Banking Laws Reviewer 1

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BANKING LAWS

GG OO VV EE RR NN II NN GG LLAA WW

Banking Institution are governed by the followinglaws:

A. General banking lawsGeneral Banking Law (R.A. No. 8791)

. New Central Bank Act (R.A. No.7653)

B. Special banking lawsNew Rural Banks Act (R.A. No. 7353)Private Development Banks Act

(R.A. No. 4093)Savings and Loan Association Act

(R.A. No. 3779). Thrift Banks Act (R.A. No. 7906)

C . Other laws affecting banksSecrecy of Bank Deposits Law(R.A. No. 1405)Unclaimed Balances Law (Act No. 3936)

Philippine Deposit Insurance Corporation Act(R.A. No. 3591)

The general banking laws above mentioned areapplicable to government banks like DBP and PNB.

The Al- Amanah Islamic Bank is subject to all bankingand pertinent laws.

(Bar Review Materials in Commercial Law, JorgeMiravite, 2002 ed.)

THREE KINDS OF ENTITIES THAT INTRODUCE FUNDSINTO THE ECONOMY:1. banks : entities that obtains funds from the public

in the form of deposits and re-lend it to the public;2. quasi-banks : those that obtain funds in the form of

deposit substitutes and re-lend the same and notfrom the public or depositors.

3. Finance companies and other financialintermediaries: those that lend funds from their own assets.

FIVEPERSONSPRIMARILYINTERESTED IN THEBUSINESS OFBANKING1. Government2. Depositors3. Investors4. Creditors5. Borrowers

BAR QUESTION:

JOINT ACCOUNT VS. PARTNERSHIP (2000)Distinguish joint account from partnership. (3%)

SUGGESTED ANSWER The following are the distinctions between jointaccount and partnership:

1) A partnership has a firm name while a jointaccount has none and is conducted in the name of theostensible partner.2) WHILE A PARTNERSHIP HAS JURIDICALPERSONALITY AND MAY SUE OR BE SUEDUNDER ITS FIRM NAME, A JOINT ACCOUNT HAS NO JURIDICAL PERSONALITY AND CANSUE OR BE SUED ONLY IN THE NAME OF THEOSTENSIBLE PARTNER.

3) While a partnership has a common fund, a jointaccount has none.4) While in a partnership, all general partners havethe right of management, in a joint account, theostensible partner manages its business operations.

5) While liquidations of a partnership may, byagreement, be entrusted to a partner or partners, in joint account liquidation thereof can only be done bythe ostensible partner.

BAR QUESTION:Theory of Cognition vs. Theory of Manifestation(1997)

The Civil Code adopts the theory of cognition, whilethe Code of Commerce generally recognizes thetheory of manifestation, in the perfection ofcontracts. How do these two theories differ?SUGGESTED ANSWER:Under the theory of cognition, the acceptance isconsidered to effectively bind the offeror only fromthe time it came to his knowledge. Under the theoryof manifestation, the contract is perfected at themoment when the acceptance is declared or made bythe offeree.


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GENERAL BANKING LAW OF 2000 (GBL)(RA No. 8791)

Purpose: To promote and maintain a stable andefficient banking and financial system that is globallycompetitive, dynamic and responsive to the demands of a developing economy ( S ec. 2) .

Scope of Application: The GBL primarily governsuniversal banks and commercial banks. It suppletorilygoverns thrift banks, rural banks and other bankinginstitutions.

GENERAL CONCEPTS

BANKS

Entities engaged in the lending of funds obtained inthe form of deposits ( S ec. 2)

Entities duly authorized by the Monetary Board toengage in the business of regularly lending fundsobtained regularly from the public through thereceipt of deposits of any kind.

An investment company that performs function assuch is NOT a bank. Thus an investment companythat is engage solely in investing, reinvesting or trading in securities is not engage in banking. ( Banas vs. Asia Pacific Finance Corp., Oct. 18,2000).

However, an investment company which loans outmoney of its customers, collects interest, andcharges a commission to both lender or borrower isengage in banking (Republic vs. S ecurity Credit and Acceptance Corp.)

QU ASI-BANKS

Entities engaged in the borrowing of funds throughthe issuance, endorsement or assignment withrecourse or acceptance of deposit substitutes ( S ec.95)

Entities authorized to perform universal or commercial banking functions may also engage inquasi-banking functions.

FINAN C IAL INTERMEDIARIES

Persons or entities whose principal functionsinclude the lending, investing or placement of fundson evidences of indebtedness or equity depositedwith them, acquired by them or otherwise coursedthrough them, either for their own account or for theaccount of others.

ORGANIZATION AND OPERATION

A. Authority to Register/Incorporate

The SEC shall not register the articles of incorporation of any bank or any amendmentthereto unless accompanied by a certificate of authority issued by the Monetary Board under itsseal ( S ec. 14).

The certificate of authority shall not be issuedunless the Monetary Board is satisfied:

1. That all requirements of existing laws andregulations to engage in the business for whichthe applicant is proposed to be incorporatedhave been complied with;

2. That the public interest and economicconditions, both general and local, justify theauthorization; and

3. That the amount of the capital, the financing,organization, direction and administration, aswell as the integrity and responsibility of theorganizers and administrators, reasonablyassure the safety of deposits and the publicinterest ( S ec. 14).

Organization of a Bank or Q uasi-BankRequirements:1. The entity is a stock corporation;2. Its funds are obtained from the public,

i.e. 20 or more persons; and3. The minimum capital requirements prescribed

by the Monetary Board are satisfied ( S ec. 8).

Note:In Quasi banks, Deposit substitute arealternative forms of obtaining funds for thepublic, other than deposit, through theissuance, endorsement, or acceptance of debtinstrument for the borrowers own account, for the purpose of relending or purchasing of receivables and other obligations.in banking or quasi-banking functions

A person or entity cannot engage in banking or quasi-banking functions without a certificate of authority from the BSP ( S ec. 6). The determination of whether a person or entity isperforming banking or quasi-banking functionswithout BSP authority shall be decided by theMonetary Board.

NATURE OF BANKING BUSINESS

Impressed with public interest where the trust andconfidence of the public in general is of paramountimportance such that:

1. The appropriate standard of diligence must bevery high, if not the highest, degree of diligence; h ig h est degree of care (PCI Bank vs.CA, 350 S CRA 446, PBCom vs. CA, G.R. No.121413, 29 Jan. 2001)

This applies only to cases where banksare acting in their fiduciary capacity, thatis, as depository of the deposits of their depositors (Reyes vs. CA, G.R. No.118492, 15 Aug. 2001) .

2. Subject to reasonable regulation under thepolice power of the state.

While an innocent mortgagee is not expected toconduct an exhaustive investigation on the historyof the mortgagors title, in case of a banking


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institution, it must exercise due diligence beforeentering into said contract, and cannot rely upon onwhat is or is not annotated on the title. Reason: Before a loan is approved, representatives are sentto the premises offered as collaterals so as toinvestigate who the real owners are (DBP vs. CA,331 S CRA 267).

The business of a bank is one affected by public

interest for which reason the bank should guardagainst loss due to negligence and bad faith. It isexpected to ascertain and verify the identities of thepersons it transacts business with (UCPB vs.Ramos, G.R. No. 147800, November 11, 2003,Callejo, J.).

Due diligence required of banks extend even topersons, or institutions like the GSIS, regularlyengaged in the business of lending money securedby real estate mortgages (GS I S vs. EduardoS antiago, G.R. No. 155206. October 28, 2003).CONSEQUENCES OF NATURE OF BUSINESS:

1. It is subject to heavy and close supervision and/or regulation by the BSP ( Central Bank of t h e P h ils. v.CA, 208 S CRA 652 ).

1. It is required to exercise utmost diligence in thehandling of deposits ( S imex International ManilaInc., 183 S CRA 361 ).

2. Special rules on strikes and lockouts: any strike or lockout involving banks, if unsettled after 7calendar days shall be reported by the BSP to theSec. of Labor who has 2 options:

a. He may assume jurisdiction over and decidethe dispute; or

b. certify it to the NLRC for compulsoryarbitration

The President may also intervene at any time andassume jurisdiction over such labor dispute in order tosettle or terminate the same.

CLASSIFICATION OF BANKS (SEC . 3)

1. U niversal banks - Primarily governed by theGeneral Banking Law (GBL ), can exercise thepowers of an investment house and invest in non-allied enterprises and have the highest

capitalization requirement.

2. C ommercial banks - Ordinary banks governed bythe GBL which have a lower capitalizationrequirement than universal banks and can neither exercise the powers of an investment house nor invest in non-allied enterprises.

3. Thrift banks These are a ) Savings and mortgagebanks; b ) Stock savings and loan associations; c ) Private development banks, which are primarilygoverned by the Thrift Banks Act (R.A. 7906).

4. Rural banks Mandated to make needed creditavailable and readily accessible in the rural areason reasonable terms and which are primarilygoverned by the Rural Banks Act of 199 2 (RA7353).

5. C ooperative banks Those banks organizedwhose majority shares are owned and controlled by

cooperatives primarily to provide financial andcredit services to cooperatives. It shall includecooperative rural banks. They are governedprimarily by the Cooperative Code (RA 6938).

6 . Islamic banks Banks whose business dealingsand activities are subject to the basic principles andrulings of Islamic Shari a, such as the Al AmanahIslamic Investment Bank of the Philippines which

was created by RA 6848.

7. Other classification of banks as determined bythe Monetary Board of the Bangko Sentral ngPilipinas.

ORDINARYC ORPORATION

BANKINGC ORPORATION

May be a stock or non-stockcorporation

Must generally be astock corporation

May issue par valueor no par valuestocks.

Shall issue par valuestocks only ( S ec. 9).

May be registeredwith the SECwithout anycertificate of authority issued bya governmentagency.

Must secure acertificate of authorityfrom the MonetaryBoard before it canregister with SEC.

Maypurchase/acquireits own shares for alegitimate corporatepurpose; providedthat, it hasunrestrictedretained earnings inits books to cover the shares to bepurchased/acquired.

May not purchase/acquire its shares or accept them assecurity for a loan.Except : whenauthorized by theMonetary Board. Insuch case, the bankmust sell or disposeof said shares within6 months from thetime of their acquisition ( S ec. 10).

Must be composedof 5 to 15 directors,each of whom shallown at least one ( 1) share of the capitalstock of thecorporation.

Also composed of 5to 15 directors. Incase of merger or consolidation, thenumber of directorsshall not exceed 2 1 ( S ec. 17).

May declaredividends out of itsunrestrictedretained earnings.

May not declaredividends, if any of the conditions setforth under Sec. 57are present.


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U NIVERSAL BANK C OMMER C IAL BANK

Authority to exerciseadditional powersother than thoseauthorized for commercial banks

No such additionalpowers

May invest in theequities of allied,whether financial or non-financial, andnon-allied enterprises(S ec. 24 )

May only invest inequities of alliedenterprises, whether financial or non-financial

Powers

1. The powersauthorized for acommercial bank;

2. The powers of aninvestment house;and

3. The power to investin non-alliedenterprises ( S ec.23).

1 . General powersincident tocorporations

2. Such powers as maybe necessary to carryon the business of commercial banking:

a. Accepting draftsand issuing letter of credits;b. Discounting andnegotiatingpromissory notes,drafts, bills of exchange and other evidence of debt;c. Accepting or creating demanddeposits; receivingother types of deposits and depositsubstitutes;d. Buying and sellingforeign exchangeand other debtsecurities;e. Extending credit.(S ec. 29 )

U NIVERSAL &C OMMER C IAL BANK

OTHER BANKS

Authorized to engage inquasi-banking functionswithout need for approval

Not so authorized

May accept or createdemand depositswithout need for approval

Demand deposits -Liabilities of the BSPand of other bankswhich are denominatedin Philippine currencyand are subject to

Must seek approval of Monetary Boardbefore accepting or creating demanddeposits. ( S ec. 33 )

payment in legal tender upon demand by thepresentation of checks ( S ec. 58, NCBA).

EQU ITY INVESTMENTSPOINT OF

DISTIN C TION

UNIVERSAL BANK

(Sec. 24-28)

C OMML BANK

(Sec. 30-32)

Total investmentin alliedenterprises

50%

of net worth

35%

of net worth

Total investmentin non-alliedenterprises

50%

of net worth

N/A

Equityinvestment in any

one enterprise

25%

of net worth

25%

of net worth

(Allied only)

Equityinvestment infinancial alliedenterprise: thriftbank, rural bankor any financialallied enterprise( S ec. 25)

A publicly-listed

bank may own upto 100% of thevoting stock of only one other UB / CB ( S ec.25).

100%

of equity

100%

of equity

y In other financial allied

enterprises,investment shall

remain aminority holding

( S ec. 31).

Equityinvestment innon-financialallied enterprises

100%

of equity

100%

of equity

Equityinvestment in asingle non-alliedenterprise

Shall not exceed35% of the total

equity in thatenterprise nor shall it exceed

35% of thevoting stock inthat enterprise

N/A

Equityinvestment inQuasi-Banks 40% 40%


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Allied Enterprises those entities which enhance or complement banking

Non-Financial Allied Enterprises pertains toactivities that do not involve money matters (such aswarehousing, safety deposit boxes )

NET WORTHThe total of the unimpaired paid-in capital includingpaid-in surplus, retained earnings and undivided profit,net valuation reserves and other adjustments as may berequired by the Bangko Sentral ( S ec. 24).

R ISK B ASED C APITAL

The minimum ratio prescribed by the MonetaryBoard which the net worth of a bank must bear toits total risk assets which may include contingentaccounts.

However, the Monetary Board may require or

suspend compliance with such ratio whenever necessary for a maximum period of one year;PROVIDED that, such ratio shall be applieduniformly to banks of the same category ( S ec. 34).

Effect of non-compliance with the prescribedminimum ratio:

1. Distribution of net profits may be limited or prohibited and MB may require that part or allof the net profits be used to increase thecapital accounts of the bank until the minimumrequirement has been met; or

2. Acquisition of major assets and making of newinvestments may be restricted. EXCEPT:

purchases of evidence of indebtednessguaranteed by the Government ( S ec. 34). 3. In case of a bank merger or consolidation, or

when a bank is under rehabilitation under aprogram approved by BSP, the MB maytemporarily relieve the surviving bank,consolidated bank, or constituent bank or corporations under rehabilitation from fullcompliance with the required capital ratio.

Effects of non-compliance with the prescribedminimum ratio:1. Distribution of net profits may be limited or

prohibited and MB may require that part or all of thenet profits be used to increase the capital accountsof the bank until the minimum requirement hasbeen met; or

2. Acquisition of major assets and making of newinvestments may be restricted. EXCEPT:purchases of evidence of indebtedness guaranteedby the Government.

3. In case of a bank merger or consolidation, or whena bank is under rehabilitation under a programapproved by BSP, the MB may temporarily relievethe surviving bank, consolidated bank, or constituent bank or corporations under rehabilitation from full compliance with the requiredcapital ratio.

FUNCTIONS OF BANKS

BASI C FU NC TIONS:1. Loan Function2. Deposit Function

OTHER F U NC TIONSUniversal banks and commercial banks may also

exercise any of the following functions:a. Receive in custody funds, documents and

valuable objects;b. Act as financial agent and buy and sell, by

order of and for the account of their customer,shares, evidences of indebtedness and typesof securities;

c. Make collection and payments for the accountof others and perform such other services for their customer as are not incompatible withbanking business;

d. Upon prior approval of the Monetary Board, actas managing agent, adviser, consultant or administrator of investment management/advisory/consultancy accounts; and

e. Rent out safety deposit boxes.

The depositary would be liable if in performing itsobligation it is found guilty of fraud, negligence; in theabsence of any stipulation prescribing the degree of diligence required, that of a good father of the family isto be observed. Any stipulation exempting thedepositary from any liability arising from loss on accountof fraud, negligence would be void for being contrary topublic policy (CA-Agro Devt vs. CA, 219 S CRA 426,Marc h 5, 1993).

Note: The bank acting as depositary or as an agentshall keep the funds, securities and other effects whichit receives duly separated from its own assets andliabilities. (Sec. 53 )

A. LOAN F U NC TION

Requirement for Grant of Loans

Before granting a loan, a bank must ascertain thatthe debtor is capable of fulfilling his commitments to thebank.

Rules:

1. A bank may demand from its applicants astatement of their assets and liabilities and of their income and expenditures and other information.

2. Sh ould suc h statements prove to be false or incorrect , the bank may terminate any loan grantedon the basis of said statements and shall have theright to demand immediate repayment or liquidationof obligation ( S ec. 40).


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C lassification of Loans

U NC LASSIFIEDLOANS

C LASSIFIED LOANS

Those that do nothave a greaterthan

normal risk and theborrower haveapparent ability tosatisfy it in full and noloss in ultimatecollection isanticipated.

Those that haveextraordinary risks of

loss in collection due tosome defects such asbad debts or thoseunder litigation.

Limit on loans, credit accommodations and guarantees (Sec. 35)

1. Single Borrowers Limit (SBL) Rules

b. The total amount of loans extended by a bank toany person, partnership, association, corporation or other entity shall at no time exceed 20% of the networth of such bank.

c. The total amount of loans may be increased by anadditional 10% of the net worth of such bankprovided the additional liabilities of any borrower are adequately secured by trust receipts, shippingdocuments, warehouse receipts or other similar documents transferring or securing title coveringreadily marketable, non-perishable goods whichmust be fully covered by insurance;

Exclusions (NON-RISK LOANS):1. Loans secured by obligations of the Bangko Sentral

or the Philippine Government;2. Loans fully guaranteed by the government;3. Loans covered by assignment of deposits

maintained in the lending bank and held in thePhilippines;

4. Loans, credit accommodations and acceptancesunder letters of credit to the extent covered bymargin deposits; and

5. Other loans or credit accommodations which theMB may specify as non-risk items.

J oint and Solidary Signature ( J SS) Practice

A common banking practice requiring as an additionalsecurity for a loan granted to a corporation the joint andSolidary signature of a major stockholder or corporateofficer of the borrowing corporation ( S ecurity Bank vs.Cuenca, 341 S CRA 781).

Reasons:

a. In case of default, creditors recourse is not limitedto corporate properties but extends to personalassets of the surety;

b. Surety would be compelled to ensure that the loanwould be used for the purpose intended.

Note: While R.A. 87 91 provides for the rates of 20%and 10% respectively, the Bangko Sentral has not yetimplemented such rates. The prevailing rates are 25%and 15% respectively.

2. DOSRI Accounts (Directors, Officers,Stockholders, and Related Interests )

Requisites (BS P Circular No. 170 ):

a. The borrower is director, officer, or anystockholder of a bank and related interest.b. He contracts a loan or any form of financial

accommodationc. The loan or financial accommodation is from(1) his bank or (2 ) a bank that is a subsidiary of abank holding company of which both his bank and

lending bank are subsidiaries, (3 ) a bank inwhich a controlling proportion of the shares isowned by the same interest that owns acontrolling proportion of the shares of his bank;

andd. The loan or financial accommodation of the DOS, singly or with that of his relatedinterest, is in excess of 5% of the capital andsurplus of the lending bank or in the maximumamount permitted by law, whichever is lower.

Who are covered (BS P Circular No. 170) :1 . Directors Directors of the lending bank

2. Officers Either identified in the by-laws or aregenerally known as such

3. Stockholders those whose stockholdings,individually and/or together with any of the followingpersons, amount to 2% or more of the totalsubscribed capital stock of the bank:a. His spouse or relative within the first degree of

affinity/consanguinity or relative by legaladoption, partnership wherein any of theforegoing is a general partner; and

b. A co-owner, with the stockholder or thestockholders spouse, or relative mentionedabove, of property/right/interest (mortgaged,pledged or assigned to secure the loan or credit accommodations, except when themortgage, pledge or assignment covers onlysaid co-owners undivided interest.

4. Related Interest a. Spouse, relatives within first degree of

consanguinity or affinity, or relative by legaladoption of a DOS, partnerships of which aDOS or any of the foregoing is a generalpartner.

b. Co-owner, with the DOS or his spouse or relative within the first degree of consanguinityor affinity, or relative by legal adoption, of theproperty/interest/ right mortgaged, pledged,assigned to secure the loans or creditaccommodations, except when the mortgage,pledge or assignment covers only said co-owners undivided interest.

c. Corporation with inter-locking directors or where 20% of the capital stock is owned by theDOS and/or their spouses or relativesmentioned above, or wholly or majority ownedor controlled by any related entity or a group of related entities in items (b ), (d), and (e ).


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Restrictions under the GBL and NCBA:a. No director or officer of any bank shall, directly or

indirectly, borrow from such bank nor shall beguarantor, endorser or surety for loans from such

bank to others, or in any manner be an obligor or incur any contractual liability to the bank, exceptwith the written approval of the majority of all thedirectors of the bank, excluding the director concerned. The written approval shall not berequired for loans granted to officers under a fringebenefit plan approved by the Bangko Sentral.

b. Dealings of a bank with any of its DOSRI shall beupon terms not less favorable to the bank thanthose offered to others (ARMS LENGTH R U LE) .

c. Loans extended to DOSRI shall be limited to anamount equivalent to their respectiveunencumbered deposits and book value of their paid-in capital contribution in the bank.Except:i. Loans, credit accommodations, and

guarantees secured by assets considered asnon-risk by the Monetary Board.

ii. Loans, credit accommodations, and advancesto officers in the form of fringe benefits.

iii. Cooperative banks with regard to their cooperative shareholders.

d. The resolution approving the loan shall be entered inthe records of the bank and transmitted to the BSP.

e. Waiver of secrecy of deposits of whatever nature inall banks in the Philippines by the borrower. Nowaiver is required if the related interests are theborrower.

f. Information obtained from examination is strictlyconfidential.

3. Rules on amount of secured loans

a. Those secured by real estate shall not exceed 75%of the appraised value of the real estate security,plus 6 0% of the appraised value of the insuredimprovements ( S ec. 37).

b. Those secured by chattels and intangible properties(such as patents, trademarks, trade names andcopyrights ) shall not exceed 75% of the appraisedvalue of the security ( S ec. 38).

BAR QUESTION:BANKS; RESTRICTIONS ON LOANACCOMMODATIONS (2006)Pio is the president of Western Bank. His wifeapplied for a loan with the said bank to finance aninternet cafe. The loan officer told her that herapplication will not be approved because the grant of

loans to related interests of bank directors,officers, and stockholders is prohibited by theGeneral Banking Law. Explain whether the loanofficer is correct. (5%)SUGGESTED ANSWER:

Section 36 of the General Banking Law of 2000 doesnot entirely prohibit directors or officers of thebank, directly or indirectly, from borrowing from thebank. In this case, Pio is the president of WesternBank, which makes him an officer, director andstockholder of the said bank. The General BankingLaw provides for additional restrictions to the bank

before it can lend to its directors or officers. Awritten approval of the majority vote of all thedirectors of the bank, excluding the directorconcerned, is required. Furthermore, such dealingsmust be upon terms not less favorable to the bankthan those offered to others (Section 1326, CentralBank's "Manual of Regulations for Banks and OtherFinancial Intermediaries, cited in Ranioso v. CA, G.R.No. 117416, December 8, 2000). A violation of thisprovision will cause his or her position to be declaredvacant and the erring director or officer subjectedto the penal provisions of the New Central Bank Act.

COLLATERALS

1. Value of collaterals

The loan shall not exceed 75% of the appraisedvalue of the real property plus 6 0% of the appraisedvalue of the improvements or 75% of the appraisedvalue of the chattel ( S ecs. 37 & 38, GBL )

B. DEPOSIT FU NC TION

Kinds of Deposits between a Bank and its Depositor

1. As debtor-creditor a. Savingsb. Timec. DemandC haracteristics:

i. In the nature of irregular deposits ( S erranovs. Central Bank, 96 S CRA 96)

ii. Contract of loan/mutuum with thedepositor as creditor

iii. Bank acquires ownership of the thingdeposited and the right to use and dispose

iv. Money deposited is commingled with theother money, constituting a common fund.

v. Not preferred credits (Central Bank vs.Morfe, 20 S CRA 507).

2. As lessor-lesseea. Safety deposit boxes the relation between a

bank renting out safety deposit boxes and itscustomer with respect to the contents of thebox is that of a bailor and bailee the bailmentfor hire and mutual benefit has been adopted inthis jurisdiction. It cannot be considered as acontract of lease because the full possessionand control of the safety deposit box is notgiven to the renters ( S ia vs. CA, 222 S CRA 24[1993]).

3. As trustee-trustor a. Trust account

4. As bailee-bailor


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a. Deposit strictly for safekeeping and for specificpurposes

5. As agent-principal :a. Deposit of check for collectionb. Deposit for specific purposec. Deposit for safekeeping

Depositors:

1. Minors :a. at least seven years of ageb. able to read and writec. not disqualified by any incapacityd. it should only be savings or time deposits

Note: Parents may deposit for their minor childrenor wards (Sec. 1 PD No.734 )

If the guardian shall give notice inwriting to any thrift bank not to make paymentsof deposits, dividends, or interest to the minor of whom he is the guardian, then such

payment shall be made to the guardian. (Sec.22, Thrift Banks Act of 199 5)

Married Women are allowed to openbank accounts without assistance of their husbands (RA No. 7 19 2

Kinds of Deposits

DEMAND DEPOSITS SAVINGS A CC OU NT

Only a universal or

commercial bank canaccept or create demanddeposits.

Evidenced by a

passbook.

A bank other than auniversal bank or commercial bankCANNOT acceptdemand deposit

Banks are prohibitedfrom issuing / acceptingwithdrawal slips or other similar instruments to effectwithdrawals without thepassbooks except for bank authorized by theBSP to adopt the nopassbook withdrawalsystem.

Temporary overdrawingagainst current accountsshall not be allowedunless caused by normalbank charges and other fees incidental tohandling such accounts.

A bank is negligent if itallows the withdrawalwithout requiring thepresentation of apassbook. (BPI v. CA )

Drawings against

uncollected deposits(uncleared checks ) aregenerally prohibited.

NOW A CC OU NTS

(Negotiable Order of Withdrawal)

TIME DEPOSITS

Interest bearing depositaccounts that combinethe payable on demandfeature of checks andinvestment feature of savings account.

An account with fixedterm

Note:

Demand, savings, NOW accounts, time depositsand deposit substitutes shall not be subject tointerest ceilings.

A bank other than a universal or commercial bankmust seek approval of Monetary Board beforeaccepting or creating demand deposits. (Sec. 33)

Anonymous accounts are prohibited. ( R.A. No9160 as amended by RA 9194; B S P Circular No. 251,July 21, 2000) exception: Foreign currency depositsmay be a numbered account. However, the lawrequires that the necessary measures are undertakenby the bank to record and establish the true identity of the depositor.

Joint account may be the subject of a survivorship

agreement whereby the co-depositor agree to permiteither of them to withdraw the whole deposit during their lifetime and transferring the balance to the survivor uponthe death of one of them ( Vitug vs, CA., Marc h 29,1990)

Types of deposit accounts (Handbook on Bank Deposits, A. Viray, 1998 ed.)

1. Individual

2. Jointa. And account

Co-ownershipThe signatures of both co-depositors arerequired for withdrawals.

b. And/or account


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Either one of the co-depositors maydeposit and withdraw from the accountwithout the knowledge, consent andsignature of the other. And upon the deathof one, the survivor may withdraw theentire balance on deposit.

The account may be deemed a

survivorship agreement depending on theintention of the parties; aleatory contractsupported by a lawful consideration whichis valid unless when made as a merecloak to hide an inofficious donation, totransfer property in fraud of creditors, or todefeat the legitime of a forced heir (Riveravs. Peoples Bank and Trust Co., 73 P h il.546 [1942]).

Deposit substitutes

An alternative form of obtaining funds from the public,other than deposits, through the issuance,endorsement, or acceptance of debt instruments for theborrowers own account, for the purpose of re-lending or purchasing of receivables and other obligations ( S ec.95, RA 7653).

DEPOSIT DEPOSITS U BSTIT U TE

No security given toguaranteerepayment; thedepositor relies onthe stability andreputation of thebank.

Guaranteed bycertificates and other instruments.(Handbook on Bank Deposits, A. Viray,1998 ed.)

A bank has the right to set-off the deposits in itshands for the payment of any outstandingindebtedness to it on the part of the depositor (Gullas vs. PNB, 62 P h il. 519; PNB vs. CA, 272 S CRA 291).

The fiduciary nature of a bank-depositor relationship does not convert the contract betweenthe bank and its depositors from a simple loan to atrust agreement, whether express or implied.Failure by the bank to pay the depositor is failure to

pay a simple loan and not a breach of trust. The lawsimply imposes on the bank a higher standard of integrity and performance in complying with itsobligations under the contract of simple loan,beyond those required of non-bank debtors, under a similar contract of simple loan (CBTC vs. CA,G.R. No. 138569, S eptember 11, 2003).

This fiduciary relationship means that the banksobligation to observe high standards of integrityand performance is deemed written into everydeposit agreement between a bank and itsdepositor. The fiduciary nature of banking requiresbanks to assume a degree of diligence higher thanthat of a good father of a family (CBTC vs. CA,Ibid.).

Suspension of Payment on its DepositLiabilities

In case a bank or quasi-bank notifies the BangkoSentral or publicly announces a bank holiday, or in anymanner suspends the payment of its deposit liabilitiescontinuously for more than 30 days, the Monetary Boardmay summarily and without need for prior hearing closesuch banking institution and place it under receivershipof the Philippine Deposit Insurance Corporation ( S ec.53).

The depositary would be liable if in performingits obligation it is found guilty of fraud,negligence; in the absence of any stipulationprescribing the degree of diligence required,that of a good father of the family is to beobserved. Any stipulation exempting thedepositary from any liability arising from losson account of fraud, negligence would be voidfor being contrary to public policy (CA-AgroDevt vs. CA, 219 S CRA 426, Marc h 5, 1993).

Note : The bank shall act as depositary or as an agentshall keep the funds, securities and other effects whichit receives duly separated from its own assets andliabilities ( S ec. 53)

PROHIBITIONS

A. O N BANKS :

1. To directly act as insurer ( S ec. 54)

2. For banks or quasi-banks to declare dividends, if atthe time of declaration:a. its clearing account with the Bangko Sentral is

overdrawn;

b. it is deficient in the required liquidity floor for government deposits for 5 or more consecutivedays;

c. it does not comply with the liquiditystandards/ratios prescribed by the BangkoSentral for purposes of determining fundsavailable for dividend declaration; or

d. It has committed a major violation as may bedetermined by the Bangko Sentral ( S ec. 57) .

3. To conduct business in an unsafe or unsoundmanner ( S ec. 56) ;

4. Publication of capital stock ( S ec. 62) ;

5. Unauthorized advertisement or businessrepresentation ( S ec. 64) ; or

6 . To employ casual or non-regular personnel or toolengthy probationary personnel in the conduct of itsbusiness involving bank deposits ( S ec. 55) .

Rationale: To prevent violation of Bank SecrecyLaw.

B. O N DIRE C TORS , OFFI C ERS , EMPLOYEES , OR AGENTS OF BANKS :

1. Make false entries in any bank report or statementor participate in any fraudulent transaction;


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2. Without order of a court of component jurisdiction, disclose to any unauthorizedperson any information relative to the funds or

properties in the custody of the bank belonging toprivate individuals, corporations, or any other entity;

3. Accept gifts or any other form of remuneration in

connection with the approval of a loan or other credit accommodation from said bank;

4. Overvalue or aid in overvaluing any security for the purpose of influencing in any way the actionsof the bank or any bank; or

5. Outsource inherent banking functions abank cannot engage the services of another

entity to receive deposits on its behalf; the bankhas to do it by itself.

Rationale: To prevent violation of Bank SecrecyLaw (Handbook on Bank Deposits, A. Viray, 1998 ed.).

However , a bank may outsource, upon prior approval of the Monetary Board the followingfunctions:

a. All information technology systems andprocesses, except for certain functionsaffecting the ability of the bank to ensure the fitof technology services deployed to meet itsstrategic and business objectives and complywith pertinent laws and regulations;

b. Data imaging, storage, and other relatedsystems;

c. Clearing and processing of checks not includedin the Philippine Clearing House System;

d. Printing of bank statements;e. Credit card services;f. Printing of bank loan statements and other

non-deposit records, bank forms andpromotional materials;

g. Credit investigation and collection;h. Processing of export, import and other trading

transactions;.i. Transfer agent services for debt and equity

services; j. Property appraisal;k. Property management services;l. Messenger, courier and postal services;m. Security guard services;

n. Vehicle service contractso. Janitorial services;p. Other services as determined by the Monetary

Board.

C . O N BORROWERS :

1. Fraudulently overvalue property offered as securityfor a loan from the bank;

2. Furnish false or make misrepresentations or suppression of material facts for the purpose of obtaining, renewing, or increasing a loan or extending the period thereof;

3. Attempt to defraud the said bank in the event of acourt action to recover a loan or other creditaccommodation; or

4. Offer any director, officer, employee or agent of abank any gift, fee, commission, or any other form of compensation in order to influence such personsinto approving a loan or other creditaccommodation application.

D. O N EXAMINERS , BSP OR GOVERNMENTOFFI C ERS AND EMPLOYEES ASSIGNED TOS U PERVISE , EXAMINE , ASSIST OR RENDERTE C HNIC AL ASSISTAN C E TO ANY BANK :

Commit any of the acts enumerated in Sec. 55 or aid inthe commission of the same.

The making of false reports or misrepresentations or suppression of materialfacts by personnel of the BSP shall constitutefraud and shall be subject to administrative andcriminal sanctions.

CONDUCTINGBUSINESS IN ANUNSAFE ORUNSOUNDMANNER(SEC . 56)

In determining whether a particular act or omission,which is not otherwise prohibited by law, rule or regulation affecting banks, quasi-banks, or trust entities,may be deemed as conducting business in an unsafe or unsound manner, the MB shall consider any of thefollowing circumstances:1. The act or omission has resulted or may result in

material loss or damage, or abnormal risk or danger

to the safety, stability, liquidity or solvency of theinstitution;

2. The act or omission has resulted or may result inmaterial loss or damage, or abnormal risk to theinstitutions depositors, creditors, investors, andstockholders or to the BSP or to the public ingeneral;

3. The act or omission has caused any undue injury,or has given any unwarranted benefits, advantageor preference to the bank or any party in thedischarge by the director or officer of his duties andresponsibilities through manifest partiality, evidentbad faith or gross inexcusable negligence;

4. The act or omission involves entering into anycontract or transaction manifestly and grosslydisadvantageous to the bank, quasi-bank or trustentity, whether or not the director or officer profitedor will profit thereby.

OWNERSHIP OF STOCKS OF A DOMESTIC BANK

1. FilipinoIn case of a Filipino individual or a domestic non-bank corporation, each may own up to 40% of theoutstanding voting stock of a local bank.

2. ForeignForeign individuals and non-bank corporations mayown or control up to an aggregate of 40% of thevoting stock of a domestic bank.


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The percentage of foreign-owned voting stocks in abank shall be determined: (GRANDFATHERRU LE) a. If individuals: by the citizenship of the

individualsb. If corporations: by the citizenship of the

controlling stockholders of the corporation,irrespective of the place of incorporation ( S ec.11).

ACT LIBERALIZING ENTRY OF FOREIGN BANKS

(R.A. NO. 7721)

The Monetary Board authorizes foreign banks tooperate through any of the following modes of entry:

1. By acquiring, purc h asing or owning up to6 0% of the voting stock of an existing bank;

2. By investing in up to 6 0% of the voting stock of anew banking subsidiary incorporated under laws of Philippines;

3. By establis h ing branc h es with full bankingauthority, provided:

a. foreign bank may avail itself of only onemode of entry; and

b. Foreign bank or Philippine corporationmay own up to 6 0% of the voting stockof only one domestic bank or newbanking subsidiary ( S ec. 2).

Entries under the second and third modes arerestricted to banks which are among the top 150foreign banks in the world or top 5 banks in their country of origin.

MINIMUM CAPITALIZATION:

1. For locally incorporated subsidiaries equal to thatof domestic banks of the same category

2. For foreign bank branches not less than the US$equivalent of P2 10M

Amendments introduced by GBL 20001. Within seven years from effectivity of the GBL

(June 13, 2000 ), foreign banks may be allowedto own up to 100% equity of only one domesticbank as a mode of entry if authorized by theMonetary Board ( S ec. 73, GBL).

2. Other foreign individuals and non-bankcorporations may own up to 40% of the votingstock of a domestic bank; the nationality of thecontrolling shareholders of the non-bankcorporations will be traced to determine theforeign ownership of the domestic bank ( S ec.11, GBL).

FOREIGN BANKS (SECS. 72 78)

1. Entry: Governed by the provisions of the ForeignBank Liberalization Act and the Offshore BankingSystem Decree ( S ec. 72)

2. Revocation of license to do business in t h eP h ilippines: The Monetary Board may revoke suchlicense on the grounds that the foreign bank isinsolvent or in imminent danger thereof or that itscontinuance in business will involve probable lossto those transacting business with it ( S ec. 78).

STOCKHOLDINGS OFFAMILY GROUPS ORRELATEDINTEREST

The law does not prohibit ownership of the stock bymembers of the same family or related interest.However, the law provides that stockholdings of individuals related to each other within the 4 th degree of consanguinity or affinity, legitimate or common law, shallbe considered family groups or related interest and mustbe fully disclosed in all transaction by such individualwith the bank. (Sec 12, GBL )

Two or more corporations owned and controlled bythe same family group or same group of person shall beconsidered related interest and must be fully disclosedin all transaction by such corporations or related groupof person with the bank. (Sec 13, GBL )

Unlike the former law, the GBL does NOT impose alimit on the number of shares that can be owned by thesame family or related interest. However this should notbe without prejudice to the 40% restriction imposed bySec 11 of the GBL.

OWNERSHIP OF REAL PROPERTY

GENERAL R U LE: A bank cannot acquire and own realproperty.

Rationale : Banks are not engaged in the business of acquiring and possessing real property. Also, banksmust maintain liquidity at all times to enable it to performits functions. Thus, banks must as much as possibleretain only assets that are easily marketable.

EXC EPTIONS:1. As shall be necessary for its own use in the conduct

of its business, provided: a. The total investment in such real estate and

improvements shall not exceed 50% of thecombined capital accounts; and

b. the equity investment of a bank in another corporation engaged primarily in real estateshall be considered as part of the bank's totalinvestment in real estate, unless otherwiseprovided by the Monetary Board ( S ec. 51).

2. As mortgaged to it in good faith by way of securityfor debts, conveyed to it in satisfaction of a debtpreviously contracted in the course of its dealings,and such as it shall purchase at forced sales or to


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secure debts; provided, however, that propertyacquired under such circumstances shall bedisposed of by the bank within a period of 5 years;provided that the bank may after said periodcontinue to hold the property for its own use,subject to ( 1) ( S ec. 52).

RULES ON FORECLOSURE OF A REAL ESTATE MORTGAGE BY A MORTGAGEE-BANK

Application: Judicial or extrajudicial foreclosure

J U DIC IAL EXTRAJ U DIC IAL

Right of redemption

Within 1 year fromregistration of theforeclosure sale(exception to Rule 6 8)

1 . Mortgagor is anatural person Within one year after the registration of sale with theRegister of Deeds(S ec. 1(3) S C Cir.

AM No. 99-10-05 )

2. Mortgagor is a j uridical person Atany time before theregistration of the

certificate of foreclosure salewhich in no caseshall be more than 3months after foreclosure,whichever is earlier.

Redemption price:

Amount due under t h e mortgage deed + interest+ all the cost and expenses incurred by thebank or institution from the sale and custody of

the property less the derived income ( S ec 78;Union Bank vs. CA, GR 134068, June 25,2001)

Right of purchaser to possess property:

Immediately after the date of the confirmation of the auction sale.

To enjoin or restrain the conduct of foreclosureproceedings, the petitioner must file a bondconditioned that he will pay all the damages whichthe bank may suffer by the injunction ( S ec. 47).

A bank may be bound by an agreement providingfor a longer redemption period (Ibaan Rural Bank

vs. CA, 321 S CRA 83) ; thus, converting it toconventional redemption or by estoppel if theextension was unilaterally made.

DIRECTORS & OFFICERS

Fit and Proper Rule

To maintain the quality of bank management and affordbetter protection to depositors and the public, in general,the Monetary Board shall prescribe, pass upon andreview the qualifications and disqualifications of individuals elected or appointed as bank directors or

officers and disqualify those found unfit ( S ec. 16)

Independent Director A person other than an officer or employee of the bank,its subsidiaries or affiliates or related interests.

Prohibition on Public OfficialsGENERAL R U LE: No appointive or elective official,whether full-time or part-time, shall, at the same time,serve as an officer of any private bank ( S ec. 19).

EXC EPTIONS:1. As otherwise provided under Sec. 5 of the Rural

Bank Act2. Where such service is incidental to financial

assistance provided by the government-owned or -controlled corporation to the bank

3. As otherwise provided under existing laws.

A bank holding out its officers and agents asworthy of confidence will not be permitted toprofit by the frauds they may thus be enabledto perpetrate in the apparent scope of their employment; nor will it be permitted to shirkfrom its responsibility for such frauds, eventhough no benefit may accrue to the banktherefrom (10 Am Jur 2d, p. 114) . Accordingly,a banking corporation is liable to innocent thirdpersons where the representation is made inthe course of its business by an agent actingwithin the general scope of his authority eventhough, in the particular case, the agent issecretly abusing his authority and attempting toperpetrate a fraud upon his principal or someother person, for his own ultimate benefit (P h ilippine Banking Corp. vs. CA and Marcos,G.R. No. 127469. January 15, 2004).

TRUST OPERATIONS (SECS. 79-93)

Only a stock corporation or a person dulyauthorized by the Monetary Board shall act as a trusteeor administer any trust or hold property in trust or ondeposit for the use, benefit, or behalf of others ( S ec. 79)


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Trust Business- any activity resulting from a trustor-trustee relationship involving the appointment of atrustee by a trustor for the administration, holding,management of funds and/or properties of the trustor bythe trustee for the use, benefit, advantage of trustor or others called beneficiaries.

Powers of trust entities:1. Act as trustee on any mortgage or bond issued by

any municipality, corporation or body politic and toaccept and execute any trust consistent with law

2. Act under the order or appointment of any court asguardian, receiver, trustee, or depositary of theestate of any minor or incompetent person, and asreceiver and depositary of any money paid intocourt by parties to any legal proceedings

3. Act as the executor of any will when it is named theexecutor thereof

4. Act as administrator of the estate of any deceasedperson, with the will annexed, or when there is nowill

5. Accept and execute any trust for the holding,management and administration of any estate, realor personal, and the rents, issues, and profitsthereof

6 . Establish and manage common trust funds ( S ec.83)

Prohibitions:1. No trust entity shall, for account of the trustor or the

beneficiary of the trust, purchase or acquireproperty from, or sell, transfer, assign or lendmoney or property to, purchase debt frominstruments of, any of the departments, directors,officers, stockholders or employees of the trustentity, including relatives within the 1st degree of consanguinity or affinity, or the related interests, of such directors, officers and stockholders, unless thetransaction is specifically authorized by the trustor and the relationship of the trustee and the other party involved in the transaction is fully disclosed tothe trustor or beneficiary of the trust prior to the

transaction ( S

ec. 80, GBL).2. The trust business and all funds, properties or

securities received by any trust entity as executor,administrator, guardian, trustee, receiver or depositary shall be kept separate and distinct fromthe general business, including all other funds,properties, and assets, of such trust entity ( S ec. 87,GBL).

PENALTIES FOR VIOLATION OF THE GBL (SEC . 66)

1. As provided by specific provisions2. Sections 34-37 of RA 7 6 53 (by excluding the bank

from clearing ) 3. Suspension or removal of the director or officer

4. Dissolution of the corporation by quo warrantoproceedings

TH E NEW CEN T RAL BANK AC T (NCBA)

(R.A. No. 7653)

Purpose: To maintain a central monetary authority thatshall function and operate as an independent andaccountable body in the discharge of its responsibilitiesconcerning money, banking and credit.

BANGKO SENTRAL NG PILIPINAS (BSP)

The states central monetary authority; it is thegovernment agency charged with the responsibility of administering the monetary, banking and credit systemof the country and is granted the power of supervisionand examination over bank and non-bank financialinstitutions performing quasi-banking functions,including savings and loan associations (Busuego vs.CA, 151 S CRA 376 [1987]).

PRIMARY OBJECTIVES:1. To maintain price stability conducive to a balanced

and sustainable growth of the economy.

2. To promote and maintain monetary stability and theconvertibility of the peso.

RESPONSIBILITIES:1. To provide policy directions in the areas of money,

banking, and credit

2. To supervise bank operations3. To regulate the operations of finance companies

and non-bank financial institutions performingquasi-banking functions, and similar institutions ( S ec. 3)

POWERS/ FUNCTIONS: 1. Issuer of currency ( S ec. 49-60)

2. Custodian of reserves ( S ecs. 64-66, 94, 103)

3. Clearing channel or house; especially where thePCHC does not operate ( S ec. 102)

4. Banker of the government the BSP shall be theofficial depository of the Government and shall


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represent it in all monetary fund dealings ( S ecs.110- 116)

5. Financial advisor of the government ( S ecs. 123-124) Under Article VII, Sec. 20 of the 19 87Constitution, the President may contract or guarantee foreign loans but with the prior concurrence of the Monetary Board.

6 . Source of credit ( S ecs. 61-63, 81-89, 109) 7. Supervisor of the banking system ( S ec. 25) shall

include the power to:a. Examine, extending to enterprises wholly or

majority-owned or controlled by the bank ( S ec.7, RA 8791) ; this power may not be restrainedby a writ of injunction unless there isconvincing proof that the action of the BSP isplainly arbitrary ( S ec. 25)

b. Place a bank under receivership or liquidation( S ec. 30)

c. Initiate criminal prosecution of erring officers of banks

8. Government agent ( S ecs. 117-122)

MONETARY BOARD (MB)

The body by which the powers and functions of theBangko Sentral are exercised ( S ec.6).

COMPOSITION: Seven members consisting of:

1. Chairman: Governor of the BSP2. A member of the cabinet to be designated by the

President of the Philippines3. Five (5 ) members who shall come from the private

sector, all of whom shall serve full-time.

Note: The degree of diligence required of the membersof the MB, officials and employees of the BSP in theperformance of their functions is extraordinary diligence ( S ec.16, NCBA).

Q UALIFICATIONS OFMEMBERS OF THEMONETARYBOARD: 1. must be natural-born citizens of the Philippines,

2. at least 35 years of age, with the exception of theGovernor who should at least be 40 years of age,

3. of good moral character, of unquestionableintegrity, of known probity and patriotism, and

4. with recognized competence in social andeconomic disciplines.

DISQUALIFICATIONS ANDINHIBITION ONGOVERNORANDBOARDMEMBERS:

1. disqualified from being a director, officer, employee,consultant, lawyer, agent or stockholder of anybank, quasi-bank or any other institution which issubject to supervision or examination by the

Bangko Sentral, in which case such member shallresign from, and divest himself of any and allinterests in such institution before assumption of office (Sec. 9);

2. those coming from the private sector shall not holdany other public office or public employment duringtheir tenure (Sec. 9);

3. cannot be connected directly with any multilateralbanking or financial institution or has a substantialinterest in any private bank in the Philippines, withinone ( 1) year prior to his appointment (Sec. 9);

4. cannot be employed in any such institution withintwo (2 ) years after the expiration of his term exceptwhen he serves as an official representative of thePhilippine Government to such institution (Sec. 9) ;

5. the Governor of the Bangko Sentral and the full-time members of the Board shall limit their

professional activities to those pertaining directly totheir positions with the Bangko Sentral. Accordingly, they may not accept any other employment, whether public or private,remunerated or ad honorem, with the exception of positions in eleemosynary, civic, cultural or religiousorganizations or whenever, by designation of thePresident, the Governor or the full-time member istasked to represent the interest of the Governmentor other government agencies in matters connectedwith or affecting the economy or the financialsystem of the country (Sec. 20 );

6. in case any member of the Monetary Board withpersonal or pecuniary interest in any matter in the

agenda of the Monetary Board shall disclose hisinterest to the Board and shall retire from themeeting when the matter is taken up (Sec. 14).

SUPERVISION ANDEXAMINATION OFBANKS The BSP shall have supervision over, and conductperiodic or special examinations of, bankinginstitutions and quasi-banks, including their subsidiaries and affiliates engaged in alliedactivities.

Subsidiary a corporation more than 50% of thevoting stock of which is owned by a bank or quasi-bank

Affiliate a corporation the voting stock of which, to theextent of 50% or less, is owned by a bank or quasi-bankor which is related or linked to such institution or intermediary through common stockholders or other factors determined by the Monetary Board.

N O RESTRAINING ORDER AGAINST BSP

No restraining order or injunction shall be issued bythe court enjoining the Bangko Sentral from examiningany institution subject to supervision or examination bythe Bangko Sentral, unless there is convincing proof that the action of the Bangko Sentral is plainly arbitrary


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and made in bad faith and the petitioner or plaintiff fileswith the clerk or judge of the court in which the action ispending a bond executed in favor of the Bangko Sentral,in an amount to be fixed by the court.

REFUSAL TO MAKE REPORTS OR PERMITEXAMINATION.

- Any officer, owner, agent, manager, director or officer-in-charge of any institution subject to the supervision or examination by the Bangko Sentral who, being requiredin writing by the Monetary Board or by the head of thesupervising and examining department willfully refusesto file the required report or permit any lawfulexamination into the affairs of such institution shall bepunished under the Act. (Sec. 34 )

False Statement. - The willful making of a false or misleading statement on a material fact to the MonetaryBoard or to the examiners of the Bangko Sentral shallbe punished. (Sec. 35 )

PROHIBITIONS ONBANKOFFICERS, DIRECTORS, LAWYERS, AGENTS

Personnel of the Bangko Sentral are herebyprohibited from:

1. being an officer, director, lawyer or agent,employee, consultant or stockholder, directly or indirectly, of any institution subject to supervision or examination by the Bangko Sentral;

Exception: non-stock savings and loanassociations and provident funds organizedexclusively for employees of the Bangko Sentral,and except as otherwise provided in this Act;

2. directly or indirectly requesting or receiving any gift,present or pecuniary or material benefit for himself or another, from any institution subject tosupervision or examination by the Bangko Sentral;

3. revealing in any manner, except under orders of thecourt, the Congress or any government office or agency authorized by law, information relating tothe condition or business of any institution;

4. borrowing from any institution subject to supervisionor examination by the Bangko Sentral shall beprohibited unless said borrowings are adequatelysecured, fully disclosed to the Monetary Board.(Sec. 27 )

CORPORATEPOWERS OF THEBSP1. To adopt, alter and use a corporate seal which shall

be judicially noticed2. To enter into contracts

3. To lease, own, and sell property4. To sue and be sued5. To acquire and hold such assets and incur such

liabilities in connection with its operations or as areessential to the proper conduct of operation

6 . To compromise, condone, or release any claim of,or settled liability to the BSP

7. To do and perform such other necessary powers

CONSERVATORSHIP OF A BANK OR QUASI-BANK

Ground: State of continuing inability or unwillingness tomaintain a condition of liquidity deemed adequate toprotect the interest of depositors and creditors.

A conservator appointed by the BSP may take over without the need of first declaring the bankinsolvent.

Duration: Not to exceed 1 year

Effects: 1. Bank/quasi-bank retains juridical personality

2. Not a precondition to the designation of a receiver

Powers of conservator: 1. To take charge of the assets, liabilities, and the

management thereof;

2. Reorganize the management;

3. Collect all monies and debts due said bank; and

4. Exercise all powers necessary to restore itsviability, with the power to overrule or rebuke the

actions of the previous management and board of directors of the bank or quasi-bank.

The powers must be related to preservation of assets, reorganization of management and therestoration of viability. Such power to revoke cannotextend to post-facto repudiation of perfectedtransactions, otherwise they would infringe the non-impairment clause of the Constitution. The power to revoke contracts only covers those that aredeemed defective i.e. , void, voidable,unenforceable or rescissible (First P h il. Intl Bank vs. CA, 252 S CRA 259). The conservators power is not unilateral and he cannot simply repudiate

valid obligations of the bank. His authority would beonly to bring actions to assail the same.

Termination:

1. When the MB is satisfied that the institution cancontinue to operate on its own and theconservatorship is no longer necessary;

2. But if the continuance in business of the bankwould involve probable loss to its depositors or creditors, proceedings for receivership andliquidation shall be pursued ( S ec. 29).

RECEIVERSHIP OF A BANK OR


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QUASI-BANK/CLOSURE

Receivership is equivalent to an injunction to restrainthe bank in any way. Thus, the appointment of areceiver operates to suspend the authority of the bankand of its directors and officers over its property andeffects (Villanueva vs. CA, 244 S CRA 395 [1995]).

Grounds:

U nder N C BA U nder GBL

1. Inability to payliabilities as they becomedue in the ordinarycourse of business, butnot including inability topay those caused byextraordinary demandsinduced by financialpanic in the bankingcommunity;

1. Notification to theBSP or publicannouncement of abank holiday ( S ec.53, GBL)

2. Insufficiency of realizable assets to meetits liabilities;

2. Suspension of payment of depositliabilitiescontinuously for morethan 30 days ( S ec.53, GBL)

3. Inability to continuebusiness withoutinvolving probable lossesto its depositors or creditors; or

3. Persistence inconducting businessin an unsafe or unsound manner.( S ec. 56, GBL)

4. Willful violation of acease and desist order that has become final,involving acts or transactions whichamount to fraud or adissipation of the assetsof the institution ( S ec.30)

Receiver: 1. Banks PDIC2. Quasi-banks Any person of recognized

competence in banking or financeFunctions: 1. Immediate gathering and taking charge of all the

assets and liabilities of the institution andadministering them for the benefit of creditors

2. General powers of a receiver 3. Determination ASAP but not later than 90 days,

whether the institution should undergorehabilitation or liquidation .Note the distinctions between rehabilitation andliquidation.

CLOSE NOW, HEAR LATER SCHEME

Sec. 2 9 of the Central Bank Act does notcontemplate prior notice and hearing before a bankis placed under receivership. It is enough that suchaction is made the subject of a subsequent judicial

review. The purpose of the scheme is to protectthe depositors, creditors, stockholders and generalpublic (Central Bank vs. CA, 220 S CRA 536).

Only stockholders representing the majority of thecapital stock of a bank have the personality to file apetition for certiorari to be filed within 10 days fromreceipt by the board of directors of the institution of the order directing receivership, liquidation or

conservatorship.

Reason: Stockholders owning a majority of theshares are expected to be more objective indetermining whether the resolution is plainlyarbitrary and issued in bad faith ( S ec. 30, NCBA;Central Bank vs. CA, G.R. No. 76118, Marc h 30,1993).

C ASE DIGEST

C entral Bank of the Philippines vs. C ourt of Appeals, 220 S C RA 536

Facts:

Based on the financial reports submitted to theCentral Bank, which states that the Financial conditionof The Triumph Savings Bank (TSB ) is one of insolvency and its continuance in the business worldinvolve probable loss to its depositors and creditors, theMonetary Board issued a Resolution ordering theclosure of TSB, forbidding it from doing business in thePhilippines, placing it under receivership and appointingRamon V. Taiaoqi as receiver. The TSB filed acomplaint assailing the resolution on the ground of lackof prior notice and hearing

Issue:

Whether or not a Monetary Board Resolutionbe annulled on the ground of lack of prior notice andhearing .

Ruling:

Section 2 9 of the Central Bank Act does notcontemplate prior notice and hearing before a bank maybe declared to stop operations and placed under receivership. When it provides for the filing of the casewithin 10 days after the receiver takes charge of the

assets of the bank, it is unmistakable that the assailedactions should precede the filing of the case. Plainly, thelegislature could not have intended or authorize noprior notice and hearing in the closure of the bank andat the same time allow the suit to annul it on the basis of the absence thereof.

This close now and hear later scheme isgrounded on practical and legal consideration to preventthe unwarranted dissipation of the banks asset and as avalid exercise of the police power to protect thedepositors, creditors, stockholders and the generalpublic.

MANDATORY RE QU IREMENTS FOR BANKC LOS U RE

1. Examination by the appropriate BSP department asto the condition of the bank


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2. Examination shows that the condition of the bank isone of insolvency

3. Director shall inform the MB in writing of such fact4. If the MB shall find the statement of the department

to be true, it shall appoint a receiver of the assetsand liabilities of the bank (Banco Filipino vs. MB,204 S CRA 519 [1991]).

5. Within 6 0 days, the MB shall determine and confirmif the bank is insolvent, and if public interest

requires, shall order the liquidation of the bank.

LIQUIDATION

Grounds: 1. The condition of the bank is one of insolvency or

that its continuance would involve probable loss toits depositors and creditors.

2. A determination by the MB that the bank cannot be

rehabilitated.

Procedure: 1. Receiver shall file ex parte , with the proper RTC, a

petition for assistance in the liquidation of theinstitution pursuant to a liquidation plan adopted bythe PDIC for general application to all closed banks.In case of quasi-banks, the liquidation plan shall beadopted by the Monetary Board.

2. He shall convert the assets of the institution tomoney for the purpose of paying the debts of theinstitution ( S ec. 30).

3. Payment shall be in accordance with the rules onconcurrence and preference of credits.Regular courts have no jurisdiction over actionsfiled by claimants against an insolvent bank (Ong vs CA, 253 S CRA 105).

EFFE C TS OF APPOINTMENT OF RE C EIVER/LIQU IDATION1. Suspension of operation2. The assets under receivership or liquidation shall

be deemed in custodia legis in the hands of thereceiver and shall be exempt from garnishment,levy, attachment or execution ( S ec. 30).

3. Bank is not liable to pay interest on deposits duringthe period of suspension of operation (OverseasBank vs. CA, 113 S CRA 778 [1982])

4. The corporation retains its legal personality (Teal Motor Co. vs. CFI, 51 P h il. 549 [1928])

5. Deposits do not become preferred credits (CB vs.Morfe, 20 S CRA 507 [1967])

LEGAL TENDER

All notes and coins issued by the Bangko Sentral arefully guaranteed by the Republic and shall be legaltender in the Philippines for all debts, both public andprivate ( S ec. 52)

Legal tender power of coins

1. 1-Peso, 5-Peso and 10-Peso coins: In amounts notexceeding P 1,000.00

2. 25 centavo coin or less: In amounts not exceedingP100.00 (Circular No. 537, 2006)

BSP Authority to Replace

1. Notes for any series or denomination More than 5years old

2. Coins More than 10 years old

Rules:

1. Notes and coins called in for replacement shallremain legal tender for a period of one year fromthe date of call.

2. After that period, they shall cease to be legal tender during the following year or for such longer periodas MB may determine.

3. After the expiration of this latter period, the notesand coins which have not been exchanged shallcease to be a liability of BSP and shall bedemonetized ( S ec. 57).

Checks representing demand deposits do nothave legal tender power and their acceptancein the payment of debts, both public andprivate, is at the option of the creditor.

However, a check which has been cleared andcredited to the account of the creditor shall be

equivalent to a delivery to the creditor of cashin an amount equal to the amount credited tohis account ( S ec. 60).

MONETARY STABILIZATION

3 I MPORTANT T OOLS TO ACHIEVE P RICE STABILITY

1. Loans to Banks (S ec. 83) (Rediscounting)a. If BSP wants to increase money supply, it

opens the rediscount window by reducing

interest on loansb. If BSP wants to decrease money supply, itcloses the rediscount window or charges veryhigh interest rates for rediscounted notes

2. Open Market Operations ( S ec. 90) a. If BSP wants to increase money supply, it buys

government securitiesb. If BSP wants to decrease money supply, it

sells government securities

3. Reserve Requirements ( S ec. 94) - where a certainpercentage of the deposit is set aside and cannotbe lent outa. if the volume of money is high, BSP will raise

reserve requirement


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b. if the volume of money is low, reserverequirement is reduced.

Rules:

1. The required reserves of each bank shall beproportional to the volume of its depositliabilities.

2. Since the required reserves are imposedprimarily to control the volume of money, theBangko Sentral shall not pay interests thereon ( S ec. 94).

3. Deposits maintained with the Bangko Sentralas part of the reserve requirements shall beexempt from attachment, garnishment, or anyother order or process of any court or agency ( S ec. 103).

4. No increase of more than 4% point within 30-day period.

PROHIBITIONS ON THE BSP

1. It shall not acquire shares of any kind or acceptthem as collateral, and shall not participate in theownership or management of any enterprise, either directly or indirectly; and

2. It shall not engage in development banking andfinancing ( S ec. 128).

SECRECY OF BANK DEPOSI T S LAW (R.A. No. 1405)

Purposes:1. To encourage people to deposit in banks2. To discourage private hoarding so that banks may

lend such funds and assist in the economicdevelopment

C overage: All deposits of whatever nature with banks or bankinginstitutions in the Philippines, including investments inbonds issued by the Government of the Philippines, itspolitical subdivisions and its instrumentalities.

PROHIBITEDACTS:

1. Examination and inquiry or looking into all deposits,of whatever nature, with the banks in thePhilippines including investments in bonds issuedby the Government.

2. Any disclosure by any official or employee of anybank to any unauthorized person of any informationconcerning the said deposits.

GENERAL R U LE: The deposits covered by law areconsidered as of an absolutely confidential nature andmay not be examined, inquired or looked into by anyperson, governmental bureau, or office.

EXC EPTIONS:A. FROM R.A. NO. 14051. Upon written permission of the depositor;

2. In cases of impeachment;

3. Upon order of a competent court in cases of briberyor dereliction of duty of public officials;

4. In cases where the money deposited or invested isthe subject matter of the litigation; ( S ec. 2)

BAR QUESTION:Banks: Secrecy of Bank Deposits; Garnishment(2004)

CDC maintained a savings account with CBank. Onorders of the MM Regional Trial Court, the Sheriffgarnished P50,000 of his account, to satisfy the

judgment in favor of his creditor, MO. CDC

complained that the garnishment violated the Law onthe Secrecy of Bank Deposits because the existenceof his savings account was disclosed to the public.(5%) Is CDC's complaint meritorious or not? Reasonbriefly.

SUGGESTED ANSWER

N o. CDC's complaint is not meritorious. It was held inChina Banking Corporation v. Ortega, 49 SCRA355 (1973) that peso deposits may be garnished andthe depositary bank can comply with the order ofgarnishment without violating the Law on theSecrecy of Bank Deposits. Execution is the goal oflitigation as it is its fruit. Garnishment is part of theexecution process. Upon service of the notice ofgarnishment on the bank where the defendantdeposited funds, such funds become part of thesubject matter of litigation.

B. From other laws

1. Anti-Graft and C orrupt Practices Act cases (R.A.

No. 3019; added by analogy in PNB vs. Gancayco,15 S CRA 91 [1965]) ;

2. NIRC - Inquiry by the Commissioner of InternalRevenue into bank deposits of:

a. A decedent to determine his gross estate;b. A taxpayer who has filed an application for

compromise of his tax liability by reason of financial incapacity to pay his tax liability. Hemust file a written waiver of his privilege under RA 1405 or other general or special laws ( S ec.6[f], NIRC).

3. Inquiry or examination by the Anti-MoneyLaundering C ouncil (AMLC ) of any particular deposit or investment with any banking institution or non-bank financial institution upon order of anycompetent court in cases of violation of the Anti-Money Laundering Law, when it has been


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established that there is probable cause that thedeposits or investments are related to an unlawfulactivity or a money laundering offense, except thatno court order shall be required in the followingunlawful activities:a. Kidnapping for ransom under Art. 2 6 7 RPC;b. Comprehensive Dangerous Drugs Act of 2002

(RA No. 9165) ;

c. Hijacking and other violations under RA 6 235;destructive arson and murder under RPC.Including those perpetrated by terrorists againstnon-combatant persons and similar targets ( S ec. 11, R.A. No. 9160 as amended by S ec. 8 of RA 9194)

4. Disclosure to the Treasurer of the Philippines of dormant deposits for at least 10 years under theU

nclaimed Balances Act (Act No. 3936).

OTHER LAWS RELATING TO SECRECY OF BANK DEPOSITS

A. Foreign C urrency Deposit Act (R.A. No. 6426) :B. Extends confidentiality to foreign currency deposits,

but the law contains only one ground authorizingexamination: upon written permission of thedepositor.

C . General Banking Law of 2000 (R.A. No. 8791) :

1. No bank shall employ casual or non-regular personnel or too lengthy probationary personnel inthe conduct of its business involving bank deposits ( S ec. 55.4).

2. No director, officer, employee, or agent of any bankshall, without court order, disclose to anyunauthorized person any information relative to thefunds or properties in the custody of the bankbelonging to private individuals, corporations, or any other entity, provided that with respect to bankdeposits, the provisions of existing laws shallprevail ( S ec. 55[b]).

3. Outsourcing of inherent bank functions

D. New C entral Bank Act (R.A. No. 7653) :1. DOSRI loans2. Periodic and special examinations by the BSP

(Sec. 25 )

E. Anti-Money Laundering Act (R.A. No. 9160)

Provides for another exception toconfidentiality, which is applicable to both pesoand foreign currency deposits.

Garnishment of bank deposit of judgmentdebtor does not violate RA 1405. It was not the

intention of the legislature to place bankdeposits beyond the reach of execution tosatisfy a final judgment . Its purpose is merelyto secure information as to the name of thedepositor and whether or not the defendanthad a deposit in said bank, only for purposes of

garnishment. Any disclosure is purelyincidental to the execution process (C h inaBanking Corporation vs. Ortega, 49 S CRA355).

Illegally acquired property extends to caseswhere property is concealed by being held byor recorded in the name of respondentsspouse, ascendants, descendants, relatives, or

any other persons (Banco Filipino S avings and Mortgage Bank vs. Purisima, 161 S CRA 576).

Money-market placement is not covered by RA1405 because it is not deposited in the bank.

BAR QUESTION:BANKS: APPLICABILITY: FOREIGN CURRENCYDEPOSIT ACT & SECRECY OF BANK DEPOSITS(2005)Hi Yielding Corporation filed a complaint against fiveof its officers for violation of Section 31 of theCorporation Code. The corporation claimed that thesaid officers were guilty of advancing their personal

interests to the prejudice of the corporation, andthat they were grossly negligent in handling itsaffairs. Aside from documents and contracts, thecorporation also submitted in evidence records ofthe officers U.S. Dollar deposits in several banksoverseas - Boston Bank, Bank of Switzerland, andBank of N ew York. For their part, the officers fileda criminal complaint against the directors of HiYielding Corporation for violation of Republic Act N o.6426, otherwise known as the Foreign CurrencyDeposit Act of the Philippines. The officers allegedthat their bank deposits were illegally disclosed for

want of a court order, and that such deposits werenot even the subject of the case against them.a) Will the complaint filed against the directors ofHi Yielding Corporation prosper? Explain

SUGGESTED ANSWER:N o, because the Foreign Currency Deposit Act (R.A.N o. 6426), including its punitive provisions, refers toforeign currency deposits accounts constitutedwithin the Philippines. It has no application at all toaccounts, even though they are banks, opened andconstituted abroad

b) Was there a violation of the Secrecy of BankDeposits Law (Republic Act No. 1405)? Explain.

SUGGESTED ANSWER:N o, because the punitive provisions of the Secrecyof Bank Deposits Law (R.A. N o. 1405), including thestatutory exemptions provided therein, are notapplicable to FCDU accounts, even when constitutedlocally. (Intengan v. Court of Appeals, G.R. No.128996, February 15, 2002 )

REQUISITES FOR IN-CAMERA INSPECTION OF BANK DEPOSITS


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Marquez vs. Desierto, G.R. No. 135882,

June 27, 2001

1. Pending case before a court of competent jurisdiction

2. Account must be clearly identified3. The inspection is limited to the subject of the

pending litigation.

4. The bank personnel and account holder must bepresent during the inspection.5. The inspection must cover only the account

identified in the pending case.

R.A. NO. 1405 VIS--VISPOWER OF THE BSP TO CONDUCT PERIODIC AND/OR SPECIAL

EXAMINATIONS (SEC . 4, GBL & SEC . 25, NCBA)

Prof. Aquino and Prof. Viray believe that thegeneral rule still applies. Hence, the depositremains confidential.

PenaltiesImprisonment of not more than 5 years or a fine notmore than P20,000 or both, in the discretion of thecourt.

Impeachment

In impeachment proceedings, the impeachmentcourt may inquire into bank deposits. Thus, during theimpeachment proceedings against former PresidentEstrada, Chief Justice Davide ruled that ClarissaOcampo could testify on the Jose Estrada/Jaime

Dichaves accounts maintained with Equitable PCIBBank, over the objections of the defense that this wouldviolate the Bank Secrecy Law. Basis for this ruling wasthat the inquiry would be made in the course of animpeachment proceeding.

WRITTENPERMISSION OFDEPOSITOR A bank may allow an inquiry into a deposit with the

written consent of the depositor. An oral or impliedauthorization does not suffice. This consent may begiven voluntarily. In some cases, however, the consentis involuntary because the law requires it.

Thus, Section 2 6 of the New Central Bank Act asimplemented by BSP Circular No. 170, series of 199 8,requires a director, officer or stockholder of a bank or their related interests to submit a written waiver of thesecrecy of all his deposits of whatever nature in allbanks of the Philippines in favor of the Bangko Sentral,if he applies for a DOSRI loan. However, theinformation obtained from the examination remainsconfidential and may be used by BSP examiners only inlegal action it may initiate involving the said deposits.

A waiver of the Bank Secrecy Law is also requiredin case of loans secured by a hold-out or an assignment

of certificates of time deposits. (Section X3 15, Manual of Regulations for Banks ).

WHEREFUNDSDEPOSITED ARESUBJECT OFLITIGATION

C ase DigestOnate v Hon Zeus Abrogar, 230 S C RA 181

Facts:Sun Life brought a collection case to recover

the proceeds of a check it had issued, the insurancecompany wanted to determine how the defendant hadapplied the proceeds of the check. The trial courtallowed Sun Life to examine pertinent records of thebank in which the check was deposited.

Ruling:The Supreme Court held that the examination

was authorized by Section 10 of Rule 57, on theexamination of a person whose property has beenattached and person indebted to him or controlling hisproperty. The Court struck down the argument that theexamination would violate the Bank Secrecy Law,explaining that the examination fell within the exception

in cases where the money deposited or invested is thesubject matter of litigation. The Court added that theexamination of bank records was not a fishingexpedition, but rather a method by which Sun Life couldtrace the proceeds of the check that it paid to thepetitioners.

In another case, Mellon Bank remitted $ 1 million rather that an intended $ 1 ,000 to the recipient,who deposited part of the remittance in a local bank.When personnel of the depositary bank testified on thebank deposits, the defense moved to strike out thetestimonies of the depositary banks witnesses. TheSupreme Court allowed their testimonies to remain onthe record, stating Section 2 of said law allows thedisclosure of bank deposits in cases where the moneydeposited is the subject matter of the litigation. (MellonBank v. Magsino, 190 S CRA 633.

UNEXPLAINEDWEALTH(RA3019)

Although the Bank Secrecy Law did not includecases covered by the Anti-Graft Law among theexceptions, the Supreme Court held that they should beincluded. The only conclusion possible is that Section 8of the Anti-Graft Law is intended to amend Section 2 of Republic Act No. 1405 by providing an additionalexception to the rule against disclosure of banddeposits. (PNB v. Gancayco, 15 S CRA 91 (1965).

This overturned an earlier case decided by the HighCourt where it held that a prosecution under the Anti-Graft Law was not embraced within any of theexceptions to the Bank Secrecy Law that would allowdisclosure by a bank of information concerning adeposit . (Tatalon Bario Council v. Bank of PI, 7 S CRA10 (1963).

In another case, the Supreme Court expanded theexception under the Anti-Graft Law, when it allowed anexamination not only of the accuseds deposits, but alsothose of his spouse, ascendant, descendants and

relatives, and other persons as well. ( Banco Filipino v.Hon. Fidel Purisima, 16 1 SCRA 57 6 (19 88). Here, theCourt declared as proper the production by subpoenaduces tecum of bank records of transactions by or in thenames of the wife, children and friends of a specialagent of the Bureau of customs accused of having


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allegedly acquired property manifestly out of proportionto his salary and lawful income. The Court explained:

To sustain the petitioners theory, and restrict theinquiry only to property held by or in the name of thegovernment official or employee, or his spouse andunmarried children, is unwarranted in the light of theprovisions of the statutes in question, and would makeavailable to persons in government who illegally acquireproperty an easy and fool-proof means of evadinginvestigation and prosecution; all they would have to dowould be to simply place the property in the possessionor name of persons other than their spouse andunmarried children. This is an absurdity that we will notascribe to the lawmakers.

U pon Order of the Ombudsman Although Section 8 of the law that created the

Office of the Ombudsman expressly granted theOmbudsman the power to administer oaths, issuesubpoena and subpoena duces tecum and taketestimony in any investigation or inquiry, including thepower to examine and have access to bank accounts

and records, the Supreme court held that theOmbudsman could not inquire into bank deposits untilthere was a pending case in court involving thedeposits .(Marquez v. Desierto, 359 S CRA 772 (2001)

U nclaimed Balances LawThe Unclaimed Balances Law (Republic Act No.

3936 ) requires each bank to file a sworn statement withthe Treasurer of the Philippines stating the deposits thatthe bank holds in the names of persons known to bedead or who have not made deposits or withdrawalsduring the preceding ten years or more. It is alsorequires the bank to post a copy of the sworn statementin the bank premises. However, this is done only after the bank shall have first communicated with the

depositor at his last known residence or post officeaddress. Such a disclosure of the deposits and thedepositors, does not violate the Bank Secrecy Law.

Garnishment of Bank Deposit

In C h ina Banking Corporation v. Court of Appeals ,(19 3 SCRA 452 ( 1991) the Supreme Court held that thegarnishment of a bank deposit does not violate the BankSecrecy Law. Said the court:

It is clear from the discussion of theconference committee report on x x x Republic Act.No. 1405, that the prohibition against examination of or inquiry into a bank deposit under Republic Act No. 1405 does not preclude its being garnished toinsure satisfaction of a j udgment. Indeed, there isno real inquiry in such a case, and if the existenceof the deposit is disclosed, the disclosure to evade

payment of their j ust debts, even if ordered by theCourt, through the expedient of converting their assets into cash and depositing the same in abank. (P hil. Commercial & International Bank v.Court of Appeals, 93 S CRA 452 ( 1991).

BAR QUESTION:Banks; Secrecy of Bank Deposits (2000)

GP is a suspecte

Documents

Banking Laws Reviewer 1