Banking Laws -Dizon CHAPTER 1 I. DECLARED Policy of the State (Sec.

2, GBL) -The
State recognizes the vital ro le of banks providing an environment conducive to
the sustained development of the national economy and the fiduciary nature of b
anking that requires high standards of integrity and pe rformance. In furtheranc
e thereof, the State shall promote and maintain a stable and efficient banking a
nd financial system that is globally competitive, dynamic and responsive to the
dem ands of a developing economy. II. Definition of Banks (Sec. 3.1, GBL) -"Bank
s" shall refer to entities engaged in the lending of funds obtained in the form
of deposits. Note: Banks may engage in other activiti es allowed by law. III. Na
ture of Banking Business A. The relationship existing between a depositor and De
btor-Creditor Relationship bank is that of a creditor and debtor. B. Fiduciary D
uty 1. Simex Intl., Inc. vs. CA: The State recognizes the fiduciary nature of ba
nking that requires high standards of integrity and performance. Banks are requi
red to treat the accounts of its depositors with meticulous care, always having
in mind the fiduciary nature of their relationship. 2. This bank s obligation is
deemed written into every deposit agreement between a bank and its depositor. C
. Not A Trust Agreement 1. The fiduciary nature of bank-depositor relationship d
oes NOT convert the contract between the bank and its depositors FROM a SIMPLE L
OAN TO a TRUST AGREEMENT. This is because Banks do not accept deposits to enrich
depositors but to earn money for themselves. 2. Failure by the bank to pay to p
ay the depositor is failure to pay a simple loan, and NOT a breach of trust. D.
Indispensable Institution 1. Banks is an indispensable institution in the modern
world and plays vital role in the economic life of every citizen. People have c
ome to regard them with respect, gratitude, and confidence. 2. Even a humble wag
e-earner does not hesitate to entrust his life savings 3. An ordinary person usu
ally maintains an account for security and convenience in settling his bills 4.
As for business entities, the bank is trusted to help them in running their affa
irs, not only in the form of loans, but in their day-to-day transactions lik e
encashing a check. E. Impressed with Public Interest (Simex vs. CA) a depositor
expects a bank to trea t his account with utmost fidelity, whether such account
consists only of a few hu ndred pesos or millions. F. Degree of Diligence (Simex
vs. CA) Art. 1172 of NCC states that the degree of diligence required of an obl
igor is t hat prescribed by law or contract, and in the absence of such, that of
a good father to a family NOTE: Due diligence is required of banks extend even
to persons or institutions, regularly engaged in the business of lending money s
ecured by real estate mortgage. G. Treatment of Accounts with Meticulous Care Th
ere is NO LAW mandating banks to call up their clients whenever their representa
tives withdraw significant amount s from their accounts. H. Duty to Keep Records
1. Banks shall have a true and accurate account, record, statement of their dai
ly transactions especially those of deposit liabilities. 2. The making of a fals
e entry or willful omission of entries is a ground for the imposition of adminis
trative sanctions and disqualification from office. I. Banks are NOT Gratuitous
Bailees Banks solicit deposits in order that they can u se the money to gain. J.
Banks are NOT Expected to be Infallible, but must bear the blame for NOT discov
ering mistakes despite established procedures. Q: Sps. A and V opened a joint cu
rrent account in C Bank with an initial deposit of P2,250. Prior thereto, A had
a personal account with the same bank. When the spouse open ed their joint curre
nt account, the New Accounts teller pulled out the old signature card o f A and
placed the old personal account number of A in the deposit slip. V issued two ch
ecks and one of these was dishonored for IF. They were deducted P20 from their
account. T he bank tried to call the spouses, but they were in Pampanga. Is the
bank liable for dam ages? A: Yes. -a depositor expects a bank to treat his accou
nt with utmost fidelity, whether s uch account consists only of a few hundred pe
sos or millions. Bank must record every transaction accurately
-A blunder on the part of the bank such as dishonor of check without good reason
can cause the depositor embarrassment, financial loss, and perhaps civil and cr
imina l litigation Note: Exemplary damages are awarded if there is malice and ba
d faith. K. Dealing with Registered Lands The rule that persons dealing with reg
istered land s can rely solely on the certificate of title does NOT APPLY to ban
ks. Banks shoul d exercise more care and prudence in dealing with registered lan
ds that private individuals, for their business is one affected by public intere
st. Q: A sold is unregistered parcel of land to B. Subsequently, an Orig. Cert.T
itle (OCT) was issued. A surrendered it to X bank as a consequence of a mortgage
. B died w/o kn owing that an OCT has been issued. Upon learning of his right, C
(B s heir) confronted A and went to X bank. C asked to photocopy the owner s du
plicate certificate outside the bank s premises. C then brought it to the Regist
er of Deeds with the Deed of Sale and h e was issued a Transfer Cert of Title. I
s the bank liable for damages to A? A: Yes. -Bank failed to foresee the risk of
its act of entrusting C with the OCT without notifying A and verifying the verac
ity of C s claim and character. This acts runs afoul of the bank s mandate to ob
serve the highest diligence -A has also the right to due process. Notice and hea
ring are indispensable eleme nts of this right which the bank ignored Q: A bank
accepted a property as mortgage despite existence of structures and oc cupants o
ther than the mortgagor. Is the bank negligent? A: Yes. Banks, being in the busi
ness of extending loans, are familiar with the r ules on land registration. They
are expected to exercise more care and prudence in dealing wi th registered lan
ds that private individuals, for their business is one affected by public intere
st. 1 | Page
The bank should have conducted investigation since there occupants other than th
e owner of the land mortgaged. This constitutes gross negligence amounting to b
ad faith. L. Banks may Exclude Persons in their Premises No employees must be sp
ared by banks and their officers and employees to ensure and preserve the trust
and confidence of the general public. IV. Liability For Acts and Employees Bank
is LIABLE for the wrongful acts of its officers done WITHIN the scope of their a
uthority. A. Negligence of Manager Bank is liable for the negligence or misdeed
of the branch manager since confide nce in the banking system necessarily includ
es reliance on bank managers. (BPI vs. First Me tro Investment Corp.) B. Neglige
nce of Officers if within the scope of authority, bank is liable C. Negligence o
f Tellers returning the passbook ONLY to the depositor or his authorized represe
ntative. If given to the wrong person, bank is liable since th ey would be cloth
ing that person presumptive ownership of the passbook. Note: Appropriation of mo
ney by a bank teller is NOT ESTAFA. Such is only MATERI AL POSSESSION. The bank
still has JURIDICAL POSSESSION. If for personal gain, THEFT . If the teller has
possession of the money since he occupies a position of confid ence, QUALIFIED T
HEFT. D. Right to Recover from Employees Banks may recover from their employees.
(Art. 2181 of NCC) E. Liabilities other than Actual 1. Exemplary by way of exam
ple. Malice and bad faith must be attendant 2. Moral when the good reputation of
the client was besmirched or his financial credit Note: Banks are NOT responsib
le for such damages in the ABSENCE of fraud, bad fa ith, malice, or wanton attit
ude. F. Respondeat superior, Diligence in the Selection, and Supervision of Empl
oyees -A bank is bound by negligence of its employees under the principle of Res
pondea t superior or command responsibility. V. Classification of Banks (CUT RIC
O) Sec. 3.2. Banks shall be classified into: (a) (b) (c) (i) Universal banks; Co
mmercial banks; Thrift banks, composed of: Savings and mortgage banks;
(ii) Stock savings and loan associations; and (iii) Private development banks, a
s defined in the Republic Act No. 7906 (hereaf ter the Thrift Banks Act ); (d) R
ural banks, as defined in Republic Act No. 73S3 (hereafter the "Rural Banks Act
"); (e) Cooperative banks, as defined in Republic Act No 6938 (hereafter the "Co
oper ative Code"); (f) Islamic banks as defined in Republic Act No. 6848, otherw
ise known as the Cha rter of Al Amanah Islamic Investment Bank of the Philippine
s ; and (g) Other classifications of banks as determined by the Monetary Board o
f the Ba ngko Sentral ng Pilipinas. A. Business Name -Only a bank that is grante
d universal/ commercial banking authority may represe nt itself to the public as
such in connection with its business name -Thrift Banks: allowed to use and ado
pt any name, provide the ff words are affix ed: A thrift bank, Saving bank, A Pr
ivate Development Bank, or A stick Savings and Loa n Association -Rural or Comme
rcial Banks: allowed to use and adopt any name, provide the ff wo rds are affixe
d: Rural or Coop, A Cooperative Bank, or A Rural Bank. o The size of the letters
of such phrase shall be at least of the size of the business name when shown on
letterheads, billboards, and other advertising materials. B. Universal Banks 1.
powers authorized for a commercial bank 2. powers of an investment house 3. powe
r to invest in non-allied enterprises C. Commercial Banks 1. general powers inci
dent to corporations 2. powers of commercial banks: (A BREAD) D. Rural Banks -de
signed to make needed credit available and readily accessible in the rural ar ea
s on reasonable terms primary purpose is to meet the normal credit needs of farm
ers, fishermen, or far m families
E. Thrift Banks include savings and mortgage banks, private devt. banks, and sto
ck savings and loans associations. -Providing short-term working capital, medium
and long term financing to busines s engaged in agriculture, services, industry
, and housing Powers of a Thrift Bank: F. Cooperative Banks -one organized by, t
he majority shares of which is owned and controlled by, cooperatives primarily t
o provide financial and credit services to cooperatives - cooperative bank shall
include cooperative rural banks -Membership shall include ONLY cooperatives and
federations of cooperatives -Functions of a Cooperative Bank G. Islamic Banks (
Al-Amanh Islamic Investment Bank of the Philippines) -in Zamboanga City -primary
purpose shall be to promote and accelerate the socio-economic devt of t he Auto
nomous Region by performing banking and financing operations and to establis h a
nd participate in the agricultural, commercial, and industrial ventures based o
n the Islamic concept of banking. 2 | Page
H. Other Banks -Philippine Veterans Bank private commercial bank owned by vetera
ns -Land Bank of the Philippines finance the acquisition and distribution of agr
icu ltural estates fro division and resale to small landholders as well as the p
urchase of the landholding by the agricultural lessee -Development Bank of the P
hilippines was created as Rehabilitation Finance Corp. (RFC); took over the func
tions of Agricultural Industrial Bank I. Non-Stock Saving And Loan Associations
mean a non-stock, non-profit corp engaged in the business of accumulating the sa
vings of its members and using suc h accumulations for loans to members for home
building or personal finance J. Quasi-banks refer to entities engaged in the bo
rrowing of funds through the issuance, endorsement or assignment with recourse o
r acceptance of deposit substitutes for purposes of relending or purchasing of r
eceivables and other obligations "deposit substitutes" is defined as an alternat
ive form of obtaining funds from the public, other than deposits, through the is
suance, endorsement, or acceptance of debt instruments for the borrower's own ac
count, for the purpose of relending or purc hasing of receivables and other obli
gations. VI. Authority to Engage in Banking and Quasi-Banking (QB) Functions A.
Authority from Bangko Sentral -No person shall engage in banking operations or Q
B functions WITHOUT authority from the Bangko Sentral -No articles of incorporat
ion or amendment to articles of incorporation of banks , banking and quasi-banki
ng institutions, building and loan associations, trust companies and other finan
cial intermediaries, insurance companies, public utilit ies, educational institu
tions, and other corporations governed by special laws shall be accepted or appr
oved by the Commission unless accompanied by a favorablerecommen dation of the a
ppropriate government agency to the effect that sucharticles or a mendment is in
accordance with law. (Sec. 17 of BP 68) -The Securities and Exchange Commission
shall not accept for filing the by-laws or any amendment thereto of any bank, b
anking institution, building and loan association, trust company, insurance comp
any, public utility, educational insti tution or other special corporations gove
rned by special laws, unless accompanied by a certificate of the appropriate gov
ernment agency to the effect that such by-laws or amendments are in accordance w
ith law. (Sec. 46 of BP 68) B. Whether a person or entity is performing banking
or quasi-banking functions W/O the BS authority shall be decided by the Monetary
Board by examining and investigati ng
the books and records of such person or entity. Upon issuance of authority, may
commence to engage in functions until authority is suspended, revoked or annulle
d by BS. C. The dept head and the examiners of the supervising and examining de
pt shall: 1. administer oath to any such person or entity 2. compel presentation
of books, records, and documents a. failure to do so would subject such to appr
opriate sanctions D. BS shall, when examining a bank, have the authority to exam
ine an enterprise whi ch is wholly or majority-owned by the bank. E. Certificate
of Authority to Register -The SEC shall not register the articles of corp or an
y amendment unless accompanied by a certificate of authority issued by the MB, u
nder its seal. The MB shall be satisfied from the evidence submitted to it: (RPC
) o All requirements of law have been complied with o Public interest and econom
ic conditions justify the authorization o The amount of capital as well as the i
ntegrity of the organizers reasonable assure the safety of deposits and the publ
ic interest -The SEC shall not register the by-laws of any bank or any amendment
unless accompanied by a certificate of authority issued by the MB, under its se
al. CHAPTER 2: ORGANIZATION, MANAGEMENT & ADMINISTRATION OF BANKS, QUASIBANKS AN
D TRUST ENTITIES I. Organization of Banks A. Conditions The MB may authorize the
organization of a bank and quasi-bank: 1. Entity is a stock corporation 2. Fund
s are obtained from the public, 20 o more persons 3. Minimum capital requirement
s by MB are satisfied B. Capabilities The MB shall take into consideration their
apability in terms of their financial resources and technical expertise and int
egrity. 1. Bank s ownership structure 2. Director s and senior management 3. Its
operating plan 4.
Internal control 5. Its projected financial condition and capital base C. Capita
l Requirements 1. Banks shall comply with the required minimum capital by MB: Un
iversal Bank-4,950M Commercial Bank-2,400M Thrift Banks w/n MM-325.0M Outside MM
-52.0M Rural Banks w/n MM-26.0M Cities of Cebu and Davao-13.0M In 1st, 2nd & 3rd
class cities and 1st class minicipalities-6.5M In 4th, 5th & 6th classcities an
d in the 2nd, 3rd & 4th class municipalities3.9M In 5th & 6th class municipaliti
es-2.6M 2. At least 25% of the total authorized capital stock shall be subscribe
d by the subscribers of the propsed bank, and at least 25% of such subscription
shall be paid-up that it must not be less than the minimum required capital. 3 |
Page
D. Incorporators/ Subscribers 1. Must be persons of integrity and of good credit
standing in the business community. Subscribers must have adequate fonancial st
rength to pay for their propsed subscriptions in the bank. 2. Must not have been
convicted of any crime involving moral turpitude unless otherwise allowed. 3. A
bank may be organized with not less than 5 or more than 15 persons in organizin
g or investing in the proposed bank. *if there is excess, may be listed among th
e original subscribers in the Article s of Corp. QUERY: MAY COOPERATIVES ORGANIZ
E A BANK? Yes, established cooperatives and corporations may organize a bank and
/or subscribe to the shares of stock oa any rural bank. Provided, that it shall
be s ubject to special examination and to such rules and regulations prescribed
by the MB. E. Bank Branches 1. UB & CB may open branches or other offices within
or outside the Philppines upon prior approval of the BS. 2. A bank authorized t
o branch out shall be responsible for all business conducted in such branches be
cause a bank and its offices shall be treated as one unit. II. Stockholdings A.
Treasury Stocks 1. No bank shall . Purchase/ acquire shares of its own capital s
tock or . Accept its own shares as a security for a loan EXCEPT: when authorized
by the MB. -stocks purchased shall be sold or disposed of at a public or privat
e sale. 2. At common law, a coprpration has no lien upon the shares of stockhold
ers for any indebtedness of the corporation. 3. Sec.35 of the US National Bankin
g At of 1864, if banking corporations were given a lien on their own stock for t
he indebtedness of the stockholders, the prohibit ion against granting loans or
discounts upon the security of the stock would become laregly ineffective. B. Fo
reign Stockholdings 1.
Foreign inividuals an non-bank corporations may own or control up to 40% of the
voting stock of a domestic bank. It shall apply t Filipinos and domestic non-ban
k cprporations. QUERY: PROVISION IS AMBIGUOUS. IF IT APPEARS THAT FPREIGN INDIV
IDUALS AND NON-BANK COPORATINS MAY ONLY CONTROL UP TO 40% OF THE VOTING STOCK. O
N THE OTHER HAND, FILIPINOS AND DOMESTIC NON-BANK CORPORATIONS MAY ALSO CONTROL
ONLY UP TO 40% OF THE VOTING STOCK. WHAT HAPPENS THEN TO THE 20%? -Foreign inivi
duals an non-bank corporations may own or control up to 40% of the voting stock
of a domestic bank Provided, that the aggregate foreign-voting stoks owned by th
em shall not exceed 40% of the outstanding voting stock of the bank. The percen
tage of foreig n-owned voting stock shall be determined by the citizenship of th
e individual stockholde rs in the bank. -Filipino individual and domestic non-ba
nk corporation may each own up to 40% o the voting stock of a domestic bank. The
re shall be no aggregate ceiling on the ownership b y such individuals and corpo
rations in a domestic bank. 2. The percentage of foreign-owned voting stock shal
l be determined by the citizenship of the individual stockholders in the bank sh
all follow the citizens hip of the controlling stockholders of the corporation,
irrespective of the place of incorporation. *CONTROLLING STOCKHOLDER-refer to in
dividuals holding more than 50% of the voting stock of the corporate stockholder
s of the bank. 3. At least 60% of voting stock of any commercial bank shall be o
wned by Filipino citizens. For thrift banks, at least 40% of its voting stock sh
all be owned by Filipinos. In rural banks,all of the capital stock. NOTE: In det
ermining the nationality of banks, the CONTROL TEST is applied. The following te
sts do not: 1. War-time test 2. Investment test 3. Place of incorporation test 4
. Grandfather rule 5. Principal place of usiness test C. Acquisition of Voting S
tock in a Domestic Bank 1. Within 7years from the effectivity of the GBL and sub
ject to guidelines issued pursuant to the Foreign Banks Libearlization Act, the
MB may authorize a foreign
bank to acquire up to 100% of the voting stock of only one bank organized under
the laws of the Republic of the Philippines. 2. Within the same period, MB may a
uthorize any foreign bank, which prior to the effectivity of the GBL availed its
elf of the privilege to acquire upto 60% of th e voting stock of a bank under th
e Foreign Banks Libearlization Act and the Thrift Banks Act, to further acquire
voting shares of such bank to the extent necessary for it to own 100% of the vot
ing stock thereof. 3. MB shall adopt measures necessary to ensure that at all ti
mes the control of 70% of the resources or assets of teh entire banking system i
s held by banks which are at keast majority-owned by Filipinos. D. Family Grous
or Related Interests 1. Stockholdingsn of individuals related to each other with
in the fourth degree of consanguinity or affinity, legitimater or common-law sha
ll be considered family groups or related interests and must be fullt disclosed
in all transactions by such an individual with the bank. 2. Two or more corporat
ions owned or controlled by the same family group or same group of persons shall
be considered related interests and must be fullly disclosed in all transaction
s by such corporations or related groups of persons with the bank. III. Board of
Directors 4 | Page
A. Number of Directors 1. Shall be at least 5, an a maximum of 15 members of the
board of directors of bank, 2 shall be independent directors. (except) -all be
of legal age -majority are residents of the Phil. -form a private corporation fo
r any lawful purpose 2. INDEPENDENT DIRECTOR-mean a person other tha an officer
or employee of the bank, its subsidiaries or ffiliates or related interests. *No
n-Filipino citizens may become members of the bord of directors of a bank to the
extent of the foreign participation in the equity of said bank. a. not or has n
ot been an officer or employee of the bank/quasibank/trust entity , its subsidia
ries and affiliates or related interests during the past 3 years conted from the
date of his election b. not a director of officer of related companies of the i
nstitution s majority st okholder c. not a majority shareholder of the instituti
ons, any of its related ompanies o r of its majority shareholder d. not a relati
ve w/n 4th degree of consanguinity or affinity, legitimate or com mon law of any
director,oficer or majority shareholder of the bank/quasibank/trust entit y, it
s subsidiaries and affiliates or related companies e. not acting as a nominee or
representatve of any director or substantial holde r f. free from any business
or other relationship which could materially interfere with the exerise of his j
udgment B. Directors of Merged or Consolidated Banks -The number of directors sh
all not excedd 21. C. Meetings 1. May be conducted throuh modern technologies su
ch as teleconferencing and video-conferencing *Banks shall include in theor byla
ws a provision taht meetings of their board of directors shall be held only with
in the Philippines. 2. Corporate officers, quorum: -Immediately after election,
directors must formally organize the election of th e a. president who shall be
thedirector b. treasurer, who may or may not be a director c. secretary who shal
l be a resident nd citizen of the Philippines d. other officers provided for in
the by-laws *Any 2 or more positions may be held concurrently by the same person
EXCEPT that no one shall act as a president and secretary or as president and t
reasurer at t
he same time. *Directors or trustees cannot attend ot vote by proy at board meet
ings. D. Compensation and other Benefits of Directors and Officers 1. MB may reg
ulate the payment by the bank to its deirectors and officers of compensation, al
lowance, fees, bonuses, stock options, proit sharing and fringe benefits only in
the exceptional cases and when the circumstances warrant, such as but not limit
ed to the following: a. When a bank is under comptrollership or conservatorship
b. When found by the MB to be conucting business in an unsafe or unsound manner
c. When found to be an unsatisfactory financial condition. 2. REMEDY: Sec.30 of
the Corporation Code Directors shall not receive any compensation except for rea
sonable per diems. Provided, taht any such compensation other than per diems may
be granted to directors by the vote of the stockholers representing at least a m
ajority of the outstanding capitl stock at a regular or special stockholder s me
eting. It shall not exceed 10& of the net income before income tax of the corpor
ation durng the preceeding year. IV. Fit and Proper Rule A. Powers of the MB 1.
To maintain the quality of bank management and afford better protection to depos
itors and the public in general. -MB shall prescribe,pass upon and review the qu
alifications and disqualification s of individuals elected or appointed bank dir
ectors or officers and disqualify th ose found unfit. 2. After due notice to the
board of directors of the bank, the MB may disqualify, suspend or remove any ba
nk director or officer who commits or omits an act which render himunfit for the
position. 3. If found fit and proper, shall be given to his integrity, experien
ce, education, training and competence. B. Disqualification a. Permanently Disqu
alified Directors 1. Have been convicted by final judgment of a court for offens
es involving dishonesty or breach of trust (ex. Estafa, extortion, forgery, malv
ersation, swindling, BP22) 2. Have been convicted by final judgment of a court s
entecing them to serve a maximum term of imprisonment of more than 6 years. 3. H
ave been convicted by final judgment of a court for violation of banking
laws, rules and regulations 4. Those who have been judicially declared insolvent
, spendthrit or incapacitated to contract 5. Those directors, officers or emplye
es of banks, quasi anks or trust entities who were found to be culpable for such
institution s closure 6. Those directors, officers or emplyees of banks, quasi
anks or trust entities who were found by the MB as administratively liable for v
iolation of banking law, rules an regulaitons 7. Those directors, officers or em
plyees of banks, quasi anks or trust entities who were found to be unfit for the
position of directors nad officers b. Temporarily Disqualified Directors: 1. Pe
rson who refuses to fully disclose the extent of their business interests to the
appropriate suoervising and examining department. 2. Directors who have been ab
sent or who have not participated in more than 50% of all meetings, both regular
and special, and those who failed to 5 | Page
physically attend at east 25% of all meetings in an year except those with notar
ized certification executed by the corporate secretary. 3. Persons who are deinq
uent in the payment of their obligations: a. DELINQUENT IN THE PAYMENT OF OBLIGA
TIONS-an obligation of a person with a bank/quasibank/trust entity where he is a
director or officer, or at least 2 obligations with other banks/financial insti
tutions, underdifferent credit lines or loan contracts, ar past due. b. Obligati
ons shall include all borrowings from a bank/quasibank obtained by: 1. Director
or officer for his own account or acts as guarantor, indorser or surety of loans
2. The spouse or child under the parental authority of the director or officer
3. Any person whose loan proceeds were credited to an acount for the benefit of
a director or officer. 4. His spouse is the managing partner or a general partne
r owning a controlling interest in the partnership 5. A corporation, association
or firm whollyowned by any group of persons 4. Have been convicted by final jud
gment of a court for offenses involving dishonesty or breach of trust (ex. Estaf
a, extortion, forgery, malversation, swindling, BP22) 5. Directors of officers o
f closed banks/quasibanks/trust entities pending their clearance by the MB 6. Di
rectors disqualified for failure to observe/discharge their duties & responsibil
ities 7. Directors who failed to attend the special seminar for board of directo
rs 8. Persons dismissed/terminated from employment for cause. 9. Those under pre
ventive suspension 10. Persons with derogatory records as certified by, or on th
e official files of, th e judiciary, National Bureau of Investigation, Philippin
e National Police, quasi judicial bodies. 11. Those are administratively liable
for violation of banking laws, rules and regulations. 12. Any person found by MB
to be unfit for th position of directors or officers. 13. When penalty is suspe
nsion from office or fine is imposed, such is found to be administratively liabl
e. C. Disqualification/ Prohibitions under the Corporation Code
Sec.27. No person convited by fianl judgment of an offense puishable by imprionm
ent for a perios exceeding 6years or a violation of this Code within 5years pri
or to date of is electiom or appointment shall qualify as a director, trustee or
officer of an y corporation. D. Disqualification? Prohibitions under NCBA V. Ba
nking Days and Hours A. Number of Days and Hour 1. Shall transact business on al
l working days for at least 6 hours a day, even before 8am or after 8pm. May ope
n for business on Sat, Sun or holidays for at least 3 hours a day. 2. If so, mus
t repot to the Bangko Sentrl the additional days 3. Working days mean Mon-Fri ex
cpet holidays. 4. Branches at international airport or major fish port are allow
ed to operate on flexible banking hours provided hat wil inform BSP of the sched
ule of the banking hours that is not less than 6 hrs a day. VI. Automated Teller
Machines A. Off-ite Automated Teller Machines (ATMs) 1. Must submit a report to
the appropriate department of the BSP on ATMs which they establish 2. Shall be
installed only in the centers of activity like shopping, supermarkets, hospitals
, university campuses. Provided, that adequate internal control and security mea
sures shall be adopted nd submitted to BSP. 3. Must comply with these, to all to
open off site ATMS. B. Mobile ATMs 1. Should allowed to visit only centers of a
ctivity and should confine their itinerary to Metro Manila until futher notice.
2. Shall secure insurance coverage or adopt a self-insurance scheme to protect i
tself against losses of whatever nature in ita mobile ATM oprations 3. Banks hal
l notify the supervising and examining department of the BSP of the tual date a
mobile ATM become oprational and when terminated. VII. Independent Auditor 1. MB
shall require a bank etc. To engage the services of an independent auditor to b
e chosen by a bank etc. From a list of certified public accountants acceptable t
o the MB 2. Term of engagement hall be prescribed by MB, whenther as continuing
basis or special engagements.
3. Board of Directors shall also conduct an annual balance sheet audit of the ba
nk etc. To review the internal audit and control system of teh bank etc, and to
submit a report of such audit. VIII. Financial Statements -Every bank etc. Shall
submit to the appropriate supervising and examining dept. Of the BSP fianncial
statements. -It shall be of a specific date designated by BSP and shall show act
ual financia l conditions of the institution submitting the statements, and of i
ts branhes, off ices, subsidiaries and affiliates, -and shall contain such infor
mations as required in the BSP regualtions. PUBLICATION: -In English or Filipino
-At least once every quarter in a newspaper of general circulation in the city
o r province -BSP msy prescibe where it shall be published -Shall make available
to the public an shall prescribe the complete set of its audited financial stat
ements 6 | Page
-If there is local emergency or imminent panic, the MB by vote of at least 5 of
its members may allow to defer for a stated period of time the publication of th
e statement of financial condition. NOTES: page 54-55 (IMPORTANT) IX. Publicatio
n of Capital Stock -It shll not publish the amount of its authorized or subscrib
ed capital stock wi thout indicating at the same tme and with equal prominence,
the amount o its capital actually paid-up. -No branch of any foreign bank doing
business in the Phil shall in any way announce the amount of the capital and sur
plus of its had office. X. Settlement of Disputes -BSP shall be consulted by oth
er gov. Agencies in actions and proceedings brought before them involving contro
versies in banks etc. , as well as disputes between any all or all of them which
theya re the directors, officers or stockholders. XI. Strikes and Lockouts A. U
nsettles Labor Disputes -The banking industry is indispensable to the national i
nterest. -If unsettled afer 7 days shall be reported by the BSP to the Sec. Of L
abor who may assume jurisdiction over the dispute and decide it or certify the s
ame. -The President, may intervene and assume juridiction over suh labor dispute
in order to settle and terminate the same. B. Reports of Strikes and lockouts T
he bank shal disclose pertinent info: 1. Cause of the strike/lockout and bank ma
nagement s position on its legality 2. Bank oprations affected XII. Laws Governi
ng other Types of Banks -Thrift Banks Act, Rural Banks Act, Cooperative Code -Fo
r Islamic banks-special laws -For purposes of prescribing the minimum ration whi
ch the net worth of a thrift bank must bear to its total risk assets, the provis
ions of the Gbl shall govern. CHAPTER 3. DEPOSIT FUNCTIONS OF BANKS Demand depos
its are all those liabilities of the BSP and other banks which are d enominated
in Phil. Currency and are subject to payment in legal tender upon demand by pres
entation of checks. The followings are prohibited from maintaining demand depos
its or current accoun ts with
the bank office in which they are assigned; a. All officers; b. Employees of the
bank s cash department/cash units c. Others employees who have direct and immed
iate responsibility in the handling of transactions/records pertaining to demand
deposits or current accounts. Includes also; The spouse, relatives within 2nd d
egree of consanguinity and affinity of the off icers and employee covered by the
prohibition. DUTY OF BANK TO HONOR CHECKS Where the bank possesses funds of a d
epositor it is bound to honor his checks to the extent of the amount of his depo
sits. Failure of the bank to pay the check, enti tles the drawer to substantial
damage without any proof of actual damages. RESPONSIBILITY OF THE DRAWER He must
personally keep track of his available balance in the bank and not rely on the
bank to notify him of the necessity to fund certain checks he previously issued.
DUTY OF BANKS TO KNOW SIGNATURES A bank is bound to know the signatures of its
customers. NO OBLI. TO PAY PARTIAL PAYMENT A bank is under no obligation to make
part payment on the check up to only the amount of the drawer s fund where the
check is drawn for an amount larger than wha t the drawer has on deposit. WITHDR
AWALS BAKS ARE PROHIBITED FROM ISSUING/ACCEPTING Withdrawals slips without requi
ring the depositors to present their passbooks and accomplishing necessary withd
rawal slips except for banks authorized by BSP to adopt the no passbook withdraw
al sys tem. Negotiable order of withdrawal (NOW) are interest bearing deposits o
f accounts that combine the payable on demand feature of the checks and investme
nt feature of a savings acct. Time deposits one the payment of which cannot lega
lly be required within such a specified number of days. NEGOTIABLE CERTIFICATES
OF TIME DEPOSITS (NCTD s) a.
Universal banks / commercial banks may issue NCTDs without approval of BSP b. Th
rift banks/Rural banks/Cooperative banks need approval of BSP NON NEGOTIABLE CTD
-Banks may issue long-term negotiable tax exempt certificates of time deposit w
ithout approval of the BSP. QUASI BANKING FUNCTIONS: Essential elements of quasi
-banking are: A. borrowing of funds for the borrower s own account; B. 20 or mor
e lenders at any one time; C. Methods of borrowing are issuance, endorsement, or
acceptance of debt instrument s of any kind, other than deposits D. The purpose
of which is (1) relending, or (2) purchasing receivables or other obligations A
ny person, natural or juridical may deposit with such Phil. Bank in good standi
ng foreign currencies which are acceptable as part of the international reserve
except thos e which are required by the central bank to be surrendered. 7 | Page
Anonymous accounts or accounts under fictitious name should not be kept allowed.
II. Administration of deposits All banking institutions are required to set a m
inimum of 3 specimens of their d epositors and to update the specimen of signatu
res every 5 years or sooner, at the discret ion of the bank. Minors are vested w
ith special capacity and power to make savings, and withdraw the same without th
e assistance of their parents or guardians, provided the f requir ements are met
; 1. at least 7 years of age; 2. able to read and write; 3. have sufficient disc
retion; 4. not otherwise disqualified by any other incapacity; Parents may never
theless deposit for their minor children and guardians for thei r wards. Corpora
tions a. Incorporation Stage payment of subscription is in cash, the SEC require
s a bank certificate of deposit of paid-up capital notarized in place where sign
ed. b. Post Incorporation in opening a bank account, the board of directors issu
es a resolution authorizing the signatories and specifying the depository bank.
Clearing cut off time General rule: all deposits and withdrawals during regular
banking hours shall be credited or debited to deposit liability accounts on the
date of receipt or payment thereof; provided, however, that a bank may set a cle
aring cut off time for its head office not earl ier than 2 hours before the star
t of clearing at the BSP and not earlier than 3-1/2 hours b efore the start of c
learing for all its branches, agencies, and extension office doing bus iness in
the Philippines. Provided, further that banks are located in areas where there a
re n o BSP regional/clearing arrangement may set a clearing cut-off time not ear
lier than 2 hours before the start of their local clearing after which time, dep
osits received sha ll be booked likewise. III. Survivorship Agreement Definition
: Joint owners of a deposit agree that either of them could withdraw any part or
t he whole of
said account during the lifetime of both, and the balance, if any, upon the deat
h of either, belonged to the survivor. Although survivorship agreement is per s
e not contrary to law, its operation or effect may be violative of the law. IV.
Duties of Banks A. METICULOUS CARE A bank is required to take meticulous care of
the deposits of its clients, who h ave the right to expect high standards of in
tegrity and performance from it. In every case the depositor expects the bank to
treat his account with the utmos t fidelity, whether such account consists only
of a few hundred pesos or of millio ns. B. PAYMENT TO PROPER PARTY C. IN CASE O
F DEATH OF DEPOSITOR National revenue code provides: If a bank has knowledge of
the death of the depositor, it shall not allow any wi thdrawal from said deposit
account unless the commissioner has certified that the taxes i mposed thereon b
y this title have been paid. Provided, however, that the administrator of the es
tate or any 1 of the heirs of the decent may upon authorization of the commissio
ner w ithdraw an amount not exceeding 20,000 without the said certification. V.
Secrecy of bank Deposits Purposes a. to give encouragement to the people to depo
sit their money in banking institutions; b. to discourage private hoarding so th
at the same may be properly utilized by banks in authorized loans to assist in t
he economic development of the country. R.A. 8367 Absolute Confidentiality All d
eposits of whatever nature with an Association in the Philippines are herby cons
idered as of an absolutely confidential nature and may not be examined, inqu ire
d or looked into by any person, government official, bureau or office except upo
n; 1. written permission of the depositor; 2. in case of impeachment; 3. upon or
der of a competent court in cases of bribery or dereliction of duty of pu blic o
fficials; 4.
in cases, where the money deposited or invested is the subject matter of the lit
igation. Authority to inquire into bank deposits under the ANTI MONEY LAUNDERING
ACT The AMLC may inquire into or examine any particular deposit or investment w
ith any banking institution or non-bank financial institution upon order of any
competent court in cases of violation, when it has been established that; a. the
re is probable cause that the deposits or investments are related to an unlawful
activity; b. a money laundering offense. Authority of the Commissioner of Inter
nal Revenue to inquire into deposits In cases; a. a decedent to determine his gr
oss estate; b. any taxpayer who has filed an application for compromise of his t
ax liability by reason of financial incapacity to pay his tax liability. CHAPTER
4 Operations of a Universal Bank a. Powers of a commercial bank b. Powers of an
inverstment house c. Power to invest in non-allied enterprises II. Equity Inves
tments of a Universal Bank a. Allied or non-allied i. Allied enterprises: financ
ial or non-financial ii. Total investment shall not exceed 50% of the net worth
of the bank 8 | Page
iii. Total investment in one enterprise shall not exceed 25% of the net worth of
the bank iv. Net worth-total of the unimpaired paid-in capital including paid-i
n surplus, retained earnings and undivided profit, net of valuation, reserves an
d other adjustments b. Acquisition is subject to prior approval of the Monetary
Board III. Equity investments of a Universal Bank in Financial Allied Enterprise
s a. Can own up to 100% of the equity in a thrift bank, a rural bank or others w
ithin this category b. A publicly-listed universal or commercial bank can own on
ly one other universal or commercial bank c. Financial Allied: leasing companies
, banks, investment houses, financing companies, credit card companies, insuranc
e companies, holding company, etc. IV. Equity Investments of a Universal Bank in
Non-financial allied enterprises a. May own up to 100% b. Warehousing, storage,
safe deposit box, management of mutual funds, providing computer services, insu
rance agencies, home building and home development c. Rural/Cooperative Banks ma
y invest, as a non-financial allied undertaking in the ff: i. Warehousing and po
stharvest facilities ii. Farm equipment distribution iii. Transportation of agri
cultural products iv. Marketing of agri products v. Leasing V. Investments in No
n-Allied Enterprises a. Shall not exceed 35% of the total equity in that enterpr
ise nor shall it exceed 35% of the voting stock b. Only universal banks can inve
stment in non-allied enterprises: i. Industrial park projects, financial and com
mercial complex projects, activities in agri, mining, manufacturing,etc. VI. Inv
estments in Quasi-Banks a. Shall not exceed 40% equity Operations of Commercial
Banks I. Powers a. Powers incident to corporations b.
Such powers necessary to carry on the business of commercial banking: i. Accepti
ng drafts and issuance of letters of credit ii. Accepting or creating demand dep
osits iii. Receiving deposit substitutes iv. Extending credit v. Buying and sell
ing foreign exchange and gold or silver vi. Discounting negotiating promissory n
otes, etc. II. Letters of Credit a. 3 relationships created: bank and buyer, ban
k and seller, buyer and seller b. Independence Principle-assures the seller of p
rompt payment even if buyer has not yet reimbursed as long as the seller present
s the necessary documents III. Investments of a Commercial Bank a. Only equities
in allied enterprises: either financial or non-financial b. Total investments i
n allied enterprises shall not exceed 35% of the net worth of the bank c. Total
investment in any one enterprise shall not exceed 25% of the net worth of the ba
nk. IV. Investments in Financial Allied a. 100% of the equity of a thrift bank o
r a rural bank b. In other financial allied enterprises, investment shall only b
e a minority holding V. Investments in non-financial allied a. May own up to 100
% Risk-Based Capital I. Minimum Ratio-monetary board shall prescribe; ration of
bank to its total risk assets which may include contingent a. May be altered or
suspended for a maximum of one year when b. Uniformly applied for banks in the s
ame category II. Effect of Non-Compliance a. Limit or prohibit the distribution
of net profits b. Restrict or prohibit acquisition of major assets Limits on Loa
ns, Credit Accommodations and Guarantees I. Single Borrower s Limit-shall not ex
ceed 20% of the net a. Except: i. the net worth of the accounts necessary
worth of the bank
As provided by the monetary board for reasons of national interest ii. Deposits
of rural banks with GOC financial institutions b. The limit maybe increased by 1
0% provided the additional loans are secured II. SBL should include: a. Direct l
iability of the maker of paper sold or discounted with the bank b. If the borrow
er owns ac majority interest in a corporation, the liabilities of said corporati
on is included c. Liabilities of subsidiaries of a corporation who is borrowing
from the bank d. In case of partnership or association, the liabilities of the m
embers thereof III. SBL should exclude: a. Loans secured by the BSP or governmen
t b. Loans covered by assignment of deposits maintained in the bank c. Loans und
er letters of credit covered by margin deposits d. Loans specified as non-risk i
tems IV. Bank Guarantee-irrevocable commitment of bank binding itself to pay in
the vent of non-performance by a third party; it shall also be subject to the li
mits herein prescribed V. Contingent Accounts of borrowers may be included among
those subject to the limits VI. Assignment of Credit-agreement by virtue of whi
ch the owner of a credit, by a legal cause, such as sales, dation in payment, do
nation, and without the need of the consent of the debtor, transfers his credit
to another who acquires the powe r to enforce it to the same extent as the credi
tor could have. VII. Pacto Commissorio-automatic appropriation of the pledged or
mortgaged property by the creditor in payment of the loan upon its maturity. It
is not all owed in assignment of deposits. DOSRI I. Prohibits the ff: a. Direct
or indirectly borrow from the bank b. Become a guarantor or indorses or surety
for loans from such bank to others c. Be an obligor to the bank except with the
written approval of the majority of all the directors of the bank
II. The approval shall entered on the records of the bank 9 | Page
III. Arms Length Rule-Dealings with DOSRI shall be upon terms not less favorable
to the bank IV. Directors: a. Names in the articles of incorporation b. Elected
in meetings of the stockholders c. Elected to fill vacancies V. Officers: a. Pr
es, VP, EVP, Sr. VP, GM, Secretary, Treasurer, Trust Officer b. Chairman, vice-c
hairman or any other position who performs functions of management VI. Stockhold
er-stockholder or record in the books of the bank a. Includes: i. Spouse and/or
relative within the 1st degree or consanguinity or affinity ii. Corporation owne
d by the stockholder or his wife VII. Related Interests a. Spouse and/or relativ
e within the 1st degree or consanguinity or affinity b. partnership where DOSRI
of those in a) above are general partners c. co-owner with a DOSRI or those in a
) of a property used as a security d. Corporation or association where the DOSRI
or those in a) are is also a director e. Corporation wholly or majority owned o
r owned by at least 20% by the DOSRI or those in a) VIII. Effect of Violation-af
ter due notice, the office of the person violating s hall be declared vacant and
shal be subject to the penal provisions of NCBA Securities on Loans I. Secured
by Real Estate a. Shall not exceed 75% of the appraised value plus 60% of the in
sured improvements II. Secured by Chattels and Intangible Properties a. Shall no
t exceed to 75% Grant and Purpose of Loans I. Amount and Purpose a. Only in the
amount and for the period of time essential for the completion of
the operations to be financed. This shall be done consistent with safe and sound
banking practice b. The purpose shall be stated in the application c. If the pu
rpose stated was not followed, the bank may terminate the loan and demand immedi
ate repayment II. Requirements: a. Statement of assets and liabilities b. Statem
ent of their income and expenditure c. Other information prescribed by law or by
the Monetary Board d. Even in the absence of this provision, the bank may still
demand immediate repayment because the borrower has lost the benefit of the per
iod under Art. 1198 of the Civil Code III. Reason for Stringent Rules in Grantin
g Loans-The bank invests the money it holds in trust for the depositors. For thi
s reason, a bank is expected to ascert ain the identities of the persons transac
ting with them to protect both the interest of the bank and the depositors. IV.
Unsecured Loans or Other Credit Accommodations-The MB is authorized to issue reg
ulations with respect to unsecured loans V. Other Security Requirements-The MB m
ay prescribe further security requirements shall be subject to. VI. Authority to
Prescribe Terms and Conditions of Loans VII. Amortization on Loans a. Shall be
adapted to the nature o the operations to be financed b. With those whose maturi
ties are more than 5 years-periodic amortization but must be made annually c. Lo
ans are used for purposes not initially producing revenue-amortization may be de
ferred until such time as said revenues are sufficient but in no case shall it b
e later than 5 years d. Microfinance-take into consideration the projected cash
flow of the borrower e. Escalation clause-raising of interest i. Only allowed wh
en the monetary board has increased the rate of interest provided that there is
also a stipulation that interest will be lowered if MB has lowered the rate of i
nterest ii. Both instances should be present before escalation clause is allowed
iii. Exception: if the creditor unilaterally decreased the interest even if it
was not stipulated, esacalation will be allowed
f. Unconscionable and exorbitant interests-SC: 5.5% per month or 66% per annum.
Will be considered as void. Hence, the court may reduce the interest rate VIII.
Prepayment of Loans-prior to the maturity date, borrower may pay subject to such
reasonable terms agreed upon with the bank IX. Development Assistance Incentive
-BSP shall give incentives to banks who extend loans to education, cooperatives,
hospitals, low-cost housing, and LGUs X. Renewal of Exntension of Loans-maybe r
egulated by the MB and prescribe conditions and limitations XI. Banks cannot ext
end peso loans to non-residents XII. Provisions for losses and write-off a. Bad
debts-debts due to on which interest is past due and unpaid b. MB shall fix the
amount of reserves for bad debts Truth In Lending (RA 3765-Disclosure of Finance
Charges) I. Policy-protect the citizens from a lack of awareness of the true co
st of credit by assuring a full disclosure of such cost II. Disclosure shall inc
lude: a. The cash price of the property or service to be acquired b. Amounts for
downpayment c. Charges which are paid in connection with the transaction d. Amo
unt to be financed e. Finance charge III. Definitions: a. Crediti. any loan, mor
tgage, deed of trust, advance or discount ii. Any conditional sales contract iii
. Rental-purchase contract b. Finance Charge-interest and fees incident to the e
xtension of credit c. Creditor: any person engaged in the business of extending
credit who requires as an incident to the extension of credit, the payment of a
finance charge IV. Penalty-either civil or criminal (1k-5k fine or imprisonment
for 6-12 months, or both) V. Government is exempted from the punishment or penal
ty
Foreclosure of Real Estate 10 | P a g e
I. The mortgagor or debtor has the right within one year after the sale of the r
eal estate, to redeem the property by paying the amount due in the mortgage w/ i
nterest and all the cost and expenses II. However, the purchaser at the auction
shall have the right to take possession immediately after the date of the confir
mation of the auction sale III. Any petition in court to restrain the auction sh
all only be given due course upo n the filing of a bond in an amount fixed by th
e court IV. Juridical Persons shall have the right to redeem the property until,
but not aft er, the registration of the certificate of foreclosure with the Reg
ister of Deeds wi thin 3 months V. Equity of Redemption v. Right of Redemption a
. Right of Redemption exists only in extrajudicial foreclosure sale i. In a judi
cial foreclosure sale where the mortgagee is the PNB or a banking institution, r
ight of redemption exits ii. Equity of Redemption-right of the mortgagor to exti
nguish the mortgage and retain ownership by paying the secured debt within a per
iod not less than 90 days nor more than 120 days after the judgment becomes fina
l. (Rule 68, Rules of Court) iii. Right of Redemption may be extended Major Inve
stments I. The MB shall establish a criteria for reviewing major acquisitions by
a bank II. Ceiling on Investments a. Acquire real estate necessary for its own
use in the conduct of its business i. Bank premises-land, buildings, constructio
n, leasehold rights, improvement, fixtures, furniture ii. Real property, quipmet
, chattel purchased by the bank in its name b. Total investment in real estate i
ncluding improvements shall not exceed 50% of combined capital accounts c. Inves
tments by a bank in a real estate corporation shall be considered as part of the
total investment in real estate by the bank III. Acquisition of Real Estate by
way of satisfaction of claims a. Notwithstanding the limitations given above, a
bank may acquire real estate under the ff circumstances: i. Shall be mortgaged t
o it in good faith by way of security of debts ii. Conveyed to it in satisfactio
n of debts previously contracted iii. Purchased at sales under judgments, decree
s, mortgages, or
trust deeds held by it b. Real Property acquired under this provision shall be d
isposed by the bank within a period of 5 years c. However, it may continue to ho
ld such property beyond the period given if the limitations given in the previou
s provision are not yet reached. Other Banking Services I. Receive in custody fu
nds, documents and other objects II. Act as financial agent and buy and sell for
their customers III. Make collection and payments for the account of others IV.
Act as managing agent, adviser, consultant or administrator of an investment ma
nagement with the approval of the MB V. Rent out safety deposit boxes VI. Safety
Deposit Box-Special Kind of Deposit because it cannot be characterized as a con
tract of lease since the guard key of the box remains with the bank. VII. If a b
ox is rented by two persons, the agreement between them shall govern VIII. The S
C said that the rent of a safety deposit box is that of a bailor an b ailee Elec
tronic Transactions I. BSP shall have full authority to regulate the use of elec
tronic devices used in connection with the operations of a bank including the de
livery of services and products to customers II. Outsourcing of IT systems-can b
e done with prior approval of the MB except: a. Strategic planning for the use o
f IT b. Determination of system functionalities c. Change management inclusive o
f quality assurance and testing d. Service level and contract management e. Secu
rity policy and administration Outsourcing of other functions I. With approval o
f the MB, banks may outsource the ff: a. Data imaging b. Clearing and processing
of checks not in the Philippine Clearing House system c. Printing of bank depos
it statement, bank loan statements, bank forms and promotional materials d. Cred
it card services e. Credit investigation f. Janitorial services
g. Procurement services h. Legal services Questions: Whether or not an alien-own
ed bank can acquire ownership of a residential lot by virtue of a deed of transf
er as settlement of a debt No. for the purpose of the constitution is to place a
nd keep in the hands of the people the ownership of private lands in order not t
o endanger the integrity of the nat ion Chapter 5 Sec. 54. Prohibition to Act as
Insurer. -A bank shall not directly engage in ins urance business as the insure
r. *Includes: a) making or proposing to make, as insurer, any insurance contract
b) making or proposing to make, as surety, any contract of suretyship as a voca
t ion and not as merely incidental to any other legitimate business or activity
of the sur ety c) doing any kind of business, including a reinsurance business,
specifically recog nized as constituting the doing of an insurance business with
in the meaning of the Ins urance Code d) doing or proposing to do any business i
n substance equivalent to any of the fore going in a manner designed to evade th
e provisions of the Insurance Code Sec. 55. Prohibited Transactions. 55.1. No di
rector, officer, employee, or agent of any bank shall 11 | P a g e
(a) Make false entries in any bank report or statement or participate in any fra
udulent transaction, thereby affecting the financial interest of, or causing da
mage to, the bank or a ny person; (b) Without order of a court of competent juri
sdiction, disclose to any unauthor ized person any information relative to the f
unds or properties in the custody of the bank belon ging to private individuals,
corporations, or any other entity: Provided, That with resp ect to bank deposit
s, the provisions of existing laws shall prevail; (c) Accept gifts, fees, or com
missions or any other form of remuneration in conn ection with the approval of a
loan or other credit accommodation from said bank; (d) Overvalue or aid in over
valuing any security for the purpose of influencing in a ny way the actions of t
he bank or any bank; or (e) Outsource inherent banking functions. . refers to an
y contract between the bank and a service provider for the latter to supply, or
any act whereby the latter supplies, the manpower to service the depo sit transa
ctions of the former . intended to ensure secrecy of bank deposits 55.2. No borr
ower of a bank shall ( a) Fraudulently overvalue property offered as security fo
r a loan or other credi t accommodation from the bank; (b) Furnish false or make
misrepresentation or suppression of material facts for the purpose of obtaining
, renewing, or increasing a loan or other credit accommodation or exten ding the
period thereof; (c) Attempt to defraud the said bank in the event of a court ac
tion to recover a loan or other credit accommodation; or (d) Offer any director,
officer, employee or agent of a bank any gift, fee, comm ission, or any other f
orm of compensation in order to influence such persons into approving a loan or
other credit accommodation application. 55.3. No examiner, officer or employee o
f the Bangko Sentral or of any department, bur eau, office, branch or agency of
the Government that is assigned to supervise, examine, assis t or render technic
al assistance to any bank shall commit any of the acts enumerated in this Sectio
n or aid in the commission of the same. The making of false reports or misrepres
entation or suppression of material fact s by personnel of the Bangko Sental ng
Pilipinas shall be subject to the administrative and cri minal sanctions provide
d under the New Central Bank Act. 55.4. Consistent with the provisions of Republ
ic Act No. 1405, otherwise known a
s the Banks Secrecy Law, no bank shall employ casual or non regular personnel or
too lengthy probati onary personnel in the conduct of its business involving ba
nk deposits. Sec. 56. Conducting Business in an Unsafe or Unsound Manner -In det
ermining whet her a particular act or omission, which is not otherwise prohibite
d by any law, rule o r regulation affecting banks, quasi-banks or trust entities
, may be deemed as conducting busi ness in an unsafe or unsound manner for purpo
ses of this Section, the Monetary Board shall consider any of the following circ
umstances: 56.1. The act or omission has resulted or may result in material loss
or damage, or ab normal risk or danger to the safety, stability, liquidity or s
olvency of the institutio n; . 56.2. The act or omission has resulted or may res
ult in material loss or damage or abn ormal risk to the institution's depositors
, creditors, investors, stockholders or to t he Bangko Sentral or to the public
in general; 56.3. The act or omission has caused any undue injury, or has given
any unwarranted benefits, advantage or preference to the bank or any party in th
e discharge by t he director or officer of his duties and responsibilities throu
gh manifest partiali ty, evident bad faith or gross inexcusable negligence; or 5
6.4.The act or omission involves entering into any contract or transaction mani
festly and grossly disadvantageous to the bank, quasi-bank or trust entity, whet
her or not the director or officer profited or will profit thereby. Whenever a b
ank, quasi-bank or trust entity persists in conducting its business in an unsafe
or unsound manner, the Monetary Board may, without prejudice to the administrat
ive sanctions provided in Section 37 of the New Central Bank Act, take action un
der Section 30 of the same Act and/or immediately exclude the erring bank from c
learing, the provisions of law to the contrary notwithstanding. Sec. 57. Prohibi
tion on Dividend Declaration. e dividends, if at the time of declaration: No ban
k or quasi-bank shall declar
57.1. Its clearing account with the Bangko Sentral is overdrawn; or 57.2. It is
deficient in the required liquidity floor for government deposits for five (5) o
r more consecutive days, or . 57.3. It does not comply with the liquidity standa
rds/ratios prescribed by the Bangko Sentral
for purposes of determining funds available for dividend declaration; or 57.4. I
t has committed a major violation as may be determined by the Bangko Sent ral. S
ec. 64. Unauthorized Advertisement or Business Representation. No person, assoc
iation, or corporation unless duly authorized to engage in the business of a ban
k, quasi-ba nk, trust entity, or savings and loan association as defined in this
Act, or other banking laws, s hall advertise or hold itself out as being engage
d in the business of such bank, quasi-bank, trust entity, or association, or use
in connection with its business title, the word or words bank , banking, banker
, quasi-bank, quasi-banking, quasi-banker, savings and loan association, corpora
tion, trust company or words of similar import or transact in any manner the bus
iness of any such bank, corporation or association. Sec. 67. Conservatorship. Th
e grounds and procedures for placing a bank under conservatorship, as well as, t
he powers and duties of the conservator appointed for the bank shall be governed
by the provisions of Section 29 and the last two paragraphs of Section 30 of th
e New Central Bank Act: Provided, That this Section shall also apply to conser v
atorship proceedings of quasi-banks. *Grounds for appointment of conservator Whe
never, on the basis of a report submitted by the appropriate supervising or e xa
mining department, the Monetary Board finds that a bank or quasi-bank is in a st
ate of: 12 | P a g e
tru
1. continuing inability, or 2. unwillingness to maintain a condition of liquidit
y deemed adequate to protect th e interests of depositors and creditors, the Mon
etary Board may appoint a conservator with such powers as the Monetary Bo ard sh
all deem necessary to: 1. take charge of the assets, liabilities, and the manage
ment thereof, 2. reorganize the management, 3. collect all monies and debts due
said institutions, and 4. exercise all powers necessary to restore its viability
. The conservator shall report and be responsible to the Monetary Board and shal
l have the power to overrule or revoke the actions of the previous management an
d board of directors of the bank or quasi-bank. *Liquidity any price discount th
e ability of an asset to be converted into cash quickly and without
*Solvency the condition that exists when liabilities amount to less than total a
ssets, thus providing the ability to pay debts *Qualifications of conservator:
1. competent 2. knowledgeable in bank operations and management *Period of conse
rvatorship shall not exceed 1 year *Termination of conservatorship: 1. The Monet
ary Board shall terminate the conservatorship when it is satisfied that the inst
itution can continue to operate on its own and the conservatorship is no lon ger
necessary. 2. It should likewise be terminated should the Monetary Board, on th
e basis of the report of the conservator or of its own findings, determine that
the continuance in bus iness of the institution would involve probable loss to i
ts depositors or creditors, in w hich case the provisions on receivership and li
quidation shall apply. *Powers of conservator cannot impair the obligations of c
ontracts the law merely gives him the power to revoke contracts that are, under
existing law, deemed to be defective. Sec. 68. Voluntary Liquidation. In case of
voluntary liquidation of any bank org
anized under the laws of the Philippines, or of any branch or office in the Phil
ippines of a foreign bank, written notice of such liquidation shall be sent to t
he Monetary Board before such liqui dation shall be sent to the Monetary Board b
efore such liquidation is undertaken, and the Moneta ry Board shall have the rig
ht to intervene and take such steps as may be necessary to protect t he interest
s of creditors. . may be undertaken by the bank itself through its board of dire
ctors, by a truste e appointed by the bank, or by a receiver appointed by the ba
nk . no voluntary dissolution shall be undertaken by a bank without prior approv
al of the Monetary Board, provided further, that it shall be accompanied by a li
quidation plan and written notice *Grounds for receivership and liquidation: The
bank or quasi-bank: 1. is unable to pay its liabilities as they become due in t
he ordinary course of bu siness 2. has insufficient realizable assets, as determ
ined by the Bangko Sentral, to meet its liabilities 3. cannot continue in busine
ss without involving probable losses to its depositors or creditors 4. has willf
ully violated a cease-and-desist order that has become final, involving acts or
transactions which amount to fraud or a dissipation of the assets of the institu
tion *Powers of a receiver: a. to bring and defend, in such capacity, actions i
n his own name b. to take and keep possession of the property in controversy c.
to receive rents d. to collect debts due to himself as receiver or to the fund,
property, estate, pe rson, or corporation of which he is the receiver e. to comp
ound for and compromise the same f. to make transfers g. to pay outstanding debt
s h.
to divide the money and other property that shall remain among the persons legal
ly entitled to receive the same i. generally to do such acts respecting the pro
perty as the court may authorize *Prohibited acts: Any director or officer of a
bank declared insolvent or placed under receivershi p by the Monetary Board shal
l not commit any of the ff: a. refusing to turn over the bank s records and asse
ts to the designated receiver b. tampering with bank records c. appropriating fo
r himself or another party, or destroying or causing misappropri ation and destr
uction of the bank s assets d. receiving or permitting or causing to be received
in said bank any deposit, coll ection of loans, and/or receivables e. paying ou
t or permitting or causing to be paid out any funds of said bank f. transferring
or permitting or causing to be transferred any securities or proper ty of said
bank * Close now hear later scheme the law does not contemplate prior notice and
hearing before a bank may be directed to stop operations and placed under recei
vership. This is to prevent unwarranted dissipation of the bank s assets and is
a valid exercise of police pow er to protect the creditors, depositors, stockhol
ders, and the general public. A hearing may b e subsequent to the closure. *Effe
cts of receivership and liquidation: 1. retention of juridical personality 2. no
t liable to pay interest 3. assets are deemed under custodia legis 4. stay of ex
ecution of judgment 5. restriction of bank s capacity to act 6. exclusive jurisd
iction of liquidation court 13 | P a g e
Sec. 70. Penalty for Transactions After a Bank Becomes Insolvent. Any director o
r officer of any bank declared insolvent or placed under receivership by the Mo
netary Board w ho refuses to turn over the bank s records and assets to the desi
gnated receivers, or who tamper s with banks records, or who appropriates for hi
mself for another party or destroys or causes the misappropriation and destructi
on of the bank s assets, or who receives or permits or causes to be received in
said bank any deposit, collection of loans and/or receivables, or who pays out o
r permits or causes to be transferred any securities or property of said bank sh
al l be subject to the penal provisions of the New Central Bank Act. **Problems*
* The conservator of B bank revoked a contract previously entered into by the ba
nk on the ground that the lands subject of said contract presently commanded a m
uch hi gher price than when it was sold. Is the revocation valid? . No. Power of
conservator cannot impair the obligations of contracts. A contract of sale ente
red into by a bank cannot be revoked if at the time of the transaction, the pric
e agreed upon was reasonable. A buyer offered to buy the property of a bank whic
h the latter accepted. However , the bank became insolvent before the buyer lear
ned of the acceptance. Was there a pe rfected contract? . None. The accepted off
er became ineffective when the bank became insolvent befor e the bank s acceptan
ce of said offer came to the offeror s knowledge. C deposited money with O bank.
Before said deposits could be withdrawn, the BSP passed a resolution suspending
the bank s operations. The SC, howver, annulled sai d resolution, for which rea
son O bank is ready to accept its liability for the pay ment to C of the balance
of the principal amount deposited with it. Is O bank liable for interest thereo
n during the period it was closed? . No. What enables a bank to pay stipulated i
nterest on money deposited with it is that thru the other aspects of its operati
on, it is able to generate funds to cover the paymen t of such interest. If it i
s closed, it cannot generate such funds, hence it cannot pay the interest .
Chapter 6: Foreign Banks and Trust Operations I. Foreign Banks entry to Phils. t
hru establishments of branches governed by For eign Bank Liberazation Act. Offsh
ore Banking governed by Offshore Banking System Decree -conduct of banking trans
actions in foreign currency involving receipt of funds from external sources and
its utilization. Offshore banking unit branch, subsidiary, affiliate of a forei
gn banking corpora tion authorized to transact offshore banking business in Phil
. Notes: Corporation Code Sec. 133. Doing business without a license foreign cor
poration transacting busin ess in Phil. may maintain or intervene in any action,
suit or proceeding in any court or adm. Agency n Phil but cannot sue before Phi
l. courts though on any valid cause. If without license ,no access to our courts
and cannot transact business in Phil. -By securing a license, a foreign entity
would be giving assurance that it wll a bide by the decisions of our courts, eve
n if adverse to it. -Primary purpose of Statute: to compel foreign corp. if it d
esires to do busines s here, to submit itself to the jurisdiction of courts of t
he Phils. Consistent with Corporation Code .. Sec. 128. Resident agent; service
of process: -SEC shall require foreign bank to file with SEC a written power of
atty. designating a resident of the Phil. whom summons must be served, before it
issues a license for it to transact business in Phil. -Foreign bank shall execu
te and file with SEC an agreement. -If summons be made with SEC, latter shall tr
ansmit it by mail to the head offic e of such bank, within 10 days. -In case of
change of address of resident agent, shall notify SEC in writing. Acquisition of
Voting Stock in a Domestic Bank: 1. Wthin 7 yrs from effectivitiy of GBL, MB ma
y authorize foreign bank to acquire u p to 100% of voting stock of ONLY one bank
organized under laws of RP. 2. Within same period, MB may authorize those forei
gn bank which prior to effectivi ty of GBL availed itself of 60% of voting stock
of a bank under FBLA and Thrift Banks Act, to further acquire voting shares to
extent necessary for it to own up to 100%. 3. MB shall adopt measures to the con
trol of 70% of resources and assets of entire banking system is held by banks wh
ich are majority owned by Filipinos. 4.
Any right or incentive granted to foreign bank shall be equally enjoyed by banks
organized under laws of RP. NOTES: -all branches of foreign bank shall be treat
ed as one unit for purpose of GBL; a nd all reference to Phil. branches of forei
gn banks shall be held to refer to such unit. -To protect interests of depositor
s and creditors of Phil. branches of FB, their head office shall fully guarantee
prompt payment of all liabilities of its Phil. branch. -Residents and citizens
of the Phil. who are creditors shall have preferential r ights to assets of such
branch. Summons and Legal Process: If served on agent or head of foreign bank,
-our courts acquires jurisdiction over such bank. -binds the bank which it repre
sents. If authority of agent or head revoked; or he became mentally incompetent,
-bank shall designate a new one. -File with SEC a duly authenticated nomination
of such agent. In absence of agent or head; or no person authorized , -summons
and legal process and notices be made upon Bangko Sentral Deputy Governor In-Cha
rge of the supervising and examining departments. The latter upon receipt, shall
transmit by mail to president or secretary of bank at its he ad or principal of
fice a duly certified copy. -Sending of copy is necessary part of services and s
hall complete service. -Registry receipt is prima facie evidence of transmission
. 14 | P a g e
-All costs incurred in transmission shall be paid in advance by the party whose
instance the service is made. Revocation of license of Foreign Bank: -By Monetay
Board. -If insolvent, in imminent danger, or its continuance will involve proba
ble loss to those it transacts business with. -After revocation, it cannot trans
act business unless license is renewed or reissued. -After revocation. BSP shall
take action to protect creditors and public. -New Central Bank Act provides the
sanction and penalties. II. Liberalized Entry of Foreign Banks: Purpose: 1. to
create more competitive environment. 2. to encourage greater foreign participati
on Policies: 1. develop self-reliant economy controlled by Filipinos. 2. promote
a competitive and stable banking system 3. provide a wider variety of financial
services 4. enhance competitiveness in international market to promote industri
alization. Modes of Entry: a. acquiring up b. investing up r Phil. laws. c. Esta
blishing FB may avail to 60% of voting stocks of an existing bank to 60% of voti
ng stocks of new banking subsidiary incorporated unde
branches with full banking authority. only 1 mode
-Only those included in top 150 FB in the world or top 5 banks in their country
of origin allowed to mode (b) and (c). -To establish a branch or subsidiary, it
must be widely-owned and publicly liste d in its country of origin, unless owned
by govt. of its country. -FB shall be allowed entry under 3rd mode within 5 yrs
. From effectivity of RA 7721. 6 FB may be allowed by MB. -Additional 4 may be a
llowed on recommendation by MB and approval of President. -FB may open 3 branche
s in location of their choice, 3 branches in locations designated by MB to insur
e balanced economic development in all regions.
Guidance for Approval: MB shall 1. ensure geographic representation. 2. consider
strategic trade and investment relationship between Phil. and country o f FB. 3
. study capacity, global reputation and stability in competitive environment of
ap plicant. 4. ensure reciprocity rights are enjoyed by Phil banks in applicant
s country. 5. consider willingness to fully share their technology. Adoption of
measures: MB adopt those which 1. ensures that 70% of resources and assets is he
ld by domestic bank majority owned by Filipinos 2. prevents dominant market posi
tion by one bank 3. secures the listing in SEC of shares of stocks Capital Requi
rements: 1. Locally Incorporated Subsidiaries -minimum capital equal to that pre
scribed by MB for domestic banks of same category. 2. Foreign Bank Branches (ent
ry under the 3rd mode) -not less than US dollar equal to P210,000,000 and shall
be entitled to 3 branch es o capital shall include those permanently assigned pl
us net due to head office outside the Philippines, 15% of which shall be inwardl
y remitted and converted into Philippine currency, provided that amounts investe
d in productive or export activities shall not be subject to conversion. Establi
shment of Additional Branches 1. FB can open three additional branches by inward
ly remitting and converting into Philippine currency as permanently assigned cap
ital, P35 Million per additional branch. Head Office Guarantee-shall guarantee p
rompt payment of all liabilities of its P hilippine branches Board of Directors-
aliens may become members of the Board of a bank to the exten t of the foreign p
articipation in the equity of said bank. Equal treatment-foreign banks shall als
o be subject to limitations imposed upon a Philippine bank such as the SBL, capi
tal to risk asset ratio, development loans incentives etc. Trust Operations I. A
uthority to engage
only a stock corporation or a person duly authorized by the MB shall act as a tr
ustee -the cardinal principle is fidelity -Trust business-refers to any activity
resulting from a trustor-trustee relation ship involving the appointment of a t
rustee for the administration of funds and/or properties of the trustor for the
benefit of the latter. II. Conduct of Trust business -Administer with diligence
that a prudent man would exercise in the conduct of a n enterprise -No transacti
on within the same trust entity will be allowed except when the transaction is a
uthorized by the trustor and the relationship of the trustee and the other party
involved is fully disclosed III. Registration of Articles of incorporation and
by-laws -The SEC shall not register the same or any amendment thereto, unless ac
companied by a certificate of authority issued by the BSP IV. Minimum Capital-tr
ust entity shall comply with the minimum paid-in capital r equirements which wil
l be determined by the MB. V. Powers of a trust entity: -Powers incident to a co
rporation -Act as trustee on any mortgage or bond issued by any body politic and
to accept and execute ant trust consistent with law -Act as an administrator of
a minor or incompetent upon the order of a court -Act as the executor of any wi
ll if named as the executor -Act as the administrator of any deceased person -Ac
cept and execute and trust for the holding and administration of any estate incl
uding the rents and profits thereof -Establish and manage common trust funds 15
| P a g e
VI. Transactions requiring prior authority -Lend, sell, transfer or assign money
or property to those related to the truste e -Purchase or acquire property or d
ebt instruments to those related to the truste e -Invest in equities I which the
trustee owns 50% of the capital -Sell transfer assign or lend from one trust ac
count to another VII. Deposit for faithful performance of trust duties Before tr
ansacting any business, there shall be a deposit made with the BSP cash or secur
ities approved by the MB an amount not less that P500,000 -This deposit can be i
ncreased by the MB whenever it is necessary -The paid-in capital and surplus of
the entity should be at least equal to the amount required to be deposited -A tr
ust entity has the right to collect the interest earned on such deposit -All cla
ims arising out of the trust business shall have priority over all other claims
as regards the deposits. Bond of certain person required for the faithful perfor
mance of duties I. Requirements a. Those appointed by the court shall file a bon
d in such sum as the court may require b. Upon application in the court, the sub
ject matter of the trust or any part thereof be deposited with a trust entity c.
Upon presentation of a proof that the subject matter has been deposited with a
trust entity, the court may order reduction in the amount of the bond given d. T
he reduced bond shall be adequate to secure the proper administration of the pro
perty II. Exemption from Bond Requirement a. Trust entities required by the cour
t to be an administrator, etc are not required to give a bond Operations of Trus
t Entity I. Separation of Trust Business from General Business -Shall be kept ph
ysically separated and distinct from the accounts of the genera l business of th
e trust entity II. Investment limitations of a trust entity -Limited to those lo
ans or investments prescribed by law, MB or any court of competent jurisdiction,
unless directed by the instrument creating the trust III. Real Estate acquired
by a trust entity -Unless otherwise directed by the trustor or the nature of the
trust, real estat e
acquired by the trust entity shall be acquired, hold, or conveyed under the ff c
ircumstances: o Mortgaged to it in good faith by way of security for debts o Con
veyed to it in satisfaction of debts previously contracted o Purchased at sales
under judgments, decrees, mortgages, or trust deeds -These properties shall be c
onveyed within 5 years -However, it may continue to hold it beyond the period wh
en: o It shall not exceed 50% of the combined capital accounts of the entity o T
he investment of a bank in another corporation engaged in real estate shall be c
onsidered as part of the total investment IV. Investment in non-trust funds b. S
hall be governed by the GBL an other applicable laws V. Sanctions and Penalties-
those who violate the pertinent provisions of the GBL shall be subject to sancti
ons and penalties VI. Exemption of Trust Assets from claims Those assets held by
a trust entity shall not be subject to any claims other tho se of the parties i
nterested in the trusts VI. Establishment of Branches Shall be in the place of b
usiness stated in the articles of incorporation Additional branches can be estab
lished with the approval of the MB The trust entity and its branches should be c
onsidered as one unit VII. Advertisement of Services In a dignified manner Ready
and willing to give full disclosure of services being offered Conduct its deali
ngs with transparency VIII. Money of Government Banks may not receive or hold as
trustee any money from the government o Except: government-owned banks with res
pect to the ff: . Funds of LGUs for long term investments in securities and othe
r evidences guaranteed by the national government. . Funds of the government whi
ch are authorized by special laws to be placed in trust Chapter 7 The Bangko Sen
tral ng Pilipinas I. Creation, Responsibilities and corporate Powers of the Bank
o Sentral A.
Declared Policy of the state The State shall maintain a central monetary authori
ty that shall function and operate as an independent and accountable body corpor
ate in the discharge of its mandated responsibilities concerning money, banking
and credit. In line with this policy, and considering its unique functions and r
esponsibilities, the central monetary authority established under the NCBA, whil
e being a government owned corporation, shall enjoy fiscal and administrative au
tonomy. (Section 1, NCBA) B. Creation of the bangko Sentral ng Pilipinas Section
2 & 4 of NCBA: SECTION 2 Creation of the Bangko Sentral. There is hereby establ
ished an independent central monetary authority, which shall be a body corporate
known as the Bangko SEntral ng Pilipinas. 16 | P a g e
The capital of the Bangko Sentral shall be Fifty Billion Pesos, to be fully subs
cribed by the Government of the Republic, Ten Billion of which shall be fully pa
id for by the government upon effectivity of this act In such manner and form as
the Government, through the Secretary of Finance and the Secretary of Budget an
d Management, may thereafter determine. SECTION 4 Place of Business. The Bangko
SEntral shall have its principal place of business in Metro Manila, but may main
tain branches, agencies and correspondents in such other places as the proper co
nduct of its business may require. Mandate by the Constitution: The Congress sha
ll establish an independent central monetary authority, the members of whose gov
erning board must be natural-born Filipino citizens, of known probity, integrity
, and patriotism, the majority of whom shall come from the private sector. They
shall also be subject to such other qualifications and disabilities as may be pr
escribed by law. The authority shall provide policy direction in the areas of mo
ney, banking, and credit. It shall have supervision over the operations of banks
and exercise such regulatory powers as may be provided by law over the operatio
ns of finance companies and other institutions performing similar functions. Unt
il the congress otherwise provides, the Central bank of the Philippines operatin
g under existing laws, shall function as the central monetary authority. C. Resp
onsibility and Primary Objectives of the bangko Sentral 1. Responsibility of BSP
-provide policy directions in the areas of money, banking, and credit. 2. It sh
all have supervision over operations of banks. 3. It shall also exercise regulat
ory powers over the operations of finance companies and non-bank financial insti
tutions performing quasi-banking functions, and institutions performing similar
functions. 4. Primary objective of BSP maintain price stability conducive to a b
alanced and sustainable growth in the economy. 5. It shall also promote and main
tain monetary stability and the convertibility of the peso. D. Corporate Powers
of the Bngko Sentral 1. Adopt, alter and use a corporate seal 2. Enter into cont
racts 3. Lease or own real and personal property, and to dispose of the same 4.
Sue and be sued 5.
Perform all things necessary to carry out the purposes of the NCBA 6. Acquire an
d hold assets and incur liabilities in connection with its as authorized by the
NCBA, or a s essential to the proper conduct of operations 7. Compromise, condon
e, or release any claim of or settled liability to Bangko Sentral , regardless o
f the amount involved, under such terms conditions as maybe prescribed by the mo
netary board. E. Power to Prosecute
operation such the and
BSP has no power to prosecute; it is a government corporation created principall
y to administer the monetary and banking System of the Philippines and not a pro
secution authority like the fiscal s office. But BSP and its officials have the
duty to cause the prosecution of those who violate the banking laws. BSP is an a
rtificial person limited to its statutory powers. The closest it can get to pros
ecuting is its power to sue and be sued (civil cases only). Prosecution of viola
tion of banking laws is not exclusive to BSP, anyone can denounce this to any pr
osecuting authority because said violations constitute a public offense and is a
matter of public interest. F. Estoppel 17 | P a g e
BSP is committed to maintain the stability of the country s foreign exchange res
erve position. Underlying this commitment however is the government s strict and
faithful adherence to basic principles of fairness and decency under the Bill o
f Rights. Hence BSP circulars/ memoranda must be implemented in a manner that wo
uld not only safeguard or harmonize them with government programs designed to up
lift or promote the country s level of production and employment, but at the sam
e time avoid irreparable or grave prejudice to participants of said program. Thu
s in case banks or banking institutions already faithfully complied with BASP s
directives, BSP is stopped from enforcing circulars that would deny banks or ban
king institutions of their rights. II. Authority of the Bangko Sentral A. Superv
isory Powers of the bangko Sentral Supervisory powers include the following: I.
Issuance of rules of conduct or the establishment of standards of operation for
uniform application to all institutions and functions covered. II. Conduct of ex
amination to determine compliance with the laws and regulations if the circumsta
nces so warrant and determined by the monetary board. III. Overseeing to ascerta
in that laws are complied with. IV. Regular investigation which shall not be oft
ener than once a year V. Inquiry into the solvency and liquidity of the institut
ion VI. Enforcing prompt corrective action. B. Phase out of Bangko Sentral Power
s Over Building Loan and Association Within 3 years form effectivity of GBl, the
BSP shall phase out and transfer its supervising and regulatory powers over bui
lding and loan associations to the Home Insurance and Guarantee Corporation. C.
Policy Direction; Ratios, Ceilings and Limitations BSP shall provide policy dire
ction in the areas of Money, Banking and Credit Monetary Board may prescribe rat
ios, ceilings, and limitations or other forms of regulation on the different typ
es of accounts and practices of banks and quasi-banks which shall conform to int
ernationally accepted standards, including those of the Bank of International Se
ttlements. Monetary Board may exempt particular categories of transactions from
such ratios, ceilings and limitations, but not limited to exceptional cases or t
o enable a bank or quasi-bank under rehabilitation or during a merger or consoli
dation to continue business with safety to its creditors, depositors and the gen
eral public. III. The Monetary Board The powers and functions of the bangko Sent
ral may be exercised by the BAngko SEntral Monetary Board. A. Composition
Composed of 7 members appointed by the president of the Philippines for a term o
f 6 years. The members are: Governor o Chairman of the monetary board o Appointm
ent subject to confirmation of the Commission on Appointments o If governor cann
ot attend a meeting of the board, he shall designate a Deputy Governor to act as
his alternate. In such event, the Monetary Board shall designate one of its mem
bers as acting chairman. A member of the cabinet to be designated by the Presiden
t. o Whenever such cabinet cannot attend a meeting of the board, he shall design
ate a Undersecretary in his department to attend as his alternate. 5 members sha
ll come from the private sector, all of whom shall serve fulltime. o Of the memb
ers first appointed, 3 shall have a term of 6 years and the other 2, 3 years. 18
| P a g e
B. Vacancies Cause of vacancy: death, resignation, removal A new member shall be
appointed who shall serve the unexpired term of the member concerned. C. Qualif
ications of the Members of the monetary Board i. Natural born citizen ii. 35 yrs
old; chairman 40yrs old iii. Good moral character iv. Known probity and patriot
ism v. Unquestionable integrity vi. Recognized competence in social and economic
disciplines. D. Disqualifications of Monetary board Members i. Disqualification
s imposed by RA 6713 (An act establishing a code of conduct and ethical standard
s for public officials and employees) ii. Being a director, officer, employee, c
onsultant, lawyer., agent, stockholder of any bank or any other institution unde
r the supervision of the bangko Sentral; he must resign first to assume office a
s member of the monetary board iii. Holding public office or public employment d
uring their tenure. iv. Person connected directly with any multilateral banking
or financial institution. v. Having a substantial interest in any private bank i
n the Philippines, within 0ne year prior to his appointment vi. No member of the
monetary board shall be employed in any such institution within two years after
expiration of his term except when he serves as an official representative of t
he Government to such Institution. (section 9 NCBA) E. Grounds for removal of Mo
netary Board members The president may remove any member of the monetary board f
or these reasons : i. Member is subsequently disqualified under section 9 of NCB
A ii. Physically or mentally incapacitatedtaht he cannot properly discharge his
duties and responsibilities as such incapacity a\has lasted for more than 6 mont
hs. iii.
Guilty of fraudulent or illegal acts or which are manifestly opposed to the aims
and interests of the bangko sentral. iv. Member no longer possesses the qualifi
cations. F. Meetings, Quorum, Decisions and Proceedings of the Monetary board i.
The Monetary Bard shall meet at least once a week. The board may be called to a
meeting by the governor of the bangko sentral or by 2 other members of the boar
d ii. Presence of 4 members constitutes a quorum. Provided that the governor is
always among those 4 iii. Decisions of MB shall require concurrence of 4 members
. i. Exceptions ( 5 votes are needed in these cases): o Sec 61 GBL -In allowing
banks to delay publication of its statements of financial condition in periods o
f national or local emergency, or imminent panic which directly monetary and ban
king stability, upon application of a bank. 19 | P a g e
o Section 28 NCBA. Examination and Fees. The supervising and examining departmen
t head, personally or by deputy, shall examine the books of every banking instit
ution once in every twelve (12) months, and at such other times as the Monetary
Board by an affirmative vote of five (5) members, may deem expedient and to make
a report on the same to the Monetary Board: Provided, That there shall be an in
terval of at least twelve (12) months between annual examinations. o Section 72
NCBA. -in the imminence of, or during an exchange crisis, or in time of national
emergency to give the Monetary Board and the Government time in which to take c
onstructive measures to forestall, combat, or overcome such a crisis or emergenc
y, the Monetary Board, with the concurrence of at least five (5) of its members
and with the approval of the President of the Philippines, may temporarily suspe
nd or restrict sales of exchange by the Bangko Sentral, and may subject all tran
sactions in gold and foreign exchange to license by the Bangko Sentral, and may
require that any foreign exchange thereafter obtained by any person residing or
entity operating in the Philippines be delivered to the Bangko Sentral or to any
bank or agent designated by the Bangko Sentral for the purpose, at the effectiv
e exchange rate or rates. o Section 84. Emergency Loans and Advances. In periods
of national and/or local emergency or of imminent financial panic which directl
y threaten monetary and banking stability, the Monetary Board may, by a vote of
at least five (5) of its members, authorize the Bangko Sentral to grant extraord
inary loans or advances to banking institutions secured by assets as defined her
eunder: Provided, That while such loans or advances are outstanding, the debtor
institution shall not, except upon prior authorization by the Monetary Board, ex
pand the total volume of its loans or investments. The Monetary Board may, at it
s discretion, likewise authorize the Bangko Sentral to grant emergency loans or
advances to banking institutions, even during normal periods, for the purpose of
assisting a bank in a precarious financial condition or under serious financial
pressures brought by unforeseen events, or events which, though foreseeable, co
uld not be prevented by the bank concerned: Provided, however, That the Monetary
Board has ascertained that the bank is not insolvent and has the assets defined
hereunder to secure the advances: Provided, further, That a concurrent vote of
at least five (5) members of the Monetary Board is obtained. The amount of any e
mergency loan or advance shall not exceed the sum of fifty percent (50%) of tota
l deposits and deposit substitutes of the banking institution and shall be disbu
rsed in two (2) or more tranches. The amount of the first tranche shall be limit
ed to twenty-five percent (25%) of the total deposit and deposit substitutes of
the institution and shall be secured by government securities to the extent of t
heir applicable loan values and other unencumbered first class collaterals which
the
Monetary Board may approve: Provided, That if as determined by the Monetary Boar
d, the circumstances surrounding the emergency warrant a loan or advance greater
than the amount provided hereinabove, the amount of the first tranche may excee
d twenty-five percent (25%) of the bank's total deposit and deposit substitutes
if the same is adequately secured by applicable loan values of government securi
ties and unencumbered first class collaterals approved by the Monetary Board, an
d the principal stockholders of the institution furnish an acceptable undertakin
g to indemnify and hold harmless from suit a conservator whose appointment the M
onetary Board may find necessary at any time. Prior to the release of the first
tranche, the banking institution shall submit to the Bangko Sentral a resolution
of its board of directors authorizing the Bangko Sentral to evaluate other asse
ts of the banking institution certified by its external auditor to be good and a
vailable for collateral purposes should the release of the subsequent tranche be
thereafter applied for. The Monetary Board may, by a vote of at least five (5)
of its members, authorize the release of a subsequent tranche on condition that
the principal stockholders of the institution: (a) furnish an acceptable underta
king to indemnify and hold harmless from suit a conservator whose appointment th
e Monetary Board may find necessary at any time; and (b) provide acceptable secu
rity which, in the judgment of the Monetary Board, would be adequate to suppleme
nt, where necessary, the assets tendered by the banking institution to collatera
lize the subsequent tranche. In connection with the exercise of these powers, th
e prohibitions in Section 128 of this Act shall not apply insofar as it refers t
o acceptance as collateral of shares and their acquisition as a result of forecl
osure proceedings, including the exercise of voting rights pertaining to said sh
ares: Provided, however, That should the Bangko Sentral acquire any of the share
s it has accepted as 20 | P a g e
collateral as a result of foreclosure proceedings, the Bangko Sentral shall disp
ose of said shares by public bidding within one (1) year from the date of consol
idation of title by the Bangko Sentral G. Deputy Governors may Attend Meetings o
f the Monetary Board He may attend with the right to be heard H. Salaries of the
Governor and Members of the Monetary Board Salaries shall be fixed by the presi
dent at an amount commensurate to the importance and responsibility attached to
the position. I. Personal or Pecuniary Interest Any member of the MB with person
al or pecuniary interest in any matter in the agenda of the monetary board shall
disclose his interest to the board and shall retire from the meeting when the m
atter is taken up. The decision taken on the matter shall be made public. The mi
nutes shall reflect the disclosure made and the retirement of the member concern
ed from the meeting. J. Scope of the Authority of the Monetary Board a. Issue ru
les and regulations it considers necessary for the effective discharge of the re
sponsibilities and exercise of the powers vested upon the Monetary Board and the
Bangko Sentral. b. Direct the management, operations, and administration of the
Bangko Sentral, reorganize its personnel and issue such rules and regulations a
s it may deem necessary or convenient for this purpose. c. Establish a Human Res
ource management system which shall govern the selection, hiring, or dismissal o
f all personnel. Such system shall aim to establish professionalism and excellen
ce in all levels of BSP in accordance with the sound principles of management. i
. A compensation structure, based on job evaluation studies and wage surveys and
subject to the Board's approval, shall be instituted as an integral component o
f the Bangko Sentral's human resource development program: Provided, That the Mo
netary Board shall make its own system conform as closely as possible with the p
rinciples provided for under Republic Act No. 6758: Provided, however, That comp
ensation and wage structure of employees whose positions fall under salary grade
19 and below shall be in accordance with the rates prescribed under Republic Ac
t No. 6758. ii. On the recommendation of the Governor, appoint, fix the remunera
tions and other emoluments, and remove personnel of the Bangko Sentral, subject
to pertinent civil service laws: Provided, That the Monetary Board shall have ex
clusive and final authority to promote, transfer, assign, or reassign personnel
of the Bangko Sentral and these personnel actions are deemed made in the interes
t of the service and not disciplinary: Provided, further, That the Monetary Boar
d may delegate such authority to the Governor under such guidelines as it may de
termine. d.
adopt an annual budget for and authorize such expenditures by the Bangko Sentral
as are in the interest of the effective administration and operations of the Ba
ngko Sentral in accordance with applicable laws and regulations; and e. indemnif
y its members and other officials of the Bangko Sentral, including personnel of
the departments performing supervision and examination functions against all cos
ts and expenses reasonably incurred by such persons in connection with any civil
or criminal action, suit or proceedings to which he may be, or is, made a party
by reason of the performance of his functions or duties, unless he is finally a
djudged in such action or proceeding to be liable for negligence or misconduct.
i. In the event of a settlement or compromise, indemnification shall be provided
only in connection with such matters covered by the settlement as to which the
Bangko Sentral is advised by external 21 | P a g e
counsel that the person to be indemnified did not commit any negligence or misco
nduct. ii. The costs and expenses incurred in defending the aforementioned actio
n, suit or proceeding may be paid by the Bangko Sentral in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of the member, officer, or employee to repay the amount advanced s
hould it ultimately be determined by the Monetary Board that he is not entitled
to be indemnified as provided in this subsection. G. Responsibilities of the Mem
bers of the Monetary Board, Officials, Examiners, and Employees of the Bangko Se
ntral a. Members of the Monetary Board, officials, examiners, and employees of t
he Bangko Sentral who willfully violate this Act or who are guilty of negligence
, abuses or acts of malfeasance or misfeasance or fail to exercise extraordinary
diligence in the performance of his duties shall be held liable for any loss or
injury suffered by the Bangko Sentral or other banking institutions as a result
of such violation, negligence, abuse, malfeasance, misfeasance or failure to ex
ercise extraordinary diligence. b. Similar responsibility shall apply to members
, officers, and employees of the Bangko Sentral for: i. the disclosure of any in
formation of a confidential nature, or any information on the discussions or res
olutions of the Monetary Board, or about the confidential operations of the Bang
ko Sentral, unless the disclosure is in connection with the performance of offic
ial functions with the Bangko Sentral, or is with prior authorization of the Mon
etary Board or the Governor; or ii. the use of such information for personal gai
n or to the detriment of the Government, the Bangko Sentral or third parties: Pr
ovided, however, That any data or information required to be submitted to the Pr
esident and/or the Congress, or to be published under the provisions of this Act
shall not be considered confidential. A. Powers and Duties of the Governor a. p
repare the agenda for the meetings of the monetary board and to submit for the c
onsideration of the monetary board the policies and measures which he believes t
o be necessary to carry out the purposes and provisions of this act b. execute a
nd administer the policies and measures approved by the Monetary Board; c. direc
t and supervise the operations and internal administration of the Bangko Sentral
. The Governor may delegate certain of his administrative responsibilities to ot
her officers or may assign specific tasks or responsibilities to any full-time m
ember of the Monetary Board without additional remuneration or allowance wheneve
r he may deem fit or subject to such rules and regulations as the Monetary Board
may
prescribe; d. appoint and fix the remunerations and other emoluments of personne
l below the rank of a department head in accordance with the position and compen
sation plans approved by the Monetary Board, as well as to impose disciplinary m
easures upon personnel of the Bangko Sentral, subject to the provisions of Secti
on 15(c) of this Act: Provided, That removal of personnel shall be with the appr
oval of the Monetary Board; e. render opinions, decisions, or rulings, which sha
ll be final and executory until reversed or modified by the Monetary Board, on m
atters regarding application or enforcement of laws pertaining to institutions s
upervised by the Bangko Sentral and laws pertaining to quasi-banks, as well as r
egulations, policies or instructions issued by the Monetary Board, and the imple
mentation thereof; and IV. The Governor and Deputy Governors of the Bangko Sentr
al Governor shall be chief executive officer of the Bangko Sentral ng Pilipinas.
22 | P a g e
f. exercise such other powers as may be vested in him by the Monetary Board. B.
Powers of the Governor as Representative of the Monetary Board and the Bangko Se
ntral The Governor of the Bangko Sentral shall be the principal representative o
f the Monetary Board and of the Bangko Sentral and, in such capacity and in acco
rdance with the instructions of the Monetary Board, with the following powers: a
. represent the Monetary Board and the Bangko Sentral in all dealings with other
offices, agencies and instrumentalities of the Government and all other persons
or entities, public or private, whether domestic, foreign or internation al b.
sign contracts entered into by the Bangko Sentral, notes and securities issued b
y the Bangko Sentral, all reports, balance sheets, profit and loss statements, c
orrespondence and other documents of the Bangko Sentral. The signature of the Go
vernor may be in facsimile whenever appropriate c. represent the Bangko Sentral,
either personally or through counsel, including private counsel, as may be auth
orized by the Monetary Board, in any legal proceedings, action or specialized le
gal studies d. delegate his power to represent the Bangko Sentral, as provided i
n subsections (a), (b) and (c) of this section, to other officers upon his own r
esponsibility: Provided, however, That in order to preserve the integrity and t
he prestige of his office, the Governor of the Bangko Sentral may choose not to
participate in preliminary discussions with any multilateral banking or financia
l institution on any negotiations for the Government within or outside the Phil
ippines. During the negotiations, he may instead be represented by a permanent n
egotiator. C. Emergencies a. In case of emergencies where time is sufficient to
call a meeting of the Monetary Board, the Governor of the Bangko Sentral, with t
he concurrence of two (2) other members of the Monetary Board, may decide any ma
tter or take any action within the authority of the Board. b. The Governor shall
submit a report to the President and Congress within seventy-two (72) hours aft
er the action has been taken. c. At the soonest possible time, the Governor shal
l call a meeting of the Monetary Board to submit his action for ratification. D.
Limitations on outside interests of the governor and the Full-time Members of t
h e Board The governor of the Bangko Sentral and the full-time members of the Bo
ard shall: a. limit their professional activities to those pertaining directly t
o their positions with the Bangko Sentral. b. not accept any other employment, w
hether public or private, remunerated or ad honorem, with the exception of posit
ions in eleemosynary, civic, cultural or religious organizations or whenever, by
designation of the President, the Governor or the full-time member is tasked to
represent the interest of the Government or other
government agencies in matters connected with or affecting the economy or the fi
nancial system of the country. E. Number and Functions of Deputy Governors a. Th
e Governor of the Bangko Sentral, with the approval of the Monetary Board, shall
appoint not more than three (3) Deputy Governors who shall perform duties as ma
y be assigned to them by the Governor and the Board. 23 | P a g e
V. b. In the absence of the Governor, a Deputy Governor designated by the Govern
or shall act as chief executive of the Bangko Sentral and shall exercise the pow
ers and perform the duties of the Governor. Whenever the Government is unable to
attend meetings of government boards or councils in which he is an ex officio m
ember pursuant to provisions of special laws, a Deputy Governor as may be design
ated by the Governor shall be vested with authority to participate and exercise
the right to vote in such meetings. Operations of the Bangko Sentral C. released
to interested persons or entities: provided finally, theth the case of data on
banks, the provisions of section 27 shall apply. Training of technical Personnel
The Bangko Sentral shall promote and sponsor the training of technical personnel
in the field of money and banking. Toward this end, the Bangko A. Research and
statistics of the bangko Sentral Sentral is hereby authorized to defray the cost
s of study, at home or abroad, of qualified employees of the Bangko Sentral, of
promising university The Bangko Sentral shall prepare data and conduct economic r
esearch for the guidance of the Monetary Board in the formulation and implementa
tion of its policies. Such data shall include, among others, forecasts of the gr
aduates or of any other qualified persons who shall be determined by proper comp
etitive examinations. The Monetary Board shall prescribe rules and regulations t
o govern the training program of the Bangko Sentral. balance of payments of the
Philippines, statistics on the monthly movement of the monetary aggregates and o
f prices and other statistical series and economic studies useful for the formul
ation and analysis of monetary, banking, credit and exchange policies. D. Scope
of the Supervision and Examination by the bangko Sentral a. The BSP shall have s
upervision over, and conduct periodic or special examination of, banking institu
tions and quasi-banks, including their B. Scope of authority of bangko Sentral t
o Obtain data and Information subsidiaries and affiliates. a. The Bangko Sentral
shall have the authority to request from government offices and instrumentaliti
es, or government-owned or i. Subsidiary more than 50% of the voting stock is ow
ned by a bank controlled corporations, any data which it may require for the pro
per discharge of its functions and responsibilities. ii. Affiliate 50% or less,
is owned by a bank or which is related or linked to such institution or intermed
iary through common stockholders or such other factors as may be determined by t
he MB. b. The Bangko Sentral through the Governor or in his absence, a duly auth
orized representative shall have the power to issue a subpoena for the productio
n of the books and records for the aforesaid purpose. b. The depart ment heads a
nd the examiners of the supervising and/or Those supply the bank with data reque
sted or required, shall be examining depart ments are hereby authorized to subje
ct to punishment for contempt in accordance with the provisions of the Rules of
Court. i. administer oaths to any director, officer, or employee of any institut
ion under their respective supervision or subject to their examination and to c.
Data on individual firms, other htan banks, gathered by the Department ii. co m
pel the presentation of all books, documents, papers or of Economic Research and
other departments or units of the Bangko records necess
ary in their judgment to ascertain the facts Sentral shall not be made available
to any person or entity outside of relative to the true condition of any instit
ution as well as the the Bangko Sentral whether public or private escept under o
rder of the books and records of persons and entities relative to or in court or
under such conditions as may be prescribed by the monetary connection w ith the
operations, activities or transactions of board: Provided however, that the col
lected data on firms may be the institution under examination, subject to the pr
ovision of existing laws protecting or safeguarding the secrecy or 24 | P a g e
confidentiality of bank deposits as well as investments of private persons, natu
ral or juridical, in debt instruments issued by the Government. E. Restraining O
rder or Injunction a. Court cannot order restraining order prohibiting the BSP f
rom examining any institution subject to the supervision and examination of the
BSP. i. Exception: there is convincing proof that the action of the BSP is plain
ly arbitrary and made in bad faith and the petitioner or plaintiff files with th
e clerk or judge of the court in which the action is pending a bond is executed
infavor of the BSP in the amount fixed by court. b. Provisions of the Rules of c
ourt regarding Preliminary injunction, in so far as they are applicable, and not
inconsistent shall govern the issuance and dissolution of the restraining order
or injunction. VI. Director, Officer or Stockholder and Related Interests A. Co
ntracting Loans a. Any director, officer or stockholder who, together with his r
elated interest, contracts a loan or any form of financial accommodation from: i
. his bank; or ii. from a bank 1. which is a subsidiary of a bank holding compan
y of which both his bank and the lending bank are subsidiaries or 2. in which a
controlling proportion of the shares is owned by the same interest that owns a c
ontrolling proportion of the shares of his bank, in excess of five percent (5%)
of the capital and surplus of the bank, or in the maximum amount permitted by la
w, whichever is lower, shall be required by the lending bank to waive the secrec
y of his deposits of whatever nature in all banks in the Philippines. b. Any inf
ormation obtained from an examination of his deposits shall be held strictly con
fidential and may be used by the examiners only in connection with their supervi
sory and examination responsibility or by the Bangko Sentral in an appropriate l
egal action it has initiated involving the deposit account. B. Prohibitions Agai
nst Personnel of the Bangko Sentral (same as disqualifications of MB Member) VII
. Examination of Banking Institutions A. Frequency of Examination The supervisin
g and examining department head, personally or by deputy,
shall examine the books of every banking institution once in every twelve (12) m
onths, and at such other times as the Monetary Board by an affirmative vote of f
ive (5) members, may deem expedient and to make a report on the same to the Mone
tary Board: Provided, That there shall be an interval of at least twelve (12) mo
nths between annual examinations. B. Affording Opportunity to Examine Bank conce
rned shall afford the head of the appropriate supervising and examining departme
nts full opportunity to examine Books Cash and available assets General conditio
n Anytime during the banking hours when requested by BSP The reports on the exam
inations will not be open to the public unless incidental to any proceedings aut
horized or is necessary for the prosecution of violations in connection with the
business of such institutions. C. Service Fees 25 | P a g e
Banks and quasi-banks subject to examination of the BSP shall pay the BSP within
30 days of each year, an annual fee. Amount of fee is prescribed by the MB. It
would be a percentage of its average total assets during the preceding year as s
hown by its end of month balance sheets, after deducting cash on hand and the am
ount due from banks, including the bangko sentral and the banks abroad. VIII. Ad
ministration A. Operating Departments of the Bangko Sentral The Monetary Board s
hall, in accordance with its authority under this Act, determine and provide for
such operating departments and other offices, including a public information of
fice, of the Bangko Sentral as it deems convenient for the proper and efficient
conduct of the operations and the accomplishment of the objectives of the Bangko
Sentral. The functions and duties of such operating departments and other offic
es shall be determined by the Monetary Board. B. Required Reports and Publicatio
ns of the Bangko Sentral a. The BSP shall publish a general balance sheet within
60 days after the end of each month except December, which shall be submitted 9
0 days after end of month. It shall contain the volume and compositions of its a
ssets and liabilities as of the last working day of the month. b. MB shall publi
sh the ff reports and submit them to the President and to congress. i. Analysis
of economic and financial developments, including the condition of net internati
onal reserves and monetary aggregate. (90 days after end of each quarter) ii. Pr
eceeding year s budget and profit and loss statement of the bankgo sentral showi
ng in reasonable detail the result of its operations. (within 90 days after end
of year) iii. Review of the state of the financial system ( 120 days after end o
f semester) iv. Abnormal movements in monetary aggregates and the general price
level. (as soon as practicable), and remedial measures in response to such abnor
mal movements (not later than 27 hours) C. Annual Report of the Bangko Sentral a
. Before the end of March of each year, the Bangko Sentral shall publish and sub
mit to the President and the Congress an annual report on the condition of the B
angko Sentral including a review of the policies and measures adopted by the Mon
etary Board during the past year and an analysis of the economic and financial c
ircumstances which gave rise to said policies and measures. b. The annual report
shall also include a statement of the financial condition of the Bangko Sentral
and a statistical appendix which shall
present, as a minimum, the following data: i. the monthly movement of monetary a
ggregates and their components; ii. the monthly movement of purchases and sales
of foreign exchange and of the international reserves of the Bangko Sentral; iii
. the balance of payments of the Philippines; iv. monthly indices of consumer pr
ices and of import and export prices; v. the monthly movement, in summary form,
of exports and imports, by volume and value; vi. the monthly movement of the acc
ounts of the Bangko Sentral and of other banks; vii. the principal data on gover
nment receipts and expenditures and on the status of the public debt, both domes
tic and foreign; and viii. the texts of the major legal and administrative measu
res adopted by the Government and the Monetary Board during the year which relat
e to the functions or operations of the Bangko Sentral or of the financial syste
m. c. The Bangko Sentral shall publish another version of the annual report in t
erms understandable to the layman. d. Failure to comply with the reportorial req
uirements pursuant to this article without justifiable reason as may be determin
ed by the Monetary Board shall cause the withholding of the salary of the person
nel concerned until the requirements are complied with. 26 | P a g e
D. Signatures on Statements Balance sheets and statements shall be signed by the
officers responsible for their preparation. IX. Profits, Losses, and Special ac
counts A. Fiscal Year a. Profits or losses arising from any revaluation of the B
angko Sentral's net assets or liabilities in gold or foreign currencies with res
pect to the Philippine peso shall not be included in the computation of the annu
al profits and losses of the Bangko Sentral. b. Any profits or losses arising in
this manner shall be offset by any amounts which, as a consequence of such reva
luations, are owed by the Philippines to any international or regional intergove
rnmental financial institution of which the Philippines is a member or are owed
by these institutions to the Philippines. c. Any remaining profit or loss shall
be carried in a special frozen account which shall be named "Revaluation of Inte
rnational Reserve" and the net balance of which shall appear either among the li
abilities or among the assets of the Bangko Sentral, depending on whether the re
valuations have produced net profits or net losses. The Revaluation of Internati
onal Reserve account shall be neither credited nor debited for any purposes othe
r than those specifically authorized in this sectio n. B. Computation of Profits
and Losses Within the first thirty (30) days following the end of each year, th
e Bangko Sen tral shall determine its net profits or losses. In the calculation
of net profits, th e Bangko Sentral shall make adequate allowance or establish a
dequate reserves for bad and doubtful accounts. C. Distribution of Net Profits W
ithin the first sixty (60) days following the end of each fiscal year, the Monet
ary Board shall determine and carry out the distribution of the net profits, in
accordance with the following rule: a. Fifty percent (50%) of the net profits sh
all be carried to surplus b. the remaining fifty percent (50%) shall revert back
to the National Treasury, except as otherwise provided in the transitory provis
ions of this Act. D. Revaluation of Profits and Losses a. Profits or losses aris
ing from any revaluation of the Bangko Sentral's net assets or liabilities in go
ld or foreign currencies with respect to the Philippine peso shall not be includ
ed in the computation of the annual profits and losses of the Bangko Sentral. b.
Any profits or losses arising in this manner shall be offset by any
amounts which, as a consequence of such revaluations, are owed by the Philippine
s to any international or regional intergovernmental financial institution of wh
ich the Philippines is a member or are owed by these institutions to the Philipp
ines. c. Any remaining profit or loss shall be carried in a special frozen accou
nt which shall be named "Revaluation of International Reserve" and the net balan
ce of which shall appear either among the liabilities or among the assets of the
Bangko Sentral, depending on whether the revaluations have produced net profits
or net losses. The Revaluation of International Reserve account shall be neithe
r credited nor debited for any purposes other than those specifically authorized
in this sectio n. E. Suspense Accounts Amounts outstanding as of the effective
date of this Act based on these accounts shall continue to be for the account of
the Central Bank and shall be governed b y the transitory provisions of this Ac
t. The Revaluation of International Reserve (RIR) account as of the effective da
te of this Act of the Central Bank shall continue to be for the account of the s
ame entity and shall be governed by the provisions of Section 44 of Republic Act
No. 265, as amended, until otherwise provided for in accordance with the transi
tory provisions of this Act. F. The Auditor The Chairman of the Commission on Au
dit shall act as the ex officio auditor of the Bangko Sentral and, as such, he i
s empowered and authorized to appoint a representative who shall be the auditor
of the Bangko Sentral and, in accordance with law, fix his salary, and to appoin
t and fix salaries and number of personne l to assist said representative in his
work. The salaries and other emoluments shall be paid by the Commission. The au
ditor of the Bangko Sentral and personnel under him may be removed only by the C
hairman of the Commission. The representative of the Chairman of the Commission
must be a certified public accountant with at least ten (10) years experience as
such. No relative of any 27 | P a g e
member of the Monetary Board or the Chairman of the Commission within the sixth
degree of consanguinity or affinity shall be appointed such representative . imp
lemented by the Bangko Sentral or any order, instruction, rule or regulation iss
ued by the Monetary Board, the person or persons responsible for such violation
shall unless otherwise provided in this Act be punished by a fine of not less th
an Fifty thousand pesos (P50,000) nor more than Two hundred thousand pesos (P200
,000) or by imprisonment of not less than X. Penalty for Violation two (2) years
nor more than ten (10) years, or both, at the discretion of the court. Unless o
therwise herein provided, the violation of any of the provisions of this Act sha
ll be subject to Sections 34, 35, 36 and 37 of the New Central Bank Act. If t he
offender is a director or officer of a bank, quasi-bank or trust entity, the Mo
n etary Board may also suspend or remove such director or officer. If the violat
ion is D . Administrative Sanctions on Banks and Quasi Banks committed by a corp
oration, such corporation may be dissolved by quo warranto proceedings institute
d by the Solicitor General. a. Administrative violation and penalties: Grounds f
or administrative sanctions imposable by the MB to any bank or quasi-bank: A. Pe
nalty for Refusal to make Reports i. Any willful violation of its charter or by-
laws Any officer, owner, agent, manager, director or officer-in-charge of any in
stitu tion subject to the supervision or examination by the Bangko Sentral withi
n the purvi ew of this Act who, being required in writing by the Monetary Board
or by the head of the ii. Willful delay in the submission of required reports an
d publications supervising and examining department willfully refuses to file th
e required repo rt or permit any lawful examination into the affairs of such ins
titution shall be puni shed by a iii. Refusal to permit examination into the aff
airs of the institution fine of not less than Fifty thousand pesos (P50,000) nor
more than One hundred thousand pesos (P100,000) or by imprisonment of not less
than one (1) year nor m ore than five (5) years, or both, in the discretion of t
he court. iv. Willful making of false or misleading statement to the board or th
e appropriate supervising and examining department examiners. v. Any willful fai
lure or refusal to comply with, or violation of any banking law or any rder, ins
truction or regualtin issued by the B. Penalty for Willful Making of a False or
Misleading Statement on a Material F act Monetary Board, or any order, instructi
on or ruling by the governor punished by a fine of not less than One hundred thou
sand pesos (P100,000) nor more than Two hundred thousand pesos (P200,000), or by
imprisonment of not more than (5) years, or both, at the discretion of the vi.
Conducting business in an unsafe or unsound manner as may be determined by the M
B. court. Imposable sanctions: i. Fines not exceeding 30,000 for each day of vio
lation. Mb would take into consideration the attendant circumstances,
C. Proceedings Upon and Penalty for Violation of NCBA and Other banking laws. Ru
les Regulations, Orders or Instructions such as the nature and gravity of the v
iolation or irregularity and the size of the bank. a. A bank, quasi-bank, person
, or any entity who willfully the NCBA or other banking laws implemented by BSP,
or any order, instruction, rule or ii. Suspension of rediscounting privileges o
r access to BSP credit facilities regulation issued by the monetary board, shall
be punished by a fine not less than 50, 000 and not more than 200,000 or impris
onment of not less than 2 years. but not more than 10 years. b. Whenever a bank
or quasi-bank, or whenever any person or entity willfully iii. suspension of len
ding or foreign exchange operations or authority to accept new deposits or make
new investments; iv. suspension of interbank clearing privileges; and/or v. revo
cation of quasi-banking license. violates this Act or other pertinent banking la
ws being enforced or 28 | P a g e
b. Whether or not there is an administrative proceeding, if the institution and/
or the directors and/or officers concerned continue with or otherwise persist in
the commission of the indicated practice or violation, the Monetary Board may i
ssue an order requiring the institution and/or the directors and/or officers con
cerned to cease and desist from the indicated practice or violation, and may fur
ther order that immediate action be taken to correct the conditions resulting fr
om such practice or violation. The cease and desist order shall be immediately e
ffective upon service on the respondents. c. The respondents shall be afforded a
n opportunity to defend their action in a hearing before the Monetary Board or a
ny committee chaired by any Monetary Board member created for the purpose, upon
request made by the respondents within five (5) days from their receipt of the o
rder. If no such hearing is requested within said period, the order shall be fin
al. If a hearing is conducted, all issues shall be determined on the basis of re
cords, after which the Monetary Board may either reconsider or make final its or
der. d. The Governor is hereby authorized, at his discretion, to impose upon ban
king institutions, for any failure to comply with the requirements of law, Monet
ary Board regulations and policies, and/or instructions issued by the Monetary B
oard or by the Governor, fines not in excess of Ten thousand pesos (P10,000) a d
ay for each violation, the imposition of which shall be final and executory unti
l reversed, modified or lifted by the Monetary Board on appeal. Chapter 8: Curre
ncy, Monetary Stabilization and Functions of the BSP I. The Unit of Monetary Val
ue A. The Peso (P) -unit of monetary value in the Philippines -divided into 100
equal parts: centavos (c) -legal tender; all monetary obligations shall be settl
ed in Philippine currency . parties may agree to settle such obligation in any o
ther currency at the time of the payment. B. Currency, defined -all Philippine n
otes and coins issued or circulating in accordance with the NCBA. C. Value of Cu
rrency -has value because people are willing to accept it in exchange of goods,
services or payment of debts. II. Issue of Means of Payment A. Exclusive Issue P
ower (i) Bangko Sentral-SOLE power to issue currency (ii) Monetary Board-may iss
ue regulations to prevent circulation of foreign currency, currency substitutes,
or to prevent the
reproduction of facsimiles of Bangko Sentral notes. (iii) Bangko Sentral-has aut
hority to investigate, arrest, search and seize for the purpose of maintaining t
he integrity of the currency. (iv) Violation: imprisonment of not less than five
years but not more than ten years. In case the RPC provides for a greater penal
ty, the latter shall prevail. *An Exception to Territoriality of Penal Laws (RPC
) Art. 2. Application of its provisions. Except as provided in the treaties and
la ws of preferential application, the provisions of this Code shall be enforced
not only within the Philippine Archipelago, including its atmosphere, its inter
ior waters and ma ritime zone, but also outside of its jurisdiction, against tho
se who: 1. Should commit an offense while on a Philippine ship or airship 2. Sho
uld forge or counterfeit any coin or currency note of the Philippine Islan ds or
obligations and securities issued by the Government of the Philippine Islands;c
h an robles virtual law library 3. Should be liable for acts connected with the
introduction into these islands of the obligations and securities mentioned in t
he presiding number; 4. While being public officers or employees, should commit
an offense in the exe rcise of their functions; or 5. Should commit any of the c
rimes against national security and the law of nati ons, defined in Title One of
Book Two of this Code. *Related Crimes under the RPC 1. Art. 163. Making and Im
porting and Uttering False Coins 2. Art. 164. Mutilation of Coins; Importation a
nd Utterance of Mutilated Coins 3. Art. 165. Selling of Flase or Mutilated Coin,
Without Connivance 4. Art. 166. Forging Treasury or Bank Notes on Other Documen
ts Payable to Bearer ; Importing, and Uttering Such False or Forged Notes and Do
cuments 5. Art. 167. Counterfeiting, Importing and Uttering Instruments Not Paya
ble to B earer 6. Art. 168. Illegal Possession and Use of False Treasury or Bank
Notes and Othe r Instruments of Credit 7. Art. 169. How forgery is committed. T
he forgery referred to in this section m ay be committed by any of the following
means: 1. By giving to a treasury or bank note or any instrument, payable to be
arer or order mentioned therein, the appearance of a true genuine document. 2. B
y erasing, substituting, counterfeiting or altering by any means the figures, le
tters, words or signs contained therein. B. Liability for Notes and Coins (i) No
tes and coins issued by the BSP shall be liabilities of the BSP. Such may be iss
ued only against, and in amounts not exceeding, the assets of the BSP. Such shal
l be a first and paramount lien on all assets of the BSP. (ii)
The Bangko Sentral s holdings of its own notes and coins shall not be considered
as part of its currency issue and, accordingly, shall not form part of the asse
ts or liabilities of the BSP. C. Legal Tender Power -all notes and coins issued
by the BSP= Legal Tender for all debts *coins: a. 25c and above denominations sh
all not exceed P50.00 b. 10c or less denominations shall not exceed P20.00 29 |
P a g e
-checks representing demand deposits do not have legal tender power: one (ii) Su
ch notes called in for replacement shall remain legal tender for cannot be compe
lled to accept the same. *a check cleared and credited to the account of the cre
ditor = delivery of cash to such creditor. *Related Civil Code Provisions Art. 1
249. The payment of debts in money shall be made in the currency stipulate d, an
d if it is not possible to deliver such currency, then in the currency which i s
legal tender in the Philippines. The delivery of promissory notes payable to or
der, or bills of exchange or other mercantile documents shall produce the effect
of payment only when they have bee n cashed, or when through the fault of the c
reditor they have been impaired. In the meantime, the action derived from the or
iginal obligation shall be held i n the abeyance. Art. 1250. In case an extraord
inary inflation or deflation of the currency stipu lated should supervene, the v
alue of the currency at the time of the establishment of the obligation shall be
the basis of payment, unless there is an agreement to the co ntrary. D. Charact
eristics of the Currency (i) Monetary Board, with approval of the President, sha
ll prescribe: 1. Denominations 2. Designs 3. Inscriptions 4. Other characteristi
cs of notes Provided that: the notes state that they are liabilities of the BSP
and are guaranteed by the Government; also shall bear the signatures of the Pres
ident of the Philippines and the Governor of the BSP. (ii) Monetary Board, with
approval of the President, shall prescribe: 1. Weight 2. Fineness 3. Designs 4.
Denominations 5. Other characteristics of the coins The MB shall consider the av
ailability and cost of materials E. Printing of Notes and Minting of Coins
(i) The MB shall prescribe the amount and conditions of notes and coins to be pr
inted and minted. It shall also have the authority to contract institutions, min
ts or firms for such operations. (ii) Expenses incurred for the operations shall
be for the account of the BSP. F. Interconvertibility of Currency -BSP shall ex
change, on demand and with no charge, Philippine currency of any denomination to
any other denomination of such currency. If BSP is temporarily unable to do so,
shall deliver the notes and coins of the denominations which most nearly approx
imate those requested. G. Replacement of Currency Unfit for Circulation -shall b
e withdrawn and demonitized by the BSP from circulation and replace them with ad
equate ones. .shall not replace: notes and coins, the identification of which is
impossible; filed, clipped, perforated coins; notes which have lost 2/5 of thei
r surface or all of the signatures therein. (mutilated conditions) H. Retirement
of Old Notes and Coins (i) The BSP may call in for replacement: notes, 5 years
old; coins, 10 years old one year since the date of the call. Lapse of one year,
may be exchanged at par and without charge during the following year or for a p
eriod determined by the MB. Lapse of such period, the notes and coins shall ceas
e to be a liability of the BSP and shall be demonitized. The called in notes and
coins shall likewise be demonitized. III. Domestic Monetary Stabilization A. Gu
iding Principle on Monetary Stabilization -the MB shall endeavour to control any
expansion or contraction in monetary aggregates which is prejudicial to the att
ainment or maintenance of price stability. B. Power to Define Terms -MB shall fo
rmulate definitions of monetary aggregates, credit and prices and shall make pub
lic such definitions and any changes thereof. C. Action When Abnormal Movements
Occur in the Monetary Aggregates, Credit, or Price Level (i) Whenever abnormal m
ovements in the monetary aggregates, in credit, or in prices endanger the stabil
ity of the Philippine economy or important sectors, the MB shall: a) Take approp
riate remedial measures b) Submit a report to the President and the Congress (al
so made public, a description and analysis: 1. Causes of the rise or fall of suc
h monetary aggregates; 2. Extent to which such changes have been reflected in
the level of domestic output, employment, wages and economic activity in general
, and the nature and significance of any such changes; 3. Measures taken and mea
sures proposed to be adopted. (ii) Whenever: a. The monetary aggregates, or the
level of credit, increases or decreases by more than 15%, b. The cost of living
index increases by more than 10%, or c. When in its judgment, the circumstances
warrant, (With respect to a-c) the MB shall submit reports and state whether suc
h changes represent a threat to the stability of the economy or of its important
sectors. (iii) The MB shall continue to make periodic reports until the disturb
ances have disappeared or have been controlled. IV. International Monetary Stabi
lization A. International Monetary Stabilization -preserved by the BSP -maintain
convertibility into other currencies primarily for foreign trade and invisibles
. B. International Reserves -Purpose: to maintain the international stability an
d convertibility of the Philippine Peso (adequate to meet foreseeable net demand
s on the BSP for foreign currencies.) -MB shall judge such adequacy based on: pr
ospective receipts and payments of ForEx by the Philippines. -MB shall pay speci
al attention to the volume and maturity of: 1. BSP s own liabilities in foreign
currencies 2. ForEx assets and liabilities of other banks operating in the Phili
ppines 30 | P a g e
3. ForEx assets and liabilities of all other persons and entities in the Philipp
ines C. Composition of the International Reserves (of the BSP): (i) May include,
but not limited to: a. Gold b. Assets in foreign currencies in the form of: 1.
Documents and instruments customarily employed for the international transfer of
funds 2. Demand and time deposits in central banks, treasuries and commercial b
anks abroad 3. Foreign government securities 4. Foreign notes and coins (ii) The
MB shall: a. Endeavour to hold the ForEx resources of the BSP b. Give particula
r consideration to the prospects of continued strength and convertibility of the
currencies c. Give particular consideration to the anticipated demands (iii) Th
e MB shall issue regulations determining the other qualifications which the ForE
x must meet in order to be included in the international reserves of the BSP. (i
v) BSP is free to convert any asset in its international reserves into other ass
ets as described in a. and b. D. Action when the international stability of the
peso is threatened: (i) Whenever: 1) The international reserve falls to a level
the MB considers inadequate to meet prospective net demands, or 2) The internati
onal reserves appear to be imminent in falling to such level, or 3) The internat
ional reserve is falling as a result of payments or remittances abroad which are
contrary to the national welfare The MB shall: a. Take appropriate remedial mea
sures b. Submit a report to the President and the Congress: 1. Nature and causes
of the existing or imminent decline 2. Measures already taken or to be taken by
the MB 3.
Measures proposed 4. Cooperation required from other government agencies for the
execution of policies of the MB (ii) If such actions fail, the MB shall propose
to the President, with notice to the Congress, additional action it deems neces
sary to restore international balance of payments in the Philippines (iii) The M
B shall submit periodic reports until the threat to international monetary stabi
lity has disappeared. E. Means of Action -MB shall rely on its moral influence a
nd the powers granted to it under the NCBA. V. Operations in Gold and Foreign Ex
change A. Purchases and Sales of Gold -by the BSP subject to the regulations of
MB -made in the national currency at the prevailing international market price a
s determined by the MB. B. Purchases and Sales of ForEx -by the BSP -with the fo
llowing entities or persons only: 1. Banking institutions within the Philippines
2. Government and its subdivisions and instrumentalities 3. Foreign governments
4. International Financial Institutions 5. Others authorized by the MB -the BSP
may buy or sell any quantity of ForEx upon demand or request by any banking ins
titution in the Philippines. Provided, that such are freely convertible into gol
d or US dollars. (not applicable to demands for foreign notes and coins) -exchan
ge transactions shall be based on the NCBA. C. Foreign Asset Position of the Ban
gko Sentral -BSP shall maintain NET POSITIVE FOREIGN ASSET POSITION (Gross ForEx
assets>Gross ForEx liabilities. -If ForEx liabilities (in Pesos) > twice the Fo
rEx assets (in Pesos), BSP shall report to the Congress the origin of the liabil
ities and the manner it shall be paid. (made within 60 days from the date of the
occurrence. D. Emergency Restrictions on Exchange Operations In order to: (i) A
chieve the primary objective of the BSP (ii) Protect international reserves in t
he imminence or during and exchange crisis (iii) Give time to the MB and the Gov
ernment to take measures to forestall or overcome such crisis 5 members of the M
B and the President of the Philippines may: 1. Temporarily suspend sales of exch
ange 2.
Subject all gold and ForEx transactions to license 3. Require that any ForEx obt
ained by any person or entity in the Philippines be delivered to the BSP at the
exchange rates. (Foreign currency deposits made under RA 6426, exempt from this
requirements) E. Acquisition of Inconvertible Currencies -shall be avoided -may
acquire more than the minimum balance necessary to cover current demands for suc
h currencies only when considered by the MB to be in the national interest. -MB
shall determine the procedure F. Exchange Rates -determined by the MB -MB shall
determine the rates for buying and selling spot exchange and may establish devia
tion limits from the exchange rates -MB shall determine the rates for other type
s of ForEx transactions. But the margins between the effective exchange rates an
d the rates established may not exceed the margins for spot exchange by more tha
n the additional costs involved in each type of transactions G. Operations with
Foreign Entities -MB may authorize the BSP to transact with foreign banks or ent
ities. The BSP may also act as agent for such. -MB may authorize the BSP to pled
ge any gold or other assets as securities against loans which it receives from f
oreign entities. VI. Regulation of Foreign Exchange Operations Of the Banks A. F
oreign Exchange Holdings of the Banks -MB may require the banks to sell to the B
SP or to other banks all or part of their surplus holdings of ForEx to maintain
international stability and 31 | P a g e
convertibility of the Peso. Such transfers shall be at the established rates and
may be required of certain currencies only. -MB may determine the net assets an
d liabilities of banks and consider the bank s networth, outstanding liabilities
, or other ratios it may deem appropriate. Such determination shall be applied i
n all banks uniformly. B. Requirement of Balanced Currency Position -MB may requ
ire banks to maintain a balanced position between their assets and liabilities.
They shall be granted reasonable time to adjust. -such powers shall be exercised
only under special circumstances which warrant the same C. Regulation of Non-sp
ot Exchange Transaction -MB may issue regulations on such transaction to restrai
n banks from speculating future fluctuations in ForEx D. Othe Exchange Profits a
nd Losses -banks bear the risks of 1. Non-compliance with the terms of the ForEx
documents and instruments they buy and sell. 2. Other commercial or other banki
ng risks 3. Exchange risks not assumed by the BSP regarding non-spot exchange tr
ansaction E. Information on Exchange Operations: a. Banks shall report to the BS
P the volume and composition of their purchases and sales of gold and ForEx each
day, and must furnish requested additional info. b. The MB may also require oth
er persons and entities to report to it all transactions as stated above. It sha
ll prescribe the form such declarations must be made. The BSP may inspect such d
eclarations for verification. VII. Loans To Banking And Other Financial Institut
ions A. Guiding Priciples -rediscounts, discounts, loans and advances which the
BSP is authorized to extend shall be used to influence the volume of credit cons
istent with the objective of price stability. B. Authorized Types of Credit Oper
ations -carried on by the BSP with banks a. Commercial Credits-BSP may rediscoun
t, discount, buy and sell bills, acceptances, promissory notes and other credit
instruments with maturities of not more than 180 days from the date of rediscoun
t, discount or acquisition and resulting from transactions related to: 1. The im
portation, exportation, purchase or sale of readily saleable goods and products,
or their transportation within the Philippines; or 2. The storing of non-perish
able goods and products, duly insured and deposited. b. Production Credits-*same
* with maturities of not more than 360 days *same* and resulting from transactio
ns related to the production or processing of agricultural, animal, mineral or i
ndustrial products. Must be secured by:
1. A pledge of the crops or products or 2. A lien or mortgage on real prop, 70%
of the appraised value of which equals or exceeds the amount of the loan granted
. c. Other credits-credit instruments not rediscountable under a and b may be re
discounted in accordance with BSP rules and regulations. -when necessary, BSP ma
y provide funds from non inflationary sources; MB shall prescribes for additiona
l safeguards for the same. d. Advances-BSP may grant advances against the follow
ing for fixed periods not exceeding 180 days except number 4 (360 days): 1. Gold
coins or bullions 2. Securities representing obligations of the BSP or of other
domestic institutions of recognized solvency 3. Commercial credits 4. Productio
n credits 5. Utilized portions of advances in current amount covered by regular
overdraft agreements related to commercial and production credits, and certified
as to the amount and liquidity by the institution soliciting the advance 6. Neg
otiable treasury bills, cert of indebtedness, notes and other negotiable obligat
ions of the Govt maturing within 3 yrs from the date of the advance 7. Negotiabl
e bonds issued by the Govt and its subdivisions and instrumentalities having mat
urities of not more tan 10 years from the date of the advance Notes: (i) The red
iscounts, discounts, loans and advances made in accordance with the above provis
ions may not be renewed or extended unless extraordinary circumstances ful ly ju
stify such renewal or extension. (ii) Advances made against the collateral in 6
and 7 may not exceed 80% of the curren t market value of the collateral C. Loans
for Liquidity Purposes -BSP may extend loans and advances to banks for a period
not exceeding 7 days without collateral to provide liquidity in times of need V
III. Emergency Loans and Advances A. Nature of Emergency Loans or Advances -inte
nded to assist a bank with serious liquidity problems arising from causes b eyon
d
the control of the management. -discretion of MB -only a temporary remedial meas
ure -must be on a fully secured basis B. When Granted a. Whole banking community
is threatened with the financial crisis -national/local emergency or imminent f
inancial panic -directly threatening the monetary and banking stability The MB (
vote of 5 members) authorize the BSP to grant the same. While such loans are out
standing, the debtor cannot expand the total volume of i ts loan or investments
without authorization from the MB b. Bank with uncertain financial condition but
is not insolvent -MB may authorize the BSP to extend such loans even during nor
mal times to assis t a bank in a precarious financial condition brought by unfor
eseen events or though foreseeable, cannot be prevented. -MB must first ascertai
n that the bank is not insolvent and has assets to secure the advances. -5 votes
of MB members must concur C. Limits -amount o loan must not exceed 50% of total
deposits or deposit substitutes of a bank -shall be disbursed in 2 or more tran
ches D. First Tranche 1. Limited to 25% of the total deposits or deposit substit
utes 32 | P a g e
-secured by govt securities and other unencumbered first class collaterals the M
B may approve 2. If MB determined that the emergency warrant a greater loan, it
may exceed 25% -must be secured by govt securities and other unencumbered first
class collatera ls the MB may approve. -principal stockholders must furnish an
acceptable undertaking to indemnify and hold harmless from suit a conservator ap
pointed by MB 3. Prior to the release of the first tranche, the bank must submit
to the BSP a resolution by its board authorizing the BSP to evaluate their asse
ts certified b y an external auditor to be good and available for collateral pur
poses. E. Second Tranche -vote of 5 MB members may authorize the release of a se
cond tranche on condition that the principal stockholders of the institution: 1.
Furnish the undertaking the same as in number 2 above 2. Provide acceptable sec
urity adequate (in the opinion of the MB) to supplement the assets tendered by t
he bank to collateralize the subsequent tranche. F. Shares as Collateral Section
128. Prohibitions. The Bangko Sentral shall not acquire shares of any ki nd or
accept them as collateral, and shall not participate in the ownership or managem
ent of any enterprise, either directly or indirectly. The Bangko Sentral shall n
ot engage in development banking or financing: Provide d, however, That outstand
ing loans obtained or extended for development financing shall not be affected b
y the prohibition of this section. -This provision shall not be applicable to ac
ceptance as collateral of shares an d their acquisition as a result f foreclosur
e proceeding. If the BSP acquired any of suc h shares, such shall be disposed in
a public bidding within one year from the date of consolida tion of title by th
e BSP. G. Overdraft -shall be eliminated within 5 consecutive banking days IX. C
redit Terms A. Interest and Rediscount -The BSP shall collect interest and other
charges on loans it extends notwithstanding the closure, receivership or liquid
ation of the bank. This shall apply prospectively. -The MB shall fix the interes
t and rediscount rates (applied uniformly to banks of the same category) B. Endo
rsement -the documents rediscounted, discounted, bought or accepted as collatera
l by the BSP shall bear the endorsement of the bank.
C. Repayment of Credits a. The collaterals must be withdrawn by the bank on matu
rity date or upon the liquidation of the obligation which they represent b. Bank
s have the right to withdraw such collaterals upon payment of the debt and its i
nterest D. Other Requirements -MB may prescribe additional requirements to obtai
n loan from the BSP. E. Provisional Advances to the National Government -may be
made with or without interest by the BSP to finance expenditures authorized in i
ts annual operations. Provided that the advances be: 1. repaid within 3 months (
may be extended up to the same period if allowed by the MB) from the date such a
dvances are received by the National Govt 2. shall not, aggregately, exceed 20 %
of the average annual income of the borrower for the last 3 preceding years. F.
Prohibitions Section 128, supra X. Open Market Operations For The Account Of Th
e Bangko Sentral A. Principles of Open Market Operations -made exclusively in ac
cordance with the objective of achieving price stability B. Purchases and Sales
of Government Securities -BSP may purchase and sell in open market: a. evidences
of indebtedness issued directly by the Govt and its subdivisions b. evidences o
f indebtedness issued by govt instrumentalities and guaranteed by the Govt -such
evidences must be freely negotiable, regularly serviced, available to the publi
c in denominations of thousand pesos or more. C. Issue and Negotiation of the BS
P Obligations -BSP may issue, place, buy and sell freely negotiable evidences of
indebtedness of the Bangko Sentral -issuance of such certificates of indebtedne
ss shall be made only in cases of extraordinary movement in price levels. -MB ma
y determine the interest rates, maturities and other characteristics of said obl
igations of the BSP and may denominate the obligations in gold or foreign curren
cies. -acquired by the BSP through purchases or redemptions. -shall not be inclu
ded among its assets, and shall be immediately retired and cancelled. XI. Compos
ition of the BSP s Portfolio Review of the BSP s Portfolio -by the MB in relatio
n to its future credit policy -shall consider whether a sufficiently large part
of the portfolio consists of a ssets with early maturities, in order that a cont
raction in BSP credit may be effected
promptly whenever the national monetary policy so requires XII. Bank Reserves A.
Reserve Requirements -banks are required to maintain reserves against their dep
osit liabilities -MB may also require all banks and/or quasi-banks to maintain r
eserves against funds held in trust and liabilities for deposit substitutes -pro
portional to the volume of its deposit liabilities and shall ordinarily take the
form of a deposit in the BSP -Reserves against deposit substitutes shall be det
ermined in the same manner as provided for reserve requirements against regular
bank deposits -MB may exempt from the reserve requirements those with remaining
maturities of 2 yrs or more and interbank borrowings -Maintenance of bank reserv
es is for the purpose of controlling the volume of money -BSP shall not pay inte
rest unless required by the MB B. Definition of Deposit Substitutes Section 95.
Definition of Deposit Substitutes. The term "deposit substitutes" is defined as
an alternative form of obtaining funds from the public, other than deposits, thr
ough the issuance, endorsement, or acceptance of debt instruments for the borrow
er's own account, for the purpose of relending or purchasing of receivables and
other obligations. These instruments may include, but need not be limited to, ba
nkers acceptances, promissory notes, participations, certificat es of assignment
and similar instruments with recourse, and repurchase agreements. The Monetary
Board shall determine what specific instruments shall be considered as deposit s
ubstitutes for the purposes of Section 94 of this Act: Provided, however, That d
eposit substitutes of commercial, industrial and other 33 | P a g e
non-financial companies for the limited purpose of financing their own needs or
XIII. Selective Regulation of Bank Operations the needs of their agents or deale
rs shall not be covered by the provisions of C. Section 94 of this Act. Required
Reserves Against Peso Deposit [just for now] -fixed by MB Section 104. Guiding
Principle. The Monetary Board shall use the po wers granted to it under D. -may
alter the minimum reserve ratios Required Reserves Against Foreign Currency Depo
sits this Act to ensure that the supply, availability and cost of money are in a
ccord with the needs of the Philippine economy and that bank credit is not grant
ed for speculative purpo ses prejudicial -fixed by MB to the national interests.
Regulations on bank operations shall be applied to all banks of the E. Reserves
against Unused Balances of Overdraft Lines -MB may establish minimum reserve re
quirements same category uniformly and without discrimination. Section 105. Marg
in Requirements Against Letters of Credit. The Monetary Board m ay at any F. Inc
rease in Reserve Requirements time prescribe minimum cash margins for the openin
g of letters of credit, and may relate the size -increase must be gradual -shall
not exceed four percentage points in any thirty-day period of the required marg
in to the nature of the transaction to be financed. Section 106. Required Securi
ty Against Bank Loans. In order to promote liquidity and -banks shall be notifie
d in advance as to when it will take effect solvency of t he banking system, the
Monetary Board may issue such regulations as it may deem G. Computation on Rese
rves -calculated daily on the basis of the amount of the institution's reserves
and t he necessary with respect to the maximum permissible maturities of the loa
ns and in vestments which the banks may make, and the kind and amount of securit
y to be required aga inst the amount of its liability accounts against which res
erves are required to be vario us types of credit operations of the banks. maint
ained -holidays or non-banking days: the reserve position of the day immediately
Section 107. Portfolio Ceilings. Whenever the Monetary Board considers it advis
a ble to prevent or check an expansion of bank credit, the Board may place an up
per limit on the amount preceding the same shall apply of loans and investments
which the banks may hold , or may place a limit on the rate of increase H. -prin
cipal office + branches + agencies =SINGLE UNIT Reserve Deficiencies of such ass
ets within specified periods of time. The Monetary Board may apply su ch limits
to the loans and investments of each bank or to specific categories thereof. -if
reserve position is below the minimum required: shall pay the Bangko Sentral In
no case shall the Monetary Board establish limits which are below the value of
the loans or one-tenth of one percent (1/10 of 1%) per day on the amount of the
deficiency or
the prevailing ninety-one-day treasury bill rate plus three percentage points, i
nvestments of the banks on the date on which they are notified of such restrict
ions. The restrictions shall be applied to all banks uniformly and without discr
imination. whichever is higher. Section 108. Minimum Capital Ratios. The Monetar
y Board may prescribe minimum ratios -excess may offset deficiencies (of the sam
e week) -MB may deny such privilege in case of abuse which the capital and surpl
us of the banks must bear to the volume of their asse ts, or to specific categor
ies thereof, and may alter said ratios whenever it deems necessary. -if a bank c
hronically has a reserve deficiency, MB may limit or prohibit the making of new
loans or investments and may require the net profits be assigned to surplus ARTI
CLE IX COORDINATION OF CREDIT POLICIES BY GOVERNMENT INSTITUTIONS -MB may modify
or set aside the reserve deficiency penalties provided in this section, for par
t or the entire period of a strike or lockout affecting a bank o r a quasi-bank
or of a national emergency affecting operations of banks or quasiSection 109. Co
ordination of Credit Policies. Government-owned corporations whic h perform bank
ing or credit functions shall coordinate their general credit policies with thos
e of the banks. The MB may also modify or set aside reserved deficiency penaltie
s for Mon etary Board. I. rehabilitation program of a bank. Interbank Settlement
Toward this end, the Monetary Board may, whenever it deems it expedient, make s
u ggestions or recommendations to such corporations for the more effective coord
ination of t heir policies -BSP shall establish facilities for interbank clearin
g under prescribed rules an d with those of the Bangko Sentral. regulations of t
he MB. BSP may charge fees. -Deposit reserves-basis for check clearing and settl
ement of interbank balances CHAPTER V -any bank which incurs on overdrawing in i
ts deposit account with the Bangko FUN CTIONS AS BANKER AND FINANCIAL ADVISOR Se
ntral shall fully cover said overdraft, including interest thereon at a rate equ
ivalent to one-tenth of one percent (1/10 of 1%) per day or the prevailing OF TH
E GOVERNMENT ninety-one-day treasury bill rate plus three percentage points, whi
chever is higher, not later than the next clearing day. -settlement of clearing
balances shall not be effected for any account which ARTICLE I -FUNCTIONS AS BAN
KER OF THE GOVERNMENT continues to be overdrawn for five (5) consecutive banking
days until such time Section 110. Designation of Bangko Sentral as Banker of th
e Government. The Bang ko as the overdrawing is fully covered or otherwise conve
rted into an emergency loan or advance. Sentral shall act as a banker of the Gov
ernment, its political subdivisions and instrumentalities. Section 111. Represen
tation with the International Monetary Fund. The Bangko Sen tral shall -the appr
opriate clearing office shall be officially notified of banks with over drawn re
present the Government in all dealings, negotiations and transactions wi
th the International J. balances. Exemption from attachment Monetary Fund and sh
all carry such accounts as may result from Philippine member ship in, or operati
ons with, said Fund. -deposits maintained by banks with the BSP as part of their
reserve requirements Section 112. Representation with Other Financial Instituti
ons. The Bangko Sentr al may be shall be exempted to satisfy a claim of any part
y except the Government, its subdivisions and instrumentalities. authorized by t
he Government to represent it in dealings, negotiations or transa ctions with th
e International Bank for Reconstruction and Development and with other foreign o
r international 34 | P a g e
financial institutions or agencies. The President may, however, designate any of
his other financial advisors to jointly represent the Government in such dealin
gs, negotia tions or transactions. Section 113. Official Deposits. The Bangko Se
ntral shall be the official deposit ory of the Government, its political subdivi
sions and instrumentalities as well as of gover nment-owned or controlled corpor
ations and, as a general policy, their cash balances should be deposited with th
e Bangko Sentral, with only minimum working balances to be held by governmentown
ed banks and such other banks incorporated in the Philippines as the Monetary Bo
ard may designate, subject to such rules and regulations as the Board may prescr
ibe: Pro vided, That such banks may hold deposits of the political subdivisions
and instrumentalities of the Government beyond their minimum working balances wh
enever such subdivisions or instrumentalities have outstanding loans with said b
anks. The Bangko Sentral may pay interest on deposits of the Government or of it
s poli tical subdivisions and instrumentalities, as well as on deposits of banks
with the Ban gko Sentral. Section 114. Fiscal Operations. The Bangko Sentral sh
all open a general cash acc ount for the Treasurer of the Philippines, in which
the liquid funds of the Government sh all be deposited. Transfers of funds from
this account to other accounts shall be made only upon o rder of the Treasurer o
f the Philippines. Section 115. Other Banks as Agents of the Bangko Sentral. In
the performance of its functions as fiscal agent, the Bangko Sentral may engage
the services of other g overnmentowned and controlled banks and of other domesti
c banks for operations in localit ies at home or abroad in which the Bangko Sent
ral does not have offices or agencies adequately equipped to perform said operat
ions: Provided, however, That for fiscal operations in foreig n countries, the B
angko Sentral may engage the services of foreign banking and financial institut
ions. Section 116. Remuneration for Services. The Bangko Sentral may charge equi
table rates, commissions or fees for services which it renders to the Government
, its politic al subdivisions and instrumentalities. ARTICLE II THE MARKETING AN
D STABILIZATION OF SECURITIES FOR THE ACCOUNT OF THE GOVERNMENT A. THE ISSUE AND
PLACING OF GOVERNMENT SECURITIES Section 117. Issue of Government Obligations.
The issue of securities representi ng obligations of the Government, its politic
al subdivisions or instrumentalities,
may be made through the Bangko Sentral, which may act as agent of, and for the a
ccount of, t he Government or its respective subdivisions or instrumentality, as
the case may be: Provided, however, That the Bangko Sentral shall not guarantee
the placement of said securities, and sha ll not subscribe to their issue excep
t to replace its maturing holdings of securities with the sa me type as the matu
ring securities. Section 118. Methods of Placing Government Securities. The Bang
ko Sentral may pl ace the securities to which the preceding section refers throu
gh direct sale to financia l institutions and the public. The Bangko Sentral sha
ll not be a member of any stock exchange or syndicate, but may intervene therein
for the sole purpose of regulating their operations in the pla cing of governme
nt securities. The Government, or its political subdivisions or instrumentalitie
s, shall reimbu rse the Bangko Sentral for the expenses incurred in the placing
of the aforesaid securities. Section 119. Servicing and Redemption of the Public
Debt. The servicing and rede mption of the public debt shall also be effected t
hrough the Bangko Sentral. B. BANGKO SENTRAL SUPPORT OF THE GOVERNMENT SECURITIE
S MARKET Section 120. The Securities Stabilization Fund. There shall be establis
hed a "Se curities Stabilization Fund" which shall be administered by the Bangko
Sentral for the ac count of the Government. chan robles virtual law library The
operations of the Securities Stabilization Fund shall consist of purchases a nd
sales, in the open market, of bonds and other evidences of indebtedness issued
or fully guaran teed by the Government. The purpose of these operations shall be
to increase the liquidity a nd stabilize the value of said securities in order
thereby to promote investment in government ob ligations. The Monetary Board sha
ll use the resources of the Fund to prevent, or moderate, sharp fluctuations in
the quotations of said government obligations, but shall not end eavor to alter
movements of the market resulting from basic changes in the pattern or level of
interest rates. The Monetary Board shall issue such regulations as may be necess
ary to implement the provisions of this section. Section 121. Resources of the S
ecurities Stabilization Fund. Subject to Section 132 of this Act, the resources
of the Securities Stabilization Fund shall come from the bala nce of the fund as
held by the Central Bank under Republic Act No. 265 as of the effective date of
this Act. Section 122. Profits and Losses of the Fund. The Securities Stabiliza
tion Fund s hall retain net profits which it may make on its operations, regardl
ess of whether said prof
its arise from capital gains or from interest earnings. The Fund shall correspon
dingly bear any net losses which it may incur. ARTICLE III FUNCTIONS AS FINANCIA
L ADVISOR OF THE GOVERNMENT Section 123. Financial Advice on Official Credit Ope
rations. Before undertaking any credit operation abroad, the Government, through
the Secretary of Finance, shall reques t the opinion, in writing, of the Moneta
ry Board on the monetary implications of the contemplat ed action. Such opinions
must similarly be requested by all political subdivisions and instrumen talitie
s of the Government before any credit operation abroad is undertaken by them. Th
e opinion of the Monetary Board shall be based on the gold and foreign exchang e
resources and obligations of the nation and on the effects of the proposed oper
ation on th e balance of payments and on monetary aggregates. Whenever the Gover
nment, or any of its political subdivisions or instrumentaliti es, contemplates
borrowing within the Philippines, the prior opinion of the Monetary Board shall
likewise be requested in order that the Board may render an opinion on the proba
ble effects of the proposed operation on monetary aggregates, the price level, a
nd the balance of payments. Section 124. Representation on the National Economic
and Development Authority. In order to assure effective coordination between th
e economic, financial and fiscal poli cies of the Government and the monetary, c
redit and exchange policies of the Bangko Sentral, the Deputy Governor designate
d by the Governor of the Bangko Sentral shall be an ex officio member of the Nat
ional Economic and Development Authority Board. CHAPTER VI PRIVILEGES AND PROHIB
ITIONS ARTICLE I PRIVILEGES Section 125. Tax Exemptions. The Bangko Sentral shal
l be exempt for a period of five (5) years from the approval of this Act from al
l national, provincial, municipal and city taxes, fees, charges and assessments.
35 | P a g e
The exemption authorized in the preceding paragraph of this section shall apply
to all property of the Bangko Sentral, to the resources, receipts, expenditures,
profits and income of the Bangko Sentral, as well as to all contracts, deeds, d
ocuments and transactions related to the conduct of the business of the Bangko S
entral: Provided, however, That said exemptions shal l apply only to such taxes,
fees, charges and assessments for which the Bangko Sentral itself wo uld otherw
ise be liable, and shall not apply to taxes, fees, charges, or assessments payab
le b y persons or other entities doing business with the Bangko Sentral: Provide
d, further, That f oreign loans and other obligations of the Bangko Sentral shal
l be exempt, both as to principal an d interest, from any and all taxes if the p
ayment of such taxes has been assumed by the Bangko Se ntral. Section 126. Exemp
tion from Customs Duties. The provision of any general or spec ial law to the co
ntrary notwithstanding, the importation and exportation by the Bangko Sent ral o
f notes and coins, and of gold and other metals to be used for purposes authoriz
ed under this Act, and the importation of all equipment needed for bank note pro
duction, minting of coi ns, metal refining and other security printing operation
s shall be fully exempt from all customs du ties and consular fees and from all
other taxes, assessments and charges related to such importati on or exportation
. Section 127. Applicability of the Civil Service Law. Appointments in the Bangk
o Sentral, except as to those which are policy-determining, primarily confidenti
al or highl y technical in nature, shall be made only according to the Civil Ser
vice Law and regulations: P rovided, That no qualification requirements for posi
tions in the Bangko Sentral shall be imposed other than those set by the Monetar
y Board: Provided, further, That, the Monetary Board or Govern or, in accordance
with Sections 15(c) and 17(d) of this Act, respectively, may without need of ob
taining prior approval from any other government agency, appoint personnel in th
e Bangko Sentral whose services are deemed necessary in order not to unduly disr
upt the o perations of the Bangko Sentral. Officers and employees of the Bangko
Sentral, including all members of the Monet ary Board, shall not engage directly
or indirectly in partisan activities or take part in a ny election except to vo
te. ARTICLE II PROHIBITIONS Section 128. Prohibitions. The Bangko Sentral shall
not acquire shares of any ki
nd or accept them as collateral, and shall not participate in the ownership or m
anagement of any enterprise, either directly or indirectly. The Bangko Sentral s
hall not engage in development banking or financing: Provide d, however, That ou
tstanding loans obtained or extended for development financing shall not be affe
cted by the prohibition of this section. Chapter 9 (incomplete) F. Rights of the
Entruster 1. The Entruster shall be entitled: . To the proceed of the sale of G
DI . To the return of the GDI incase of non-sale\ . To the enforcemet of all rig
hts conferred on him in the trust receipt provided s uch are not contrary to law
2. The Entruster may cancel the trust and take possession of the GDI OR of the
proceeds at any time upon default or failure to comply with the terms and condit
ions or agreement, and . Give notice to the Entrustee on or after default of th
e intention to SELL and ma y, NOT LESS THAN 5 DAYS, after serving such, sell the
GDI at a PUBLIC or PRIVATE SALE. The Entruster may be the purchaser. . Notice o
f Sale shall be deemed sufficient if given in writing and either: served personal
ly to the entrustee, or sent by post-paid ordinary mail to the the entrustee's la
st known bsiness address . The proceeds of such sales shall be applied: To the pa
yment of the expenses thereof To the payment of the expenses of re-taking, keepin
g and storing the GDI To the satisfaction of the entrustee's indebtedness to the
entruster . The Entrustee shall receive any surpus but shall be liable for any d
eficiency to the Entruster G. Entruster NOT Responsible on Sale by EntrusteeThe
Entruster, holding security interest or has given the entrustee the liberty to s
ell or
dispose of the GDI, is NOT responsible as a principal or as a vendor in a sale o
r contract to sell made by the entrustee. H. Obligations of the Entrustee The e
ntrustee shall: 1. Hold the GDI and shall dispose of them in accordance with the
terms and conditio ns of the trust receipt; 2. Receive the proceeds in trust fo
r the entruster and turnover the same to the ent ruster to the extent of the amo
unt owing the entruster or as appears on the trust recei pt; 3. Insure the GOODS
for their total value against loss from fire, theft, pilferage, or other casual
ties; 4. Keep said goods adn proceeds thereof whether in money or whatever form,
separate and capable of identification as property of the entruster; and 5. Obs
erve all other terms and conditions of the trust receipt not contrary to the pro
visions of the law. I. Liability of Entrustee for Loss . Risk of Loss shall be b
orne by the Entrustee. . The loss of the GDI pending their disposition, whether
or not the entrustee is a t fault or negligent, it shall NOT extinguish his obli
gation to teh entruster for the value thereof J. Rights of the Purchaser for Val
ue and Good Faith . If the entrustee has the right to sell then a purchaser of v
alue and good faith acquires the GDI free from the entruster's security interest
K. Validity of Entruster's Security Interest as Against Creditors . The Entrust
er's security interest in GDI pursuant to the written terms of a trus t receipt
shall be VALID against all creditors of the Entrustee for the duratioon fo the t
rust receipt agreement L. Violation of the Trust Receipts Law (Malum Prohibitum
--intent is immaterial) . When the Entrustee fails to: . turn over the proceeds
of the sale of the goods 36 | P a g e
. return the goods covered by the trust receipt if the goods are not sold . Fail
ure to account, upon demand, for the goods received in trust is evidence of conv
ersion or misappropriation--constitutes estafa. . The Trust Receipts Law punishe
s dishonesty and abuse of confidence in handling o f money or goods to the preju
dice of pubic order. . Mere failure to deliver the proceeds or return the goods
constitutes a criminal offense the causes prejudice not only to the creditors, b
ut to the public interest. M. Penalty . Punished under Art. 315 par. 1 (b) of th
e RPC or RA 3815 . If vilaotion is committed by corporations, partnerships, asso
ciations, or other juridical entities, penalty shall be imposed on the directors
, officers, employees,or othe r officials or persons therein responsible for the
offense, w/o prejudice to the c ivil liabilities . Reason: Corporation and othe
r juridical entities CANNOT be put into jail. But they are LIABLE for the civil
liabilities because of the clause, "w/o prejudice to the civil liabilities." Cha
pter 10 (incomplete) G. Duty to Indicate Insurance on Deposits All banks shall i
ndicate the coverage of the PDIC in each passbook, CTD and/or c over of checkboo
k for demand deposit/NOW accounts stating, inter alia, the maximum am ount of in
surance. VI. Assessment A. Assessment Rate shall be determined by the Board of D
irectors -shall not exceed 1/5 of 1% per annum; semi-assessment rate for each in
sured ban k shall be in the amount of the product of the assessment rate multipli
ed by the assessment base but in no case shall it be less than P250. the assessm
ent base s hall be the amount of the liability of he bank for deposits without a
ny deduction for indebtedness of depositors.
B. Certified Statement of Assessment Base and Assessment Due (i) On or before Ju
ly 31 of each year, each insured bank shall file with the Corp. a certified stat
ement showing for the 6 months ending on the preceding June 30 the amount of the
assessment base and the amount of the semiannual assessment due to PDIC for the
period ending on the following Dec. 31, determined in accordance with (a) above
which shall contain or be verified by a written declaration that it is made und
er the penalties of perjury. (ii) On or before Jan. 31 of each year, each insure
d bank shall file with the PDIC a similar certified statement for the 6 months e
nding on the preceding Dec. 31 and shall pay the amount of the semiannual assess
ment for the period ending in the following June 30 which it is required to cert
ify. (iii) Each bank which becomes an insured bank shall not be required to file
any certified statement for the semiannual period in which it becomes as insure
d bank. (iv) On the expiration of such period, each such bank shall comply with
(b) above except that the semiannual assessment base for its first certified sta
tement sha ll be the assessment base of the bank as of the close of business on
the preceding June 30 or Dec. 31, whichever is applicable, determined in accorda
nce with (a) above. (v) If such bank has assumed the liabilities for deposits of
another bank or banks, it shall include such liabilities in its assessment base
. (vi) The assessment payments required from the insured banks shall be made in
such manner as the Board shall prescribe, provided it shall not be later than 60
days after filing the certified statement setting forth the amount of assessmen
t . (vii) Any insured bank which fails to pay any certified statement may be com
pelled to do so by mandatory injunction or other appropriate remedy . C. Refund
and Credit PDIC may: 1. refund to an IB any payment of assessment in excess of t
he amount due 2. credit such excess toward the payment of the assessment next be
coming due from such bank and upon succeeding assessments until the credit is ex
hausted. D. Termination -PDIC shall not terminate the insured status of any bank
which continues to oper ate or receive deposits -Should any IB fail or refuse t
o pay any assessment required, and should not cor rect such failure of refusal w
ithin 30 days after written notice has been given to an officer of the bank, and
stating that the bank has failed or refused to pay, PDIC may, a t its discretio
n, file a case for collection without prejudice to the imposition of ad ministra
tive
sanctions E. Trust Funds -means funds held by an insured bank in a fiduciary cap
acity and includes, witho ut being limited to, funds held as trustee, executor,
administrator, guardian, or a gent -shall be insured like other forms of deposit
s, in an amount not to exceed P10,0 00 for each trust estate, and when deposited
by the fiduciary bank in another IB, such funds shall be similarly insured to t
he FB according to the trust estates represented -the amount so held by other IB
s on deposit shall not for the purpose of any cer tified statement be considered
to be a deposit liability of the FB, but shall be consid ered to be a deposit l
iability of the IB F. Payment of Dividends and/or Interests -no insured bank sha
ll pay any dividend on its capital stock or interest on its capital notes or deb
entures or distribute any of its capital assets while it remains in default in t
he payment of any assessment due -if such default is due to a dispute between th
e insured bank and PDIC over the amount of such assessment, this rule shall not
apply if such bank shall deposit security satisfactory to PDIC for payment upon
final determination of the issue VII. Deposit Insurance Fund -the permanent insu
rance fund shall be P3 billion -the DIF shall be the capital account of PDIC and
shall principally consist of t he ff: a. the PIF b. assessment collections, sub
ject to the charges 37 | P a g e
c. reserves for insurance and financial assistance losses d. retained earnings -
PDIC may, within 2 years from the passage of the PDIC Law, and every 5 years the
reafter, conduct a study on the need to adjust the amount of the PIF, insuran ce
cover, assessment rate and assessment base, and thereafter make the necessary r
ecommendation to Congress All assessment collections and income from operations
after expenses and charges shall be added to the DIF. Such expenses and charges
are: a. the operating costs and expenses of the Corp. for the calendar year b. a
dditions to reserve to provide for insurance and financial assistance losses, ne
t of recoverable amounts from applicable assets and collaterals, during the cale
ndar year c. the net insurance and financial assistance losses sustained in said
calendar year -In a suit, PDIC is entitled to recover from any insured bank the
amount of any unpaid assessment lawfully payable by such insured bank, whether
or not such bank shall have filed any such certified statement and whether or no
t suit shall have been brought to compel the bank to file any such statement No
action or proceeding shall be brought for recovery of any assessment due of f or
the recovery of any amount paid in excess of the amount due, unless it has been
brought within 5 years after the right accrued for which the claim is made VIII
. Unsound Practice In case of commission of unsafe or unsound practices by an IB
or its officers, t he Board of Directors shall: -submit the report of the exami
nation to the MB to secure corrective action ther eon -if no such action is take
n within 45 days from submission of the report, the Bo D shall motu proprio inst
itute corrective action which it deems necessary (BoD may issue a cease-and-desi
st order, and require the bank or its directors or agents concerne d to correct
the practices or violations within 45 days) -if the practice or violation is lik
ely to cause insolvency or substantial dissi pation of assets or earnings of the
bank, or is likely to seriously weaken the condition o f the bank or otherwise
seriously prejudice the interests of its depositors and the Co rp., the period t
o take corrective action shall not be more than 15 days. The order may a
lso include the imposition of fines What may be violated: 1. any provision of th
e PDIC Law 2. any order, rule or instruction issued by PDIC 3. any written condi
tion imposed in connection with any transaction with or granted by PDIC IX. Repo
rts by Insured Banks -each IB shall make to PDIC reports of conditions in such f
orm and at such times as the BoD may require such reports to be published in suc
h manner not inconsistent with any applicable law as it may direct -PDIC shall h
ave access to reports of examination made by, and report of conditi ons made to
the BSP or its appropriate supervising dept., and the BSP shall also hav e acces
s to such reports made by and to PDIC -Each IB shall keep and maintain a true an
d accurate record or statement of its daily deposit transactions consistent with
the standards set by the BSP and PDIC X. Prohibitions on PDIC Personnel -being
an officer, director, consultant, employee or stockholder, directly or in direct
ly, of any bank or banking institution except as otherwise provided by law -rece
iving any gift or thing of value from any officer, director, or employee of any
bank -revealing in any manner, except as provided by law or under court order, i
nform ation relating to the condition or business of any bank . shall not apply
to the giving of information to the BoD, the President of the Corp., Congress, a
ny agency of govt . authorized by law, or to any person authorized by either of
them in writing to r eceive such information XI. Legal Assistance -PDIC shall un
derwrite or advance litigation costs and expenses, or provide lega l assistance
to its directors, officers, employees, or agents in connection with a ny civil,
criminal, administrative, or any other action to which such director etc. is mad
e a party by reason of or in connection with the exercise of authority or perfo
rmance of functions and duties . does not apply against actions initiated by PDI
C against such director etc. -Applies also to those who resigned, retired, or tr
ansferred to another agency,
in connection with acts done during their tenure or employment with PDIC XII. De
alings by PDIC Personnel with Banks A. Designation as Directors and Officers of
Banks Members of the BoD and personnel of PDIC may become directors and officers
of an y bank or banking institution and of any entity related to such instituti
on in con nection with financial assistance extended by PDIC to such institution
and when, in the opini on of the Board, it is appropriate to make such designat
ion to protect the interest of PDIC. B. Borrowing from Banks -shall be prohibite
d only with respect to the particular institution in which th ey are assigned, o
r are conducting an examination -personnel are likewise prohibited from borrowin
g from any bank or banking insti tution during the time that a transaction of su
ch institution with PDIC is being evalua ted, processed, or acted upon by such p
ersonnel XIII. Receivership A. Appointment -whenever it shall be appropriate for
the MB of the BSP to appoint a receiver of any banking institution pursuant to
existing laws, the MB shall give prior notice an d appoint PDIC as receiver - re
ceiver includes a receiver, commission, person, or other agency charged by law w
ith the duty to take charge of the assets and liabilities of a bank which has b
een forbidden fro doing business in the Phil, as well as the duty to gather, pre
serv e and administer such assets and liabilities for the benefit of the deposit
ors and cre ditors of dais bank, and to continue into liquidation whenever autho
rized under the law, a nd to dispose of the assets and to wind up the affairs of
such bank B. Powers 38 | P a g e
As receiver, it shall control, manage and administer the affairs of the closed b
ank. Effective immediately upon takeover as receiver of such bank: -the powers,
functions and duties, as well as all allowances, remunerations, and perquisites
of the directors, officers, and stockholders of such bank are suspen ded -the r
elevant provisions of the Articles of Incorporation and By-laws of the clo sed b
ank are likewise suspended -the assets shall be deemed in custodia legis in the
hands of the receiver -from the time the bank is placed under receivership, its
assets shall not be su bject to attachment, garnishment, execution, levy or any
other court processes In addition to the powers of a receiver pursuant to existi
ng laws, PDIC is empow ered to: 1. bring suit to enforce liabilities to or recov
eries of the closed bank 2. appoint and hire persons and entities of recognized
competence in banking or fin ance as its deputies and assistants, to perform suc
h powers and functions of PDIC as receiver and liquidator of the closed bank 3.
suspend or terminate the employment of officers and employees of the bank . paym
ent of separation pay or benefits shall be made only after the bank has been pla
ced under liquidation 4. pay accrued utilities, rentals and salaries of personne
l of the bank for a perio d not exceeding 3 months from available funds of the b
ank 5. collect loans and other claims of the bank, and for the purpose, modify,
comprom ise or restructure the terms and conditions of such loans or claims as m
a be deemed advantageous to the interest of the creditors and claimants of the b
ank 6. hire or retain private counsels as ma be necessary 7. borrow or obtain a
loan, or mortgage, pledge, or encumber any asset of the bank, when necessary to
preserve or prevent dissipation of the assets, or to redeem foreclosed assets of
the closed bank, or to minimize losses to the depositors an d creditors 8. if t
he stipulated interest on deposits is unusually high compared with the preva ili
ng applicable interest rate, PDIC as receiver may exercise such powers which may
include a reduction of the interest rate to a reasonable rate. Any modification
or reduction shall apply only to unpaid interest 9. exercise such other powers a
s are inherent and necessary for the effective disch arge of the duties of PDIC
as receiver C. Suits filed by PDIC (i) In all cases filed by PDIC as receiver fo
r the recovery of or involving any asse t of the closed bank, payment of all doc
ket and other court fees shall be deferred until the action is terminated with f
inality. (ii) Any such fees shall constitute as a first lien on any judgment in
favor of the closed bank or in case of unfavorable judgment, such fees shall be
paid as administrative expenses during the distribution of the assets of the clo
sed bank . D. Distribution of Assets 1. Before any distribution of assets of the
closed bank, PDIC shall charge against such assets: Reasonable receivership exp
enses (subject to approval of court) Reasonable liquidation expenses 2. After pa
yment of all liabilities and claims against closed bank, PDIC shall pay any surp
lus dividends at the legal rate of interest from the date of takeover to the dat
e of distribution, to creditors and claimants in accordance with legal priority
be fore distribution to the shareholders. XIV. Payment of Insured Deposits A. Ma
nner of Payment 1. Whenever an insured bank shall have been closed by the Moneta
ry Board, payment of the insured deposits on such closed banks shall be made by
the PDIC by: i. Cash ii. Transferred deposit 2. Transfer deposit deposit in an i
nsured bank made available to a depositor by PDIC as payment of insured deposit
of such depositor in a closed bank. Not to exceed two hundred fifty thousand (25
0,000) 3. A joint account shall be insured separately from any individually owne
d deposit account. 4. Maximum insured deposits of Joint accounts shall be divide
d into as many equal shares as there are co-owners, unless a different sharing i
s stipulated in the document of deposit. 5. If an account is held by a juridical
person jointly with an individual, it is presumed that the maximum insured depo
sit belongs to the juridical person. 6. The aggregate of the interests of each c
o-owner over several joint accounts shall likewise not exceed 250,000 7.
No owner/holder of any negotiable certificate of deposit shall be recognized as
a depositor entitled to the rights provided unless his name is registered in the
books of the issuing bank. B. Proof of Claims 1. PDIC may require proof of clai
ms to be filed before paying the insured deposits. 2. It may require final deter
mination by the courts if not satisfied to the viabili ty of the claim. C. Settl
ement Period and Penalties in Case of Failure to Settle 39 | P a g e
1. Failure to settle claim within six months from the date of filing claim due t
o grave abuse of discretion, gross negligence, bad faith, or malice shall subjec
t the directors, employees, or officers of PDIC Responsible for the delay to imp
risonment from six months to one year. 2. Period shall not apply if the validity
of the claim depends on resolution of issues of fact or law by another office.
3. Upon payment to such depositor, PDIC shall be subrogated to all of the rights
of the depositor to the extent of such payment. 4. Such subrogation shall inclu
de the right to receive the same dividends from the proceeds of the assets of th
e closed bank. But such depositor shall retain his claim for any uninsured porti
on of his deposit. D. Notice 1. PDIC shall commence the determination of insured
deposits due to depositors of the closed bank upon its actual takeover of the c
losed bank. 2. PDIC shall publish the notice once a week for at least 3 consecut
ive weeks in a newspaper of general circulation or newspaper circulated in the c
ommunity where the closed bank or its branches are located. E. Discharge Payment
of an insured deposit shall discharge PDIC. And payment of a transferred deposi
t by the new bank in which a transferred deposit has been made available shall d
ischarge PDIC and the new bank. F. Recognition of Owner PDIC cannot recognize as
the owner any person, whose name or interest as such owner is not disclosed on
the records of a closed bank, as part owner of any portion of a deposit appearin
g on the records of the closed bank under a name other than that of the claimant
. G. Withholding of Payment PDIC may withhold payment of such portions of the in
sured deposit of any depositor in a closed bank as may be required to provide fo
r the payment of any liability of such depositor as a stockholder of the closed
bank, or any liability of such depositor to the closed bank or to its receiver,
which is not offset against a claim due from such bank, pending the determinatio
n and payment of such liability by such depositor or any other liable therefore.
H. Prescription All rights of a depositor with respect to the insured deposit s
hall be barred if : He fails to file a claim within two years from actual take-o
ver of the closed bank by the receiver. Or does not enforce his claim within two
years after the filing a claim Unless otherwise waived by PDIC. All rights of t
he depositor subrogated to PDIC shall thereupon revert back to the depositor. PD
IC shall be discharged from any liability.
XV. Investment by PDIC A. Money of the PDIC not otherwise employed shall be inve
sted in obligations of the Republic of the Philippines or by obligations guarant
eed by it. 1. It shall not sell or purchase any such obligation for its own acco
unt or in its own right and interest in any one time aggregating in excess of 10
0,000 without approval of the Insurance Commissioner. 2. Insurance Commissioner
may waive the requirement of his approval as he may determine. B. The banking or
checking account of PDIC shall be kept in: 1. BSP 2. PNB 3. Any bank designated
as fiscal agent or depository of RP XVI. Extension of Loans A. In order to prev
ent an insured bank from closing, PDCI may make loans, purchase the assets, assu
me liability, or make deposits in such insured bank, upon such condi tions as th
e Board of Directors may prescribe, the operations of such bank is essentia l to
provide adequate banking service in the community or maintain financial stabili
t y in the economy. a. Such power may also be exercised in case of a closed insu
red bank if: i. the resumption of the operations of said bank is vital to the in
terest of the community ii. Severe financial climate exists b. Reopening of said
bank is subject to the approval of the Monetary Board. B. PDIC may provide any
corporation acquiring control of, merging or consolidating with or acquiring the
assets of an insured bank in order to prevent such closing or o f a closed insu
red bank in order to restore it to normal operation 40 | P a g e
a. Within 60 days from date C. PDIC shall determine the nsive than the exercise
of its D. PDIC may grant financial
of assistance, PDIC shall submit a report to MB actual payoff and liquidation th
ereof will be more expe power prior to exercise of its powers. assistance to ins
ured banks, with systemic consequences
with a probable failure or closure, as may be necessary to prevent its failure o
r closure. subject to the approval of the Monetary Board. a. systemic risk poss
ibility that failure of one bank to settle net transactions with other banks wil
l trigger a chain reaction, depriving other banks of funds leading to a general
shutdown of normal clearing and settlement activity. -Likelihood of a sudden une
xpected collapse of confidence in a significant portion of the banking or financ
ial system with potentially large real economic effects. E. PDIC may not purchas
e the voting or common stock of an insured bank but it can enter into or force a
greements that it determines to be necessary to protect its financial interests.
F. Financial assistance may take the form of equity or quasi-equity of insured
bank s as may be deemed necessary by the Board of Directors with concurrence by
the MB. The corporation shall dispose of such equity as soon as practicable. XVI
I. Borrowings A. PDIC is authorized to borrow from the BSP on such terms as may
be agreed by them . Such loans granted by the BSP shall be consistent with monet
ary policy, the inte rest rate thereon shall not exceed the treasury bill rate.
B. When in the Judgment of the Board of Directors, the PDIC has insufficient fun
ds to attain its purpose, PDIC shall be authorized to borrow money, obtain loans
, or a rrange credit lines or other credit accommodations from any bank designat
ed as deposito ry or fiscal agent by the RP. XVII. Issuance of Bonds With approv
al of the President of RP, PDIC is authorized to issue bonds, debentu res, and o
ther obligations necessary fro the purpose of settlement of insured deposit s in
closed banks as well as for financial assistance. a. BoD shall determine intere
st rate and other requirements of such obligation. b. PDIC shall provide appropr
iate reserves for the redemption of said obligation. XIX. Reports and Audit A.
PDIC shall annually make a report of its operations to the Congress as soon s pr
acticable after Jan 1 B. Financial transactions shall be audited by the COA in a
ccordance with principles and processes and procedures applicable to commercial
corporate transactions. Audit shall be conducted in places where the accounts of
the corporation are normally kept. C. COA shall have access to all books, accou
nts, records, reports, files, and all o ther papers belonging to PDIC pertaining
to its financial transactions. Except as to matters relating to the Function of
the PDIC which shall be subject to visitorial audit only. XX. Miscellaneous A.
Signs a. Insured banks shall place signs in all place of business and in its sta
tements that its deposits are insured by PDIC. b. BoD may exempt from this requi
rement advertisements not relating to deposits. B. Merger or consolidation of in
sured banks Upon consent of PDIC, banks may: 1. Merge or consolidate with an uni
nsured bank 2. Assume liability to pay any deposits made in noninsured bank 3. T
ransfer assets to any noninsured bank C. Protection Against Losses a. PDIC may r
equire an insured bank to provide protection and indemnity against burglary, def
alcation, losses arising from discharge of duties, by particular acts of its dir
ectors, employees, officres b. BoD shall determine the bonding requirement refer
ring to directors, officers, anfd employees of an insured bank c. If insured ban
k refuse to comply with any such requirement, PDIC may add the cost thereof to t
he assessment otherwise payable to such bank. D. Directors, Officers and employe
es of Insured banks 41 | P a g e
a. No person shall be a director, officer, or employee of an insured bank who ha
s been convicted of any criminal offense involving dishonesty of breach of trust
. b. Penalty for violation of this prohibition: the bank will be subject to pena
lty o f not more than 100 for every day of violation. XXI. Criminal Penalties A.
Punishable by prision mayor or a fine of 50,000-2,000,000,000 or both, any dire
c tor, officer, employee or agent of bank who: 1. Willful refusal to submit repo
rts 2. Unjustified refusal to permit examination and audit of records as require
d by law, rules, and regulations 3. Willful making of false statement or entry i
n any bank report or document 4. Submission of false material information in con
nection with or in relation to any financial assistance extended to the bank 5.
Splitting of deposits or creation of fictitious loans or deposit accounts i. dep
osit accounts with an outstanding balance Splitting deposits of more than the st
atutory maximum amount of insured deposit maintained under the name of a person
is broken down and transferred into two or more accounts in the names of persons
who have no beneficial ownership on transferred deposits in their names within
30 days preceding or during a bank declared holiday, or preceding a closure orde
r issued by the MB for the purpose of availing of the maximum deposit insurance
coverage. 6. Refusal to allow PDIC to takeover a closed bank placed under its re
ceivership 7. Refusal to turnover or destroying or tampering bank records 8. Fra
udulent disposal , transfer or concealment of any asset, property, liability of
the closed bank under the receivership of the PDIC 9. Violation, or causing a pe
rson to violate, the exemption of garnishment, levy attachment, or execution pro
vided under the PDIC Law and the NCBA 10. Willful failure or refusal to comply w
ith, or violation of any provision of eh PDIC Law, or commission of any other ir
regularities and/or conducting business in an unsafe or unsound manner. XXII. FI
NES A. BOD is authorized to impose administrative fines for violation of any oth
er inst ruction, rule, or regulation issued by PDIC, against a bank or any of it
s directors, offi cers, or agents responsible for such act, omission, or violati
on. In no case such fine ex ceed 3times the amount of the damages or costs cause
d by the transaction for each day
that the violation subsist. Chap 11 Anti-Money Laundering ( RA 9160) I. CONCEPTS
A. Policies i. To protect and preserve the integrity and confidentiality of ban
k accounts ii. Ensure that the Philippines shall not be used as a money launderi
ng site for the proceeds of any unlawful activity. iii. Cooperation in transnati
onal investigation and prosecution of persons involved in money laundering B. Co
vered Institutions i. Banks, non-banks, quasi-banks, trust entities ad all other
institutions regulated by the BSP ii. Insurance companies and all other institu
tions regulated by the insurance commission iii. Securities, brokers, salesmen,
investment house and other entities managing securities or service as agent, adv
isor, consultant iv. Mutual funds, closed-end investment company, common trust f
und and preneed companies v. Foreign exchange corporations, money changers, mone
y payments, remittance, and transfer companies vi. Those administering or dealin
g in currency, commodities, financial derivatives or other monetary instruments
or property supervised by the SEC C. Covered and Suspicious transaction i. Trans
action in cash or monetary instrument exceeding P500,000 in one banking day ii.
Suspicious transactions regardless of the amount a. No legal or trade obligation
, purpose or economic justification b. Client is not properly identified c. Amou
nt is not commensurate with the client s financial capacity d. Structured transa
ctions to avoid being the subject of reporting required under the act e. Those w
hich deviate from the profile of the client or past transactions f. Related to a
ny unlawful activity or offense g. Any transaction that is similar to any of the
foregoing D.
Monetary instrument i. Coins/currency of legal tender of the Phil. Or any countr
y ii. Drafts, checks and notes iii. Securities or negotiable instruments, bonds,
commercial papers, deposit certificates, trust certificates, custodial receipts
, trading orders, transactio n tickets, confirmation of sale money market instru
ments iv. Other similar instruments when title passes to another by endorsement,
assignment or delivery E. Unlawful Activities i. Kidnapping for ransom under Ar
t.267 of RPC 42 | P a g e
ii. Secs. 4-6, 8-10, 12-16 of the Dangerous Drugs Act of 2002 iii. Sec.3 par b,
c, e, g, h, I of the Anti-Graft and Corrupt Practices Act iv. Plunder under RA 7
080 v. Robbery and extortion under Arts. 294-296, 299-302 of the RPC vi. Jueteng
and Masiao under PD 1602 vii. Piracy on high seas under RPC and PD 532 viii. Qu
alified theft under Art.310 of RPC ix. Swindling under Art.315 of RPC x. Smuggli
ng under RA 455 and 1937 xi. Violations of Electronic Commerce Act of 2000 xii.
Hijacking and other violations of RA 6235 xiii. Destructive arson and murder und
er RPC xiv. Fraudulent practices under Securities Regulation Code of 2000 xv. Fe
lonies or offenses of similar nature punishable under penal laws of other countr
ies F. Money Laundering Offense-is a crime whereby the proceeds of an unlawfulac
tivity are transacted, thereby making them appear to have originated fromlegitim
ate sou rces. It can be committed by the ff: i. Any person knowing that any mone
tary instrument or property represents, involves, or relates to, the proceeds of
any unlawful activity, transacts or attempts to transact said monetary instrume
nt or property ii. Any person knowing any monetary instrument or property repres
ents, involves, or relates to, the proceeds of any unlawful activity, performs o
r fails to perform any act as a result of which he facilitates the offense of mo
ney laundering referred to above iii. Any person knowing that any monetary instr
ument or property is required to be disclosed and filed with the Anti-Money Laun
dering Council, fails to do so II. Jurisdiction and Prosecution A. Jurisdiction
i. Private persons-RTC ii. Public persons and private persons in conspiracy with
the formerSandiganbayan B. Prosecution i. Any person may be charged of both mon
ey laundering and the unlawful activity ii.
Any proceeding relating to the unlawful activity shall be given precedence over
the prosecution of any offense or violation w/o prejudice to the freezing and ot
her remedies III. Anti-Money Laundering Council A. Composition i. Governor of he
BSP as chairman ii. Commissioner of the Insurance Commission iii. Chairman of t
he SEC B. Functions i. Require and receive covered or suspicious transaction rep
orts from covered institutions ii. Issue orders addressed to the supervising aut
hority of the institution to determine the true owner of a covered or suspicious
transaction report or request assistance on the basis of substantial evidence i
ii. Institute civil forfeiture proceedings through the OSG iv. Cause the filing
of complaints with the DOJ or Ombudsman v. Investigate suspicious and covered tr
ansactions vi. Apply before the CA ex parte, for the freezing of any monetary in
strument or property vii. Implement measures as may be necessary to counteract m
oney laundering viii. Receive and take action any request of assistance from for
eign states in their own anti-money laundering operations ix. Develop educationa
l programs on the effects, methods, and means to prevent money laundering x. Enl
ist assistance from government instrumentality for any anti-money laundering ope
ration xi. Impose administrative sanctions for violation of laws, rules, regulat
ions and orders issued pursuant thereto xii. Establish a secretariat a. Member o
f the Bar b. 35 years of age c. GMC d. Unquestionable integrity and known probit
y IV. Prevention of Money Laundering A. Customer Identification i. Institutions
shall establish and record the true identity of its clients based o n
office documents ii. Maintain a system of verifying the identity and legal exist
ence of their clients iii. Anonymous, fictitious an similar accounts are prohibi
ted iv. Peso and foreign currency non-checking accounts shall be allowed which w
ill be subject to test by the BSP to determine the existence and identity of the
owners B. Record Keeping i. Records of transactions shall be maintained and sto
red from 5 years from the date of transaction ii. For closed accounts, its recor
ds shall also be stored for 5 years from the date it was closed C. Reporting of
Covered and Suspicious Transaction i. Shall be reported to AMLC within 5 working
days from the occurrence thereof, unless supervising authority prescribes a lon
ger period not exceeding 10 days ii. Should a transaction be determined a a cove
red and suspicious transaction, it shall be required to report the same iii. Suc
h reporting shall not be considered as a violation of RA 1405, RA 6426, RA 8791,
but are prohibited to communicate to any other person iv. In case of violation
of the prohibition above, they shall be criminally liable v. Reporting to the AM
LC is also prohibited to be disclosed to the media or any other person or entity
D. Freezing of Monetary Instrument or Property i. To the CA, upon application e
x parte by the AMLC and after determination that probable cause exists, may issu
e a freeze order ii. Such order shall be for 20 days unless extended by the Cour
t E. Authority to inquire into bank deposits i. The AMLC may inquire upon order
of any competent court when it has been established that: a. There is probable c
ause that the deposit or investment s related to any unlawful activity; or b. A
money laundering offense 43 | P a g e
ii. No court order shall be required in the following activities a. Kidnapping f
or ransom b. Violations of Dangerous Drug Act of 2002 c. Hijacking and other vio
lations of RA 6235 d. Destructive arson and murder including those perpetrated b
y terrorists V. Forfeiture A. Civil forfeiture a. When there is a report made, a
nd the Court, in a petition filed for the purpose of seizure, the Rules of Court
on civil forfeiture applies B. Claim on Forfeiture Assets a. Those claiming an
interest may apply, by verified petition, for a declaration that the seized inst
rument or property legitimately belongs to him and pray for the segregation and
exclusion b. It shall be filed with the court which rendered the judgment of for
feiture within 15 days from the order of forfeiture C. Payment in lieu of forfei
ture a. Is allowed because forfeiture cannot be enforced due to the ff: i. With
due diligence, it cannot be located ii. Substantially altered, destroyed, dimini
shed in value or rendered worthless by any act or omission attributable to the o
ffender iii. Concealed, removed, converted or transferred to prevent from being
found or avoid forfeiture iv. Located outside the Philippine or outside the juri
sdiction of the court v. Commingled with other instrument or property rendering
it difficult to be identified or segregated VI. Mutual assistance among states A
. Request for assistance from a foreign state a. The AMLC may execute or refuse
to execute such request and inform the state of any valid reason for not executi
ng such request B. Powers of the AMLC to act on a request for assistance a. May
execute a request by: i. Tracking down, freezing, restraining and seizing assets
ii. Give information needed iii. Apply for an order of forfeiture b.
Court will issue such order only when accompanied by: i. Authenticated copy of t
he order of a court in the requesting state ordering the forfeiture ii. Certific
ation or affidavit of a competent officer of the requesting stat that the convic
tion and order of forfeiture are final C. Obtaining assistance from foreign stat
e a. Tracking down, freezing, restraining and seizing assets b. Obtain info that
it needs relating to covered transaction and money laundering offense c. Enter
into the premises belonging to or in the possession of the persons named in the
request, to the extent allowed by the law of the foreign state d. Apply for an o
rder of forfeiture and must be accompanied by the order of the RTC and an affida
vit of the Clerk of Court that the conviction and forfeiture are final D. Limita
tions on request a. When it contravenes the constitution b. Prejudicial to the i
nterest of the Philippines i. Except: if there is a treaty between the Phil. And
the requesting State relating to the provisions of assistance in money launderi
ng offense E. Requirement for request from a foreign state a. Confirm that an in
vestigation or prosecution is being conducted b. State the grounds on which any
person is being investigated or prosecuted for c. Give sufficient particulars as
to the identity of the person d. Give particulars sufficient to identify the in
stitution believed to have any inf o e. Ask from the institution for any info wh
ich may be of assistance to the investigation or prosecution f. Specify the mann
er in which such info will be obtained or produced g. Give all the particulars n
ecessary for the issuance by the court in the requested state of the orders need
ed by th requesting state h. Contain other info as may assist in the execution o
f the request F. Authentication of documents a. Signed or certified by a judge o
r equivalent officer in or of the requesting state b. Authenticated by the oath
or affirmation of a witness or sealed with an
official seal of a minister or secretary of the government of the requesting sta
te c. By the secretary of embassy, consul general, consul or any officer in the
foreign service of the Philippines stationed in the foreign state G. Extradition
a. Negotiate for the inclusion of money laundering offenses among extraditable
offenses VII. Penalties A. Crime of money laundering a. Any person knowing that
any monetary instrument or property represents, involves, or relates to, the pro
ceeds of any unlawful activity, transacts or attempts to transact said monetary
instrument or property i. Imprisonment of 7 to 14 years and a fine not less than
P3M b. Any person knowing any monetary instrument or property represents, invol
ves, or relates to, the proceeds of any unlawful activity, performs or fails to
perform any act as a result of which he facilitates the offense of money launder
ing referred to above i. 4-7 years and fin not less than P1.5M not more than P3M
c. Any person knowing that any monetary instrument or property is required to b
e disclosed and filed with the Anti-Money Laundering Council, fails to do so i.
6m-4years or fine not less than P100,000 not more than P500,000, or both B. Fail
ure to keep records a. 6m-1year or fine not less than P100,000 not more than P50
0,000, or both C. Malicious reporting a. Any person who, with malice or bad fait
h, reports a completely unwarranted or false info relative to money laundering i
. 6m-4years and a fine not less than P100,000 not more than P500,000 ii. If corp
oration-upon the responsible officers iii. Juridical person-suspend or revoke it
s license iv. Alien-deportation 44 | P a g e
v. Public official-perpetual or temporary absolute disqualification from office
vi. Public official who refuses to testify-same penalties above D. Breach of Con
fidentiality a. 3-8years and fine P500,000-P1M b. If disclosed to media-reporter
, writer, publisher, manager, editor VIII. Prohibitions against political harass
ment A. shall not be used for political persecution or harassment or as an instr
ument to hamper competition in trade and commerce B. no case may be filed agains
t and no assets shall be frozen or forfeited to the p rejudice of a candidate fo
r electoral office during election period IX. Implementing rules and Regulations
A. The BSP, IC, and SEC shall promulgate rules to effectively implement this Ac
t. T hese rules shall be submitted to the congressional oversight committee for
approval. B. Covered institutions shall formulate their own prevention programs
X. Congressional Oversight Committee A. Composition a. 7 members from the Senate
and 7 members from the House of Representatives b. Shall be appointed by the Se
nate President and the Speaker, respectively, based on proportional representati
on of parties B. Powers a. Power to promulgate rules to overse the implementatio
n of the law and to review and revise the rules issued by the AMLC within 30 day
s from promulgation XI. Rules and Regulation for banks and non-financial institu
tions to combat mone y laundering 1. Take reasonable measures to establish and r
ecord the true identity and legal existence of their clients 2. in case of doubt
, obtain the true identity of the persons on whose behalf an account is opened 3
. anonymous or fictitious accounts should not be allowed 4. identity of clients
should be updated 5. necessary records of transactions should be maintained 6. s
pecial attention should be given to complex, unusual large transactions and all
unusual patterns of transaction
7. other suspicious transactions not involving deposit should be reported 8. Ban
ks should avoid business with criminals 9. Programs against money laundering-emp
loyee training, audit function, developm ent of internal policies. D. Distributi
on of Assets 3. Before any distribution of assets of the closed bank, PDIC shall
charge against such assets: Reasonable receivership expenses (subject to approv
al of court) Reasonable liquidation expenses 4. After payment of all liabilities
and claims against closed bank, PDIC shall pay any surplus dividends at the leg
al rate of interest from the date of takeover to the date of distribution, to cr
editors and claimants in accordance with legal priority be fore distribution to
the shareholders. XIV. Payment of Insured Deposits I. Manner of Payment 1. Whene
ver an insured bank shall have been closed by the Monetary Board, payment of the
insured deposits on such closed banks shall be made by the PDIC by: i. Cash ii.
Transferred deposit 2. deposit in an insured bank made available to a depositor
Transfer deposit by PDIC as payment of insured deposit of such depositor in a c
losed bank. Not to exceed two hundred fifty thousand (250,000) 3. A joint accoun
t shall be insured separately from any individually owned deposit account. 4. Ma
ximum insured deposits of Joint accounts shall be divided into as many equal sha
res as there are co-owners, unless a different sharing is stipulated in the docu
ment of deposit. 5. If an account is held by a juridical person jointly with an
individual, it is presumed that the maximum insured deposit belongs to the jurid
ical person. 6. The aggregate of the interests of each co-owner over several joi
nt accounts shall likewise not exceed 250,000 7. No owner/holder of any negotiab
le certificate of deposit shall be recognized as a depositor entitled to the rig
hts provided unless his name is registered in the books of the issuing bank. J.
Proof of Claims 1. PDIC may require proof of claims to be filed before paying th
e insured deposits.
2. It may require final determination by the courts if not satisfied to the viab
ili ty of the claim. K. Settlement Period and Penalties in Case of Failure to Se
ttle 45 | P a g e
1. Failure to settle claim within six months from the date of filing claim due t
o grave abuse of discretion, gross negligence, bad faith, or malice shall subjec
t the directors, employees, or officers of PDIC Responsible for the delay to imp
risonment from six months to one year. 2. Period shall not apply if the validity
of the claim depends on resolution of issues of fact or law by another office.
3. Upon payment to such depositor, PDIC shall be subrogated to all of the rights
of the depositor to the extent of such payment. 4. Such subrogation shall inclu
de the right to receive the same dividends from the proceeds of the assets of th
e closed bank. But such depositor shall retain his claim for any uninsured porti
on of his deposit. L. Notice 1. PDIC shall commence the determination of insured
deposits due to depositors of the closed bank upon its actual takeover of the c
losed bank. 2. PDIC shall publish the notice once a week for at least 3 consecut
ive weeks in a newspaper of general circulation or newspaper circulated in the c
ommunity where the closed bank or its branches are located. M. Discharge Payment
of an insured deposit shall discharge PDIC. And payment of a transferred deposi
t by the new bank in which a transferred deposit has been made available shall d
ischarge PDIC and the new bank. N. Recognition of Owner PDIC cannot recognize as
the owner any person, whose name or interest as such owner is not disclosed on
the records of a closed bank, as part owner of any portion of a deposit appearin
g on the records of the closed bank under a name other than that of the claimant
. O. Withholding of Payment PDIC may withhold payment of such portions of the in
sured deposit of any depositor in a closed bank as may be required to provide fo
r the payment of any liability of such depositor as a stockholder of the closed
bank, or any liability of such depositor to the closed bank or to its receiver,
which is not offset against a claim due from such bank, pending the determinatio
n and payment of such liability by such depositor or any other liable therefore.
P. Prescription All rights of a depositor with respect to the insured deposit s
hall be barred if : He fails to file a claim within two years from actual take-o
ver of the closed bank by the receiver. Or does not enforce his claim within two
years after the filing a claim Unless otherwise waived by PDIC. All rights of t
he depositor subrogated to PDIC shall thereupon revert back to the depositor. PD
IC shall be discharged from any liability.
XV. Investment by PDIC C. Money of the PDIC not otherwise employed shall be inve
sted in obligations of the Republic of the Philippines or by obligations guarant
eed by it. 1. It shall not sell or purchase any such obligation for its own acco
unt or in its own right and interest in any one time aggregating in excess of 10
0,000 without approval of the Insurance Commissioner. 2. Insurance Commissioner
may waive the requirement of his approval as he may determine. D. The banking or
checking account of PDIC shall be kept in: 1. BSP 2. PNB 3. Any bank designated
as fiscal agent or depository of RP XVI. Extension of Loans G. In order to prev
ent an insured bank from closing, PDCI may make loans, purchase the assets, assu
me liability, or make deposits in such insured bank, upon such condi tions as th
e Board of Directors may prescribe, the operations of such bank is essentia l to
provide adequate banking service in the community or maintain financial stabili
t y in the economy. a. Such power may also be exercised in case of a closed insu
red bank if: i. the resumption of the operations of said bank is vital to the in
terest of the community ii. Severe financial climate exists b. Reopening of said
bank is subject to the approval of the Monetary Board. H. PDIC may provide any
corporation acquiring control of, merging or consolidating with or acquiring the
assets of an insured bank in order to prevent such closing or o f a closed insu
red bank in order to restore it to normal operation 46 | P a g e
a. Within 60 days from date I. PDIC shall determine the nsive than the exercise
of its J. PDIC may grant financial
of assistance, PDIC shall submit a report to MB actual payoff and liquidation th
ereof will be more expe power prior to exercise of its powers. assistance to ins
ured banks, with systemic consequences
with a probable failure or closure, as may be necessary to prevent its failure o
r closure. subject to the approval of the Monetary Board. a. systemic risk poss
ibility that failure of one bank to settle net transactions with other banks wil
l trigger a chain reaction, depriving other banks of funds leading to a general
shutdown of normal clearing and settlement activity. -Likelihood of a sudden une
xpected collapse of confidence in a significant portion of the banking or financ
ial system with potentially large real economic effects. K. PDIC may not purchas
e the voting or common stock of an insured bank but it can enter into or force a
greements that it determines to be necessary to protect its financial interests.
L. Financial assistance may take the form of equity or quasi-equity of insured
bank s as may be deemed necessary by the Board of Directors with concurrence by
the MB. The corporation shall dispose of such equity as soon as practicable. XVI
I. Borrowings C. PDIC is authorized to borrow from the BSP on such terms as may
be agreed by them . Such loans granted by the BSP shall be consistent with monet
ary policy, the inte rest rate thereon shall not exceed the treasury bill rate.
D. When in the Judgment of the Board of Directors, the PDIC has insufficient fun
ds to attain its purpose, PDIC shall be authorized to borrow money, obtain loans
, or a rrange credit lines or other credit accommodations from any bank designat
ed as deposito ry or fiscal agent by the RP. XVII. Issuance of Bonds With approv
al of the President of RP, PDIC is authorized to issue bonds, debentu res, and o
ther obligations necessary fro the purpose of settlement of insured deposit s in
closed banks as well as for financial assistance. a. BoD shall determine intere
st rate and other requirements of such obligation. b. PDIC shall provide appropr
iate reserves for the redemption of said obligation. XIX. Reports and Audit D.
PDIC shall annually make a report of its operations to the Congress as soon s pr
acticable after Jan 1 E. Financial transactions shall be audited by the COA in a
ccordance with principles and processes and procedures applicable to commercial
corporate transactions. Audit shall be conducted in places where the accounts of
the corporation are normally kept. F. COA shall have access to all books, accou
nts, records, reports, files, and all o ther papers belonging to PDIC pertaining
to its financial transactions. Except as to matters relating to the Function of
the PDIC which shall be subject to visitorial audit only. XX. Miscellaneous E.
Signs a. Insured banks shall place signs in all place of business and in its sta
tements that its deposits are insured by PDIC. b. BoD may exempt from this requi
rement advertisements not relating to deposits. F. Merger or consolidation of in
sured banks Upon consent of PDIC, banks may: 4. Merge or consolidate with an uni
nsured bank 5. Assume liability to pay any deposits made in noninsured bank 6. T
ransfer assets to any noninsured bank G. Protection Against Losses a. PDIC may r
equire an insured bank to provide protection and indemnity against burglary, def
alcation, losses arising from discharge of duties, by particular acts of its dir
ectors, employees, officres b. BoD shall determine the bonding requirement refer
ring to directors, officers, anfd employees of an insured bank c. If insured ban
k refuse to comply with any such requirement, PDIC may add the cost thereof to t
he assessment otherwise payable to such bank. H. Directors, Officers and employe
es of Insured banks a. No person shall be a director, officer, or employee of an
insured bank who has been convicted of any criminal offense involving dishonest
y of breach of trust. 47 | P a g e
b. Penalty for violation of this prohibition: the bank will be subject to penalt
y o f not more than 100 for every day of violation. XXI. Criminal Penalties B. P
unishable by prision mayor or a fine of 50,000-2,000,000,000 or both, any direc
tor, officer, employee or agent of bank who: 1. Willful refusal to submit report
s 2. Unjustified refusal to permit examination and audit of records as required
by law, rules, and regulations 3. Willful making of false statement or entry in
any bank report or document 4. Submission of false material information in conne
ction with or in relation to any financial assistance extended to the bank 5. Sp
litting of deposits or creation of fictitious loans or deposit accounts i. depos
it accounts with an outstanding balance Splitting deposits of more than the stat
utory maximum amount of insured deposit maintained under the name of a person is
broken down and transferred into two or more accounts in the names of persons w
ho have no beneficial ownership on transferred deposits in their names within 30
days preceding or during a bank declared holiday, or preceding a closure order
issued by the MB for the purpose of availing of the maximum deposit insurance co
verage. 6. Refusal to allow PDIC to takeover a closed bank placed under its rece
ivership 7. Refusal to turnover or destroying or tampering bank records 8. Fraud
ulent disposal , transfer or concealment of any asset, property, liability of th
e closed bank under the receivership of the PDIC 9. Violation, or causing a pers
on to violate, the exemption of garnishment, levy attachment, or execution provi
ded under the PDIC Law and the NCBA 10. Willful failure or refusal to comply wit
h, or violation of any provision of eh PDIC Law, or commission of any other irre
gularities and/or conducting business in an unsafe or unsound manner. XXII. FINE
S B. BOD is authorized to impose administrative fines for violation of any other
inst ruction, rule, or regulation issued by PDIC, against a bank or any of its
directors, offi cers, or agents responsible for such act, omission, or violation
. In no case such fine ex ceed 3times the amount of the damages or costs caused
by the transaction for each day that the violation subsist. Chap 11 Anti-Money L
aundering ( RA 9160)
I. CONCEPTS G. Policies i. To protect and preserve the integrity and confidentia
lity of bank accounts ii. Ensure that the Philippines shall not be used as a mon
ey laundering site for the proceeds of any unlawful activity. iii. Cooperation i
n transnational investigation and prosecution of persons involved in money laund
ering H. Covered Institutions i. Banks, non-banks, quasi-banks, trust entities a
d all other institutions regulated by the BSP ii. Insurance companies and all ot
her institutions regulated by the insurance commission iii. Securities, brokers,
salesmen, investment house and other entities managing securities or service as
agent, advisor, consultant iv. Mutual funds, closed-end investment company, com
mon trust fund and preneed companies v. Foreign exchange corporations, money cha
ngers, money payments, remittance, and transfer companies vi. Those administerin
g or dealing in currency, commodities, financial derivatives or other monetary i
nstruments or property supervised by the SEC I. Covered and Suspicious transacti
on i. Transaction in cash or monetary instrument exceeding P500,000 in one banki
ng day ii. Suspicious transactions regardless of the amount a. No legal or trade
obligation, purpose or economic justification b. Client is not properly identif
ied c. Amount is not commensurate with the client s financial capacity d. Struct
ured transactions to avoid being the subject of reporting required under the act
e. Those which deviate from the profile of the client or past transactions f. R
elated to any unlawful activity or offense g. Any transaction that is similar to
any of the foregoing J. Monetary instrument i. Coins/currency of legal tender o
f the Phil. Or any country
ii. Drafts, checks and notes iii. Securities or negotiable instruments, bonds, c
ommercial papers, deposit certificates, trust certificates, custodial receipts,
trading orders, transactio n tickets, confirmation of sale money market instrume
nts iv. Other similar instruments when title passes to another by endorsement, a
ssignment or delivery K. Unlawful Activities i. Kidnapping for ransom under Art.
267 of RPC ii. Secs. 4-6, 8-10, 12-16 of the Dangerous Drugs Act of 2002 iii. Se
c.3 par b, c, e, g, h, I of the Anti-Graft and Corrupt Practices Act iv. Plunder
under RA 7080 v. Robbery and extortion under Arts. 294-296, 299-302 of the RPC
48 | P a g e
vi. Jueteng and Masiao under PD 1602 vii. Piracy on high seas under RPC and PD 5
32 viii. Qualified theft under Art.310 of RPC ix. Swindling under Art.315 of RPC
x. Smuggling under RA 455 and 1937 xi. Violations of Electronic Commerce Act of
2000 xii. Hijacking and other violations of RA 6235 xiii. Destructive arson and
murder under RPC xiv. Fraudulent practices under Securities Regulation Code of
2000 xv. Felonies or offenses of similar nature punishable under penal laws of o
ther countries L. Money Laundering Offense-is a crime whereby the proceeds of an
unlawfulactivity are transacted, thereby making them appear to have originated
fromlegitimate sou rces. It can be committed by the ff: i. Any person knowing th
at any monetary instrument or property represents, involves, or relates to, the
proceeds of any unlawful activity, transacts or attempts to transact said moneta
ry instrument or property ii. Any person knowing any monetary instrument or prop
erty represents, involves, or relates to, the proceeds of any unlawful activity,
performs or fails to perform any act as a result of which he facilitates the of
fense of money laundering referred to above iii. Any person knowing that any mon
etary instrument or property is required to be disclosed and filed with the Anti
-Money Laundering Council, fails to do so II. Jurisdiction and Prosecution C. Ju
risdiction i. Private persons-RTC ii. Public persons and private persons in cons
piracy with the formerSandiganbayan D. Prosecution i. Any person may be charged
of both money laundering and the unlawful activity ii. Any proceeding relating t
o the unlawful activity shall be given precedence over the prosecution of any of
fense or violation w/o prejudice to the freezing and other remedies III. Anti-Mo
ney Laundering Council C. Composition iv. Governor of he BSP as chairman
v. Commissioner of the Insurance Commission vi. Chairman of the SEC D. Functions
xiii. Require and receive covered or suspicious transaction reports from covere
d institutions xiv. Issue orders addressed to the supervising authority of the i
nstitution to determine the true owner of a covered or suspicious transaction re
port or request assistance on the basis of substantial evidence xv. Institute ci
vil forfeiture proceedings through the OSG xvi. Cause the filing of complaints w
ith the DOJ or Ombudsman xvii. Investigate suspicious and covered transactions x
viii. Apply before the CA ex parte, for the freezing of any monetary instrument
or property xix. Implement measures as may be necessary to counteract money laun
dering xx. Receive and take action any request of assistance from foreign states
in their own anti-money laundering operations xxi. Develop educational programs
on the effects, methods, and means to prevent money laundering xxii. Enlist ass
istance from government instrumentality for any anti-money laundering operation
xxiii. Impose administrative sanctions for violation of laws, rules, regulations
and orders issued pursuant thereto xxiv. Establish a secretariat a. Member of t
he Bar b. 35 years of age c. GMC d. Unquestionable integrity and known probity I
V. Prevention of Money Laundering F. Customer Identification v. Institutions sha
ll establish and record the true identity of its clients based o n office docume
nts vi. Maintain a system of verifying the identity and legal existence of their
clients vii. Anonymous, fictitious an similar accounts are prohibited viii. Pes
o and foreign currency non-checking accounts shall be allowed which
will be subject to test by the BSP to determine the existence and identity of th
e owners G. Record Keeping iii. Records of transactions shall be maintained and
stored from 5 years from the date of transaction iv. For closed accounts, its re
cords shall also be stored for 5 years from the date it was closed H. Reporting
of Covered and Suspicious Transaction vi. Shall be reported to AMLC within 5 wor
king days from the occurrence thereof, unless supervising authority prescribes a
longer period not exceeding 10 days vii. Should a transaction be determined a a
covered and suspicious transaction, it shall be required to report the same vii
i. Such reporting shall not be considered as a violation of RA 1405, RA 6426, RA
8791, but are prohibited to communicate to any other person ix. In case of viol
ation of the prohibition above, they shall be criminally liable x. Reporting to
the AMLC is also prohibited to be disclosed to the media or any other person or
entity I. Freezing of Monetary Instrument or Property iii. To the CA, upon appli
cation ex parte by the AMLC and after determination that probable cause exists,
may issue a freeze order iv. Such order shall be for 20 days unless extended by
the Court J. Authority to inquire into bank deposits iii. The AMLC may inquire u
pon order of any competent court when it has been established that: a. There is
probable cause that the deposit or investment s related to any unlawful activity
; or b. A money laundering offense iv. No court order shall be required in the f
ollowing activities a. Kidnapping for ransom b. Violations of Dangerous Drug Act
of 2002 c. Hijacking and other violations of RA 6235 49 | P a g e
d. Destructive arson and murder including those perpetrated by terrorists V. For
feiture D. Civil forfeiture a. When there is a report made, and the Court, in a
petition filed for the purpose of seizure, the Rules of Court on civil forfeitur
e applies E. Claim on Forfeiture Assets a. Those claiming an interest may apply,
by verified petition, for a declaration that the seized instrument or property
legitimately belongs to him and pray for the segregation and exclusion b. It sha
ll be filed with the court which rendered the judgment of forfeiture within 15 d
ays from the order of forfeiture F. Payment in lieu of forfeiture a. Is allowed
because forfeiture cannot be enforced due to the ff: i. With due diligence, it c
annot be located ii. Substantially altered, destroyed, diminished in value or re
ndered worthless by any act or omission attributable to the offender iii. Concea
led, removed, converted or transferred to prevent from being found or avoid forf
eiture iv. Located outside the Philippine or outside the jurisdiction of the cou
rt v. Commingled with other instrument or property rendering it difficult to be
identified or segregated VI. Mutual assistance among states H. Request for assis
tance from a foreign state a. The AMLC may execute or refuse to execute such req
uest and inform the state of any valid reason for not executing such request I.
Powers of the AMLC to act on a request for assistance a. May execute a request b
y: i. Tracking down, freezing, restraining and seizing assets ii. Give informati
on needed iii. Apply for an order of forfeiture b. Court will issue such order o
nly when accompanied by: i. Authenticated copy of the order of a court in the re
questing state ordering the forfeiture ii. Certification or affidavit of a compe
tent officer of the requesting stat that the conviction and order of forfeiture
are final
J. Obtaining assistance from foreign state a. Tracking down, freezing, restraini
ng and seizing assets b. Obtain info that it needs relating to covered transacti
on and money laundering offense c. Enter into the premises belonging to or in th
e possession of the persons named in the request, to the extent allowed by the l
aw of the foreign state d. Apply for an order of forfeiture and must be accompan
ied by the order of the RTC and an affidavit of the Clerk of Court that the conv
iction and forfeiture are final K. Limitations on request a. When it contravenes
the constitution b. Prejudicial to the interest of the Philippines i. Except: i
f there is a treaty between the Phil. And the requesting State relating to the p
rovisions of assistance in money laundering offense L. Requirement for request f
rom a foreign state a. Confirm that an investigation or prosecution is being con
ducted b. State the grounds on which any person is being investigated or prosecu
ted for c. Give sufficient particulars as to the identity of the person d. Give
particulars sufficient to identify the institution believed to have any inf o e.
Ask from the institution for any info which may be of assistance to the investi
gation or prosecution f. Specify the manner in which such info will be obtained
or produced g. Give all the particulars necessary for the issuance by the court
in the requested state of the orders needed by th requesting state h. Contain ot
her info as may assist in the execution of the request M. Authentication of docu
ments a. Signed or certified by a judge or equivalent officer in or of the reque
sting state b. Authenticated by the oath or affirmation of a witness or sealed w
ith an official seal of a minister or secretary of the government of the request
ing state c. By the secretary of embassy, consul general, consul or any officer
in the foreign service of the Philippines stationed in the foreign state N. Extr
adition
a. Negotiate for the inclusion of money laundering offenses among extraditable o
ffenses VII. Penalties E. Crime of money laundering a. Any person knowing that a
ny monetary instrument or property represents, involves, or relates to, the proc
eeds of any unlawful activity, transacts or attempts to transact said monetary i
nstrument or property i. Imprisonment of 7 to 14 years and a fine not less than
P3M b. Any person knowing any monetary instrument or property represents, involv
es, or relates to, the proceeds of any unlawful activity, performs or fails to p
erform any act as a result of which he facilitates the offense of money launderi
ng referred to above i. 4-7 years and fin not less than P1.5M not more than P3M
c. Any person knowing that any monetary instrument or property is required to be
disclosed and filed with the Anti-Money Laundering Council, fails to do so i. 6
m-4years or fine not less than P100,000 not more than P500,000, or both F. Failu
re to keep records a. 6m-1year or fine not less than P100,000 not more than P500
,000, or both G. Malicious reporting a. Any person who, with malice or bad faith
, reports a completely unwarranted or false info relative to money laundering i.
6m-4years and a fine not less than P100,000 not more than P500,000 ii. If corpo
ration-upon the responsible officers iii. Juridical person-suspend or revoke its
license iv. Alien-deportation v. Public official-perpetual or temporary absolut
e disqualification from office 50 | P a g e
vi. Public official who refuses to testify-same penalties above H. Breach of Con
fidentiality a. 3-8years and fine P500,000-P1M b. If disclosed to media-reporter
, writer, publisher, manager, editor VIII. Prohibitions against political harass
ment C. shall not be used for political persecution or harassment or as an instr
ument to hamper competition in trade and commerce D. no case may be filed agains
t and no assets shall be frozen or forfeited to the p rejudice of a candidate fo
r electoral office during election period IX. Implementing rules and Regulations
A. The BSP, IC, and SEC shall promulgate rules to effectively implement this Ac
t. T hese rules shall be submitted to the congressional oversight committee for
approval. B. Covered institutions shall formulate their own prevention programs
X. Congressional Oversight Committee C. Composition a. 7 members from the Senate
and 7 members from the House of Representatives b. Shall be appointed by the Se
nate President and the Speaker, respectively, based on proportional representati
on of parties D. Powers a. Power to promulgate rules to overse the implementatio
n of the law and to review and revise the rules issued by the AMLC within 30 day
s from promulgation XI. Rules and Regulation for banks and non-financial institu
tions to combat mone ylaundering 1. Take reasonable measures to establish and re
cord the true identity and legal existence of their clients 2. in case of doubt,
obtain the true identity of the persons on whose behalf an account is opened 3.
anonymous or fictitious accounts should not be allowed 4. identity of clients s
hould be updated 5. necessary records of transactions should be maintained 6. sp
ecial attention should be given to complex, unusual large transactions and all u
nusual patterns of transaction 7. other suspicious transactions not involving de
posit should be reported 8. Banks should avoid business with criminals
9. Programs against money laundering-employee training, audit function, developm
ent of internal policies. 51 | P a g e
52 | P a g e