sec. 71, pars. 1 and 3, GBL; Art. 99, Cooperative
Code
a. Organization, ownership, capital requirements, powers, supervision,
and general conduct of business xArts. 99 to 109, Cooperative Code
b. Other matters: GBL of suppletory application
10 2. Declaration of Policy Art. 2, Cooperative Code
11 3. Definition/Functions Art. 100, Cooperative Code
a. Definition: Organized by, the majority shares of which is owned and
controlled by, cooperatives primarily to provide financial and credit
services to cooperatives
b. Functions xArt. 100 Cooperative Code
4. Powers: Same as RB xSec. X101(b)(5), MRB
F. ISLAMIC BANKS (IB) Sec. 3.2(f), GBL
12
13 1. Governing Law Sec. 71, par. 2, GBL
21

Republic Act No. 7353

7
a. Organization, ownership, capital requirements, powers, supervision,
and general conduct of business xIslamic Bank Charter22
2. Purpose Sec. 3, Islamic Bank Charter
3. Powers Sec. 6, Islamic Bank Charter; xSec. X101(b)(6), MRB
G. OTHER CLASSIFICATIONS OF BANKS Sec. 3.2(g), GBL
1. Land Bank of the Philippines (Land Bank) xSecs. 74 to 100-A, Code
of Agrarian Reform of the Philippines23
2. Development Bank of the Philippines (DBP) xRevised Charter of
Development Bank of the Philippines24
3. Philippine Veterans Bank (PVB) xPhilippine Veterans Bank Act25; xAn
Act to Rehabilitate the PVB26
4. Philippine National Bank (PNB) but now privatized xRevised Charter
of Philippine National Bank27; xPhilippine National Bank v. Velasco, 564
SCRA 512 (2008)
5. Pawnshops? First Planters Pawnshop, Inc. v. Commissioner of
Internal Revenue, 560 SCRA 606 (2008)
H. FOREIGN BANKS
1. Entry of Foreign Banks
a. Modes of entry Sec. 2, Foreign Banks Liberalization Act 28
(i)

By acquiring, purchasing or owning up to 60% of the voting stock

of an existing domestic bank

(ii)

By investing in up to 60% of a new banking subsidiary

incorporated under the laws of the Philippines

(iii) By establishing branches with full banking authority

b. Subject to MB approval, guidelines Secs. 2 and 3, Foreign Banks
Liberalization Act
c. Foreign bank may avail of only 1 mode of entry Sec. 2, Foreign
Banks Liberalization Act; But may change from one mode of entry to
another xSubsec. 121.10, MRB

22

Republic Act No. 6848 (Charter of Al Amanah Islamic Development Bank of the Philippines)
Republic Act No. 3844
24
Executive Order No. 81, Series of 1986
25
Republic Act No. 3518
26
Republic Act No. 7169
27
Executive Order No. 80 Series of 1986
28
Republic Act No. 7221
23

8
d. Control of 70% of resources or assets of entire banking system must
be held by banks which are at least majority-owned by Filipinos Sec.
73, par. 3, GBL; Sec. 3, par. 3, Foreign Banks Liberalization Act
e. Equal treatment of local banks Sec. 73, par. 4, GBL; Sec. 8,
Foreign Banks Liberalization Act
2. Rules on Acquisition of Voting Stock in Existing Domestic Bank
a. May own up to 60% voting stock of only 1 domestic bank Sec. 2,
Foreign Banks Liberalization Act
b. Within 7 years from GBL effectivity, MB may authorize foreign bank:
(i) To acquire up to 100% of voting stock of only 1 domestic bank
Sec. 73, par. 1, GBL
(ii) Which acquired up to 60% of voting stock under the Foreign Banks
Liberalization Act and Thrift Banks Act, to further acquire up to
100% voting stock thereof Sec. 73, par. 2, GBL
c. MB shall secure the listing in the PSE 29 of shares of stocks of banks
established under this mode of entry Sec. 3, par. 3, Foreign Banks
Liberalization Act
d. License to do business not required: Equity investment is not deemed
doing business Sec. 3(d), Foreign Investments Act of 199130
3. Rules on Acquisition of Voting Stock in New Domestic Bank
a. May own up to 60% of the voting stock of only 1 new banking
subsidiary Sec. 2, Foreign Banks Liberalization Act
b. Must be among top 150 foreign banks in the world or top 5 in their
country of origin as of application date Sec. 3, par. 2, Foreign
Banks Liberalization Act
c. MB shall secure the listing in the PSE of shares of stocks of banks
established under this mode of entry Sec. 3, par. 3, Foreign Banks
Liberalization Act
d. Must be widely-owned and publicly-listed in its country of origin, unless
applicant is owned by government thereof Sec. 3, par. 4, Foreign
Banks Liberalization Act
e. Capitalization Sec. 4(i), Foreign Banks Liberalization Act
f. License to do business not required: Equity investment is not deemed
doing business Sec. 3(d), Foreign Investments Act of 1991
4. Rules on Establishing Branches
a. Governing Laws
29
30

Philippine Stock Exchange

Republic Act No. 7042

9
(i)

Creation, formation, organization or dissolution of corporations;

fixing of relations, liabilities, responsibilities, or duties of
stockholders, members, directors or officers of corporations to
each other and the corporation: Law of place where foreign bank
established Sec. 77, GBL

(ii)

Entry into the Philippines through establishment of branches:

xForeign Banks Liberalization Act Sec. 72, par. 1, GBL

(iii) Conduct of offshore banking business: xOffshore Banking System

Decree31; xChapter 1, Part Three, BSP Circular No. 1389 Sec.
72, par. 2, GBL
(iv) All other matters: GBL Sec. 77, GBL
b. Must be among top 150 foreign banks in the world or top 5 in country
of origin Sec. 3, par. 2, Foreign Banks Liberalization Act
c. Must be widely-owned and publicly-listed in country of origin, unless
government-owned Sec. 3, par. 4, Foreign Banks Liberalization
Act
d. Time limitation on entry Sec. 6, Foreign Banks Liberalization Act
e. Capitalization Sec. 4(ii), Foreign Banks Liberalization Act
f. Treatment of multiple branches Sec. 74, GBL; Citibank, N.A. v.
Sabeniano, 514 SCRA 441 (2007)
g. Head office guarantee Sec. 75, GBL; Sec. 5, Foreign Banks
Liberalization Act
h. Must be licensed to transact business Sec. 133, Corporation Code;
Hang Lung Bank, Ltd. v. Saulog, 201 SCRA 137 (1991)
i. Summons and legal processes Sec. 76, GBL; Sec. 12, Rule 14,
1997 Rules of Civil Procedure
j. Revocation of license Sec. 78, GBL
5. Offshore Banking Units (OBU) Secs. 1(a) and 1(b), Offshore
Banking System Decree
a. Qualification Sec. 2, Offshore Banking System Decree
b. Certificate of authority to operate Sec. 3, Offshore Banking System
Decree
c. Head office guarantee Sec. 4, Offshore Banking System Decree
d. Effects of certain laws Sec. 8, Offshore Banking System Decree

31

Presidential Decree No. 1034, as amended

10

III. DEPOSIT FUNCTION

A. NATURE OF DEPOSIT
1. Deposits as Simple Loans 32 Arts. 1953 and 1980, Civil Code;
Serrano v. Central Bank, 96 SCRA 96 (1980)
2. Bank as Debtor
a. Deposit is voluntary agreement; Know Your Customer standards
xMemorandum dated 1 October 2002; xSec. X262.1, MRB
b. Bank acquires ownership of money deposited; obligation to pay
amount, but no obligation to return the same money 33 Guingona, Jr.
v. City Fiscal of Manila, 128 SCRA 577 (1984); BPI Family Bank v.
Franco, 538 SCRA 184 (2007)
c. Payment to proper party-depositor Fulton Iron Works Co. v. China
Banking Corp., 58 Phil. 206 (1930); Bank of the Philippine Islands
v. Court of Appeals, 232 SCRA 302 (1994)
d. Deposits are not preferred credits Central Bank v. Morfe, 63 SCRA
114 (1975)
e. Bank has right to compensation Gullas v. Philippine National
Bank, 62 Phil. 519 (1935); Republic v. Court of Appeals, 65 SCRA
186 (1975); Bank of the Philippine Islands v. Court of Appeals, 512
SCRA 620 (2007)
f. No breach of trust; Mandamus not a remedy xLucman v. Malawi,
511 SCRA 268 (2006)
3. Banks Duty of Utmost Care34 Sec. 2, GBL

B. KINDS OF DEPOSIT
1. Demand Deposits Secs. 58-60, NCBA; xSecs. X201 to X204, MRB
a. For UB and KB Sec. 33, GBL
b. For TB Sec. 10(b), Thrift Banks Act
32

San Carlos Milling Co., Ltd. v. Bank of the Philippine Islands, 59 Phil. 59 (1933); Hilado v. De la
Costa, 83 Phil. 471 (1949); People v. Ong, 204 SCRA 942 (1991); Moran v. Court of Appeals,
230 SCRA 799 (1994); Consolidated Bank and Trust Corporation v. Court of Appeals, 410 SCRA
562 (2003)
33
Serrano v. Central Bank, 96 SCRA 96 (1980); People v. Puig, 563 SCRA 564 (2008).
34
Simex International (Manila), Inc. v. Court of Appeals, 183 SCRA 360 (1990); Go v.
Intermediate Appellate Court, 197 SCRA 22 (1991); Bank of the Philippine Islands v.
Intermediate Appellate Court, 206 SCRA 408 (1992); Philippine Bank of Commerce v. Court of
Appeals, 269 SCRA 695 (1997); Bank of the Philippine Islands v. Court of Appeals, 326 SCRA
641 (2000); Firestone Tire & Rubber Company of the Philippines v. Court of Appeals, 353 SCRA
601 (2001)

11
c. For RB/Coop Bank Sec. 12(b), Rural Banks Act; xSubsec. X201.1,
MRB
d. For Islamic Banks Sec. 6, par. (7)(a), Islamic Bank Charter
2. Savings Deposits xSec. X213 and X214, MRB; International
Exchange Bank v. Commissioner of Internal Revenue, 520 SCRA 688
(2007)
3. Negotiable Order of Withdrawal (NOW) Accounts xSecs. X223 to
X226, MRB; People v. Reyes, 454 SCRA 635 (2005)
4. Time Deposits xSecs. X231, MRB; BPI Family Savings Bank v. First
Metro Investment Corporation, 429 SCRA 30 (2004)
5. Foreign Currency Deposits Secs. 2 and 3, FCDA35
6. Money Market Placements? Allied Banking Corporation v. Lim Sio
Wan, 549 SCRA 504 (2008)

C. CAPACITY OF DEPOSITORS
1. Minors Sec. 1, Presidential Decree No. 734; Sec. 22, Thrift Banks
Act
2. Married Women Sec. 5, Republic Act No. 7192
3. Corporations: Through signatories designated by Board of Directors
Sec. 23, Corporation Code
4. Bank Officers and Employees: Prohibited from maintaining demand
deposits or current accounts in banking office where they are assigned
xSec. X204, MRB

D. OPENING OF DEPOSIT ACCOUNTS

1. Know Your Customer Standards: At least 3 specimen signatures
updated every 5 years, ID optional xSubsec. X262.1, MRB
2. Prohibitions:
a. Anonymous Accounts/Fictitious Names Sec. 9(a), AMLA36
b. Pseudonyms xArt. 178, Revised Penal Code; xCommonwealth Act
No. 142, as amended; xArts. 379-380, Civil Code
c. Exception: Numbered accounts Sec. 9(a), AMLA; Sec. 3(1), FCDA
3. Joint Accounts Arts. 485, 1207 and 1208, Civil Code

E. ADMINISTRATION OF DEPOSIT ACCOUNTS

35

Republic Act No. 6426, as amended (Foreign Currency Deposit Act)

Republic Act No. 9160, as amended by Republic Act No. 9194 (Anti-Money Laundering Act of
2001)
36

12

1. Deposit of Funds
a. Delivery required Art. 1934, Civil Code
b. Acceptability of withdrawal slips as deposits Firestone Tire &
Rubber Co. of the Phil. v. Court of Appeals, 353 SCRA 601 (2001)
2. Withdrawal of Funds
a. From current accounts: Allowing withdrawal of value of check drawn:
(i)

In case of insufficiency of funds Moran v. Court of Appeals,

230 SCRA 799 (1994); Villanueva v. Nite, 496 SCRA 459 (2006)

(ii)

Prior to clearing Associated Bank v. Tan, 446 SCRA 282

(2004)

(iii) In favor of other persons when check crossed Traders Royal

Bank v. Radio Philippines Network, Inc., 390 SCRA 608 (2002)
(iv) By issuing a managers check Equitable PCI Bank v. Ong, 502
SCRA 119 (2006)
b. From savings accounts: Presentation of passbook and withdrawal slip
Bank of the Philippine Islands v. Court of Appeals, 326 SCRA
641 (2000)
c. From time deposits: Surrender of certificate of deposit Far East
Bank and Trust Company v. Querimit, 373 SCRA 665 (2002)
d. From foreign currency deposit accounts : Based on contract Sec. 5,
FCDA
e. If deceased depositor:
(i)

Tax clearance required Sec. 97, NIRC; But See: xSec. 28(A)(1)
(a) and (6), NIRC

(ii)

Survivorship Agreements Vitug v. Court of Appeals, 183

SCRA 755 (1990)

3. Booking of Deposits xSec. X261, MRB

4. Interest on Deposits Citibank, N.A. v. Cabamongan, 488 SCRA 517
(2006)
a. Not subject to interest ceilings xSec. X242, MRB
b. Time of payment of interest on time deposits xSubsec. X242.1, MRB
c. Matured time deposits xSubsec. X242.2, MRB
d. Disclosure requirements xSec. X243, MRB
5. Closing of Account Far East Bank and Trust Company v. Pacilan,
Jr., 465 SCRA 372 (2005)

13

F. SECRECY OF BANK DEPOSITS

1. General Rules
a. Rationale: right to privacy Art. III, Secs. 2, 3, and 7 and Art. II, Sec.
28, 1987 Constitution; Republic v. Eugenio, 545 SCRA 384 (2008)
b. Applicable law Intengan v. Court of Appeals, 377 SCRA 63 (2002)
c. Applicability of exclusionary rule Art. III, Secs. 2 and 3, 1987
Constitution; Ejercito v. Sandiganbayan (Special Division), 509
SCRA190 (2006)
2. Rules for Peso Deposits
a. Coverage Sec. 2, Law on Secrecy of Bank Deposits 37; Ejercito v.
Sandiganbayan (Special Division), 509 SCRA190 (2006)
b. Prohibitions Secs. 2 and 3, Law on Secrecy of Bank Deposits;
Secs. 55.1(b) and 55.4, GBL
c. Exceptions
(i)

Under the Law on Secrecy of Bank Deposits Sec. 2, Law on

Secrecy of Bank Deposits
(a)

Upon written permission of the depositor or investor:

(1)
(2)

(ii)

DOSRI38 loans Sec. 26, NCBA; xSec. X337, MRB

For loans secured by hold-out or assignment of CTDs
xSec. X315(f), MRB

(b)

In cases of impeachment

(c)

Upon the order of a competent court in cases of bribery or

dereliction of duty of public officials

(d)

In cases where the money deposited or invested is the

subject of litigation

Under the Anti-Graft and Corrupt Practices Act 39: In cases

involving unexplained wealth Sec. 8, Anti-Graft and Corrupt
Practices Act; Philippine National Bank v. Gancayco, 15
SCRA 91 (1965); Banco Filipino Savings and Mortgage Bank
v. Purisima, 161 SCRA 576 (1988)

(iii) Under the Ombudsman Act40 Sec. 15(8), Ombudsman Act;

Marquez v. Disierto, 359 SCRA 772 (2001); Ejercito v.
Sandiganbayan (Special Division), 509 SCRA190 (2006)

37

Republic Act No. 1405, as amended

Directors, Officers, Stockholders, Related Interests
39
Republic Act No. 3019, as amended
40
Republic Act No. 6770
38

14
(iv) Under the Plunder Law41 Secs. 1(d) and 4, Plunder Law;
Ejercito v. Sandiganbayan (Special Division), 509 SCRA190
(2006)
(v)

Under the AMLA Sec. 11, AMLA; Republic v. Eugenio, 545

SCRA 384 (2008)
(a)

Upon order of a competent court in cases of violation of the

AMLA where there is probable cause of money laundering,
except that no court order is required in cases of:
(1)
(2)
(3)

(b)

kidnapping for ransom

drug trafficking
hijacking, destructive arson and murder, including those
perpetrated by terrorists against non-combatants and
similar targets42

BSP inquiry into or examination of deposits or investments

with any bank, when the inquiry or examination is made in
the course of the BSPs periodic or special examination

(vi) Independent auditor hired by the bank to conduct its regular audit,
provided that the examination is for audit purposes only and the
results thereof shall be for the exclusive use of the bank xDOJ
Opinion No. 243 (Series of 1957); xMarquez v. Disierto, 359
SCRA 772 (2001)
(vii) Under the PDIC43 Charter44 Sec. 8, par. Eighth, PDIC Charter
(vii) Under the Human Security Act 45 Secs. 27-43, Human Security
Act
(viii) Under the NIRC Sec. 6(F), NIRC
(a)

Upon inquiry by the Commissioner of Internal Revenue for

the purpose of determining the net estate of a deceased
depositor

(b)

In case a taxpayer files and application to compromise his

tax liabilities on the ground of financial incapacity (waiver
required)

(ix) Under the Unclaimed Balances Law46 Disclosure to the

Treasurer of the Philippines for dormant deposits for at least ten
(10) years Sec. 2, Unclaimed Balances Law; xDOJ Opinion
No. 104 (Series of 1975)
(x)
41

Under the Rules of Court

Republic Act No. 7080, as amended

As defined under Revised Penal Code
43
Philippine Deposit Insurance Corporation
44
Republic Act No. 3591, as amended by Republic Act No. 7400 and Republic Act No. 9576
45
Republic Act No. 9732
46
Act No. 3936, as amended by Presidential Decree No. 679
42

15
(a)

Garnishment Sec. 9(c), Rule 39, 1997 Revised Rules of

Civil Procedure; China Banking Corporation v. Ortega,
49 SCRA 356 (1973); xPhilippine Commercial and Industrial
Bank v. Court of Appeals, 193 SCRA 452 (1991)

(b)

Preliminary attachment Sec. 10, Rule 57, 1997 Revised

Rules of Civil Procedure;

d. Penalty for Violation Sec. 5, Law on Secrecy of Bank Deposits

3. Rules for Foreign Currency Deposits
a. Coverage Sec. 8, FCDA; Estrada v. Disierto, 445 SCRA 655
(2004); Salvacion v. Central Bank of the Philippines, 278 SCRA 27
(1997)
b. Prohibition Sec. 8, FCDA
c. Exceptions
(i)

Upon written consent of the depositor 47 Sec. 8, FCDA; China

Banking Corporation v. Court of Appeals, 511 SCRA 110
(2006)

(ii)

Upon order of a competent court in cases of violation of the AMLA

where there is probable cause of money laundering, except that
no court order is required in specified cases Sec. 11, AMLA

(iii) BSP inquiry into or examination of deposits or investments with

any bank, when the inquiry or examination is made in the course
of the BSPs periodic of special examination of said bank Sec.
11, AMLA
(iv) Under the PDIC48 Charter49 Sec. 8, par. Eighth, PDIC Charter
d. Penalty for Violation Sec. 10, FCDA
4. Rules for Deposits in Specific Banks and Financial Institutions
a. Under the GBL Sec. 55.1(b), GBL
a. Islamic Banks Secs. 33 and 45, Islamic Bank Charter
b. Rural Banks Sec. 26(a)(2), Rural Banks Act
c. Thrift Banks Sec. 21(a)(2), Thrift Banks Act
d. Non-Stock Savings and Loans Association xSec. 6, Revised NonStock Savings and Loans Association Act of 1997

47

Intengan v. Court of Appeals, 377 SCRA 63 (2002); Estrada v. Desierto, 445 SCRA 655 (2004)
Philippine Deposit Insurance Corporation
49
Republic Act No. 3591, as amended by Republic Act No. 7400 and Republic Act No. 9576
48

16

G. GARNISHMENT
1. Procedure Sec. 9(c), Rule 39, 1997 Rules of Civil Procedure
2. Exempt Deposits
a. Foreign currency deposits Sec. 8, FCDA; But See xSalvacion v.
Central Bank of the Philippines, 278 SCRA 27 (1997)
b. Under the Rules of Court Sec. 13, Rule 39, 1997 Rules of Civil
Procedure
3. No violation of Law on Secrecy of Bank Deposits xChina Bank v.
Ortega, 49 SCRA 356 (1973); xPhilippine Commercial and Industrial Bank
v. Court of Appeals, 193 SCRA 452 (1991)
4. Liability for Release Rizal Commercial Banking Corporation v. De
Castro, 168 SCRA 49 (1988); xPhilippine Commercial and Industrial Bank
v. Court of Appeals, 193 SCRA 452 (1991)

H. DEPOSIT INSURANCE
1. Coverage Sec. 4, PDIC50 Charter51; Sec. 9, FCDA
2. Amount Insured: Maximum of P500,000.00 Sec. 4(g), PDIC Charter52
3. Rules on Payment Secs. 10(b) to (d), PDIC Charter
4. Liability of PDIC Philippine Deposit Insurance Corp. v. Court of
Appeals, 283 SCRA 462 (1997)
I. UNCLAIMED BALANCES
1. Definition Sec. 1, Unclaimed Balances Law
2. Report to Treasurer; Notice, Posting, Publication Sec. 2, Unclaimed
Balances Law; Republic v. Court of Appeals, 345 SCRA 63 (2000)
3. Escheat Proceedings Sec. 3, Unclaimed Balances Law
4. Effects of Compliance/Non-Compliance Secs. 4 and 5, Unclaimed
Balances Law

50

Philippine Deposit Insurance Corporation

Republic Act No. 3591, as amended by Republic Act No. 7400 and Republic Act No. 9576
52
As further amended by Secs. 3 and 4, Republic Act No. 9576
51

17
J. ANTI-MONEY LAUNDERING ACT
1. Declared Policy Sec. 2, AMLA
2. Covered Transactions: Transaction, in cash or other equivalent
monetary instrument in excess of P500,000 within 1 banking day Sec.
3(b), AMLA
3. Suspicious Transactions: Transaction with Covered Institution,
regardless of amount involved, where any of the enumerated suspicious
circumstances exist Sec. 3(b-1), AMLA
4. Covered Institutions Sec. 3(a), AMLA
a. Banks and other entities,
supervised/regulated by BSP

their

subsidiaries

and

affiliates,

b. Insurance companies and other entities supervised/regulated by

Insurance Commission
c. SEC supervised/regulated entities53
5. Obligations of Covered Institutions Sec. 9, AMLA
a. Customer Identification: Establish and record, and maintain a system
of verifying true identities of clients, including legal existence and
organizational structure of corporate clients, and their representatives,
based on official documents
b. Record Keeping: Keep records for 5 years
c. Reporting of Covered and Suspicious Transactions: Report Covered
Transactions and Suspicious Transactions to AMLC 54, within 5 working
days from occurrence, which shall not violate the Law on Secrecy of
Bank Deposits, FCDA, and GBL
6. Money-Laundering Crime: Committed when the proceeds of an Unlawful
Activity are transacted to make them appear to have originated from
legitimate sources, by the following acts: Sec. 4, AMLA
a. Transacting or attempting to transact, with monetary instrument or
property, knowing it represents, involves, or relates to proceeds of any
Unlawful Activity
b. Facilitating money-laundering referred to in Item (a) above, by failing to
perform an act
53

(a) Securities dealers, brokers, salesmen, investment houses, and other entities managing
securities or rendering services as investment agents, advisor, or consultants; (b) Mutual funds,
closed-end investment companies, common trust funds, pre-need companies, and other similar
entities; (c) Foreign exchange corporations, money changers, money payment, remittance, and
transfer companies, and other similar entities; (d) Other entities administering or dealing in
currency, commodities or financial derivatives based thereon, valuable objects, cash substitutes
and other similar monetary instruments or property
54
Anti-Money Laundering Council

18
c. Failing to disclose and file report with AMLC of any monetary
instrument or property as required under AMLA
7. Unlawful Activities: Act or omission or series or combination thereof,
involving or having relation to the crimes enumerated Sec. 3(i), AMLA
8. Jurisdiction: Regional Trial Court/Sandiganbayan Sec. 5, AMLA
9. Prosecution Sec. 6, AMLA
10. Prohibition against Political Harassment Sec. 16, AMLA
11. Penalties and Other Consequences
a. Penalties Sec. 14, AMLA
(i)
(ii)
(iii)
(iv)

Money laundering
Failure to keep records
Malicious reporting
Breach of confidentiality

b. Forfeiture Sec. 12, AMLA; xRules on Civil Forfeiture55; Republic v.

Glasgow Credit and Collection Services, Inc., 542 SCRA 95 (2008)
12. Freezing of Accounts: Issued by Court of Appeals upon ex-parte
application of AMLC after determination of probable cause that monetary
instrument or property is in any way related to Unlawful Activity, for 20
days unless extended Sec. 10, AMLA; Republic v. Eugenio, 545
SCRA 384 (2008)
13. Examination of Accounts Sec. 11, AMLA; xRepublic v. Eugenio, 545
SCRA 384 (2008)
a. Upon order of a competent court in cases of violation of the AMLA
where there is probable cause of money laundering, except that no
court order is required in cases of kidnapping for ransom, drug
trafficking, hijacking, destructive arson and murder, including those
perpetrated by terrorists against non-combatants and similar targets.
b. BSP inquiry into or examination of deposits or investments with any
bank, when the inquiry or examination is made in the course of the
BSPs periodic of special examination of said bank to ensure
compliance with AMLA
14. AMLC; Composition and Powers Sec. 7, AMLA
15. Mutual Assistance among States Sec. 13, AMLA

55

SC Circular A.M. No. 05-11-04-SC