Banking Laws - Dizon

CHAPTER 1
. DECLARED Policy of the State (Sec. 2, GBL) - The State recognizes the vital role of banks
providing an environment conducive to the sustained development of the national economy and
the fiduciary nature of banking that requires high standards of integrity and performance. n
furtherance thereof, the State shall promote and maintain a stable and efficient banking and
financial system that is globally competitive, dynamic and responsive to the demands of a
developing economy.
. Definition of Banks (Sec. 3.1, GBL) - "Banks" shall refer to entities engaged in the lending of
funds obtained in the form of deposits. Note: Banks may engage in other activities allowed by
law.
. Nature of Banking Business
A. Debtor-Creditor Relationship The relationship existing between a depositor and
bank is that of a creditor and debtor.
B. Fiduciary Duty
1. Simex ntl., nc. vs. CA: The State recognizes the "fiduciary nature of
banking that requires high standards of integrity and performance. Banks
are required 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 does NOT convert the
contract between the bank and its depositors FROM a SMPLE LOAN 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 pay the depositor is failure to pay a simple
loan, and NOT a breach of trust.
D. ndispensable nstitution
1. Banks is an indispensable institution in the modern world and plays vital role
in the economic life of every citizen. People have come to regard them with
respect, gratitude, and confidence.
2. Even a humble wage-earner does not hesitate to entrust his life savings
3. An ordinary person usually 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
affairs, not only in the form of loans, but in their day-to-day transactions like
encashing a check.
E. mpressed with Public nterest (Simex vs. CA) a depositor expects a bank to treat
his account with utmost fidelity, whether such account consists only of a few hundred
pesos or millions.
F. Degree of Diligence (Simex vs. CA)
Art. 1172 of NCC states that the degree of diligence required of an obligor is that
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 secured by reaI estate
mortgage.
G. Treatment of Accounts with Meticulous Care There is NO LAW mandating banks to
call up their clients whenever their representatives withdraw significant amounts
from their accounts.
H. Duty to Keep Records
1. Banks shall have a true and accurate account, record, statement of their
daily transactions especially those of deposit liabilities.
2. The making of a false entry or willful omission of entries is a ground for the
imposition of administrative sanctions and disqualification from office.
. Banks are NOT Gratuitous Bailees Banks solicit deposits in order that they can use
the money to gain.
J. Banks are NOT Expected to be nfallible, but must bear the blame for NOT
discovering mistakes despite established procedures.
Q: Sps. A and V opened a joint current 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 opened their
joint current account, the "New Accounts teller pulled out the old signature card of A and
placed the old personal account number of A in the deposit slip. V issued two checks and
one of these was dishonored for F. They were deducted P20 from their account. The bank
tried to call the spouses, but they were in Pampanga. Is the bank IiabIe for damages?
A: Yes.
- a depositor expects a bank to treat his account with utmost fidelity, whether such
account consists only of a few hundred pesos 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 criminal
litigation
Note: Exemplary damages are awarded if there is malice and bad faith.
K. Dealing with Registered Lands The rule that persons dealing with registered lands
can rely solely on the certificate of title does NOT APPLY to banks. Banks should
exercise more care and prudence in dealing with registered lands that private
individuals, for their business is one affected by public interest.
Q: A sold is unregistered parcel of land to B. Subsequently, an Orig. Cert.Title (OCT) was
issued. A surrendered it to X bank as a consequence of a mortgage. B died w/o knowing
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 duplicate certificate outside the bank's
premises. C then brought it to the Register of Deeds with the Deed of Sale and he was
issued a Transfer Cert of Title. Is the bank IiabIe 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 veracity of C's claim and character.
- This acts runs afoul of the bank's mandate to observe the highest diligence
- A has also the right to due process. Notice and hearing are indispensable elements of
this right which the bank ignored
Q: A bank accepted a property as mortgage despite existence of structures and occupants
other than the mortgagor. Is the bank negIigent?
A: Yes. Banks, being in the business of extending loans, are familiar with the rules on land
registration. They are expected to exercise more care and prudence in dealing with
registered lands that private individuals, for their business is one affected by public interest.
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The bank should have conducted investigation since there occupants other than the owner
of the land mortgaged. This constitutes gross negligence amounting to bad faith.
L. Banks may Exclude Persons in their Premises No employees must be spared by
banks and their officers and employees to ensure and preserve the trust and
confidence of the general public.
V. Liability For Acts and Employees Bank is LABLE for the wrongful acts of its officers
done WTHN the scope of their authority.
A. Negligence of Manager
Bank is liable for the negligence or misdeed of the branch manager since confidence in the
banking system necessarily includes reliance on bank managers. (BP vs. First Metro
nvestment Corp.)
B. Negligence of Officers if within the scope of authority, bank is liable
C. Negligence of Tellers returning the passbook ONLY to the depositor or his
authorized representative. f given to the wrong person, bank is liable since they would
be clothing that person presumptive ownership of the passbook.
Note: Appropriation of money by a bank teller is NOT ESTAFA. Such is only MATERAL
POSSESSON. The bank still has JURDCAL POSSESSON. f for personal gain, THEFT.
f the teller has possession of the money since he occupies a position of confidence,
QUALFED THEFT.
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 example. 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 responsible for such damages in the ABSENCE of fraud, bad faith,
malice, or wanton attitude.
F. Respondeat superior, Diligence in the Selection, and Supervision of Employees
- A bank is bound by negligence of its employees under the principIe of Respondeat
superior or command responsibility.
V. Classification of Banks (CUT RICO)
Sec. 3.2. Banks shall be classified into:
(a) Universal banks;
(b) Commercial banks;
(c) Thrift banks, composed of:
(i) Savings and mortgage banks;
(ii) Stock savings and loan associations; and
(iii) Private development banks, as defined in the Republic Act No. 7906 (hereafter the
"Thrift Banks Act);
(d) Rural 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 "Cooperative
Code");
(f) slamic banks as defined in Republic Act No. 6848, otherwise known as the "Charter of Al
Amanah slamic nvestment Bank of the Philippines; and
(g) Other classifications of banks as determined by the Monetary Board of the Bangko Sentral
ng Pilipinas.
A. Business Name
- Only a bank that is granted universal/ commercial banking authority may represent
itself to the public as such in connection with its business name
- Thrift Banks: allowed to use and adopt any name, provide the ff words are affixed: A
thrift bank, Saving bank, A Private Development Bank, or A stick Savings and Loan
Association
- Rural or Commercial Banks: allowed to use and adopt any name, provide the ff words
are affixed: Rural or Coop, A Cooperative Bank, or A Rural Bank.
! The size of the letters of such phrase shall be at Ieast 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. power to invest in non-allied enterprises
C. Commercial Banks
1. general powers incident to corporations
2. powers of commercial banks: (A BREAD)
D. Rural Banks
- designed to make needed credit available and readily accessible in the rural areas on
reasonable terms
- primary purpose is to meet the normal credit needs of farmers, fishermen, or farm
families
E. Thrift Banks
- include savings and mortgage banks, private devt. banks, and stock savings and
loans associations.
- Providing short-term working capital, medium and long term financing to business
engaged in agriculture, services, industry, and housing
- Powers of a Thrift Bank:
F. Cooperative Banks
- one organized by, the majority shares of which is owned and controlled by,
cooperatives primarily to 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. slamic Banks (Al-Amanh slamic nvestment Bank of the Philippines)
- in Zamboanga City
- primary purpose shall be to promote and accelerate the socio-economic devt of the
Autonomous Region by performing banking and financing operations and to establish
and participate in the agricultural, commercial, and industrial ventures based on the
slamic concept of banking.
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H. Other Banks
- Philippine Veterans Bank private commercial bank owned by veterans
- Land Bank of the Philippines finance the acquisition and distribution of agricultural
estates fro division and resale to small landholders as well as the purchase of the
landholding by the agricultural lessee
- Development Bank of the Philippines was created as Rehabilitation Finance Corp.
(RFC); took over the functions of Agricultural ndustrial Bank
. Non-Stock Saving And Loan Associations mean a non-stock, non-profit corp
engaged in the business of accumulating the savings of its members and using such
accumulations for loans to members for home building or personal finance
J. Quasi-banks refer to entities engaged in the borrowing of funds through the
issuance, endorsement or assignment with recourse or acceptance of deposit
substitutes for purposes of relending or purchasing of receivables and other
obligations
"deposit substitutes" is defined as an alternative form of obtaining funds from the
public, other than deposits, through the issuance, endorsement, or acceptance of debt
instruments for the borrower's own account, for the purpose of relending or purchasing
of receivables and other obligations.
V. Authority to Engage in Banking and Quasi-Banking (QB) Functions
A. Authority from Bangko Sentral
- No person shall engage in banking operations or QB functions WTHOUT authority
from the Bangko Sentral
- No articIes of incorporation or amendment to articIes of incorporation of banks,
banking and quasi-banking institutions, building and loan associations, trust
companies and other financial intermediaries, insurance companies, public utilities,
educational institutions, and other corporations governed by special laws shall be
accepted or approved by the Commission unIess accompanied by a favorabIe
recommendation of the appropriate government agency to the effect that such
articIes or amendment is in accordance with Iaw. (Sec. 17 of BP 68)
- The Securities and Exchange Commission shall not accept for fiIing the by-Iaws or
any amendment thereto of any bank, banking institution, building and loan
association, trust company, insurance company, public utility, educational institution or
other special corporations governed by special laws, unIess accompanied by a
certificate of the appropriate government agency to the effect that such by-Iaws
or amendments are in accordance with Iaw. (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 investigating
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 annulled by
BS.
C. The dept head and the examiners of the supervising and examining dept 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 appropriate sanctions
!" BS shall, when examining a bank, have the authority to examine an enterprise which
is wholly or majority-owned by the bank.
E. Certificate of Authority to Register
- The SEC shall not register the articles of corp or any amendment unIess
accompanied by a certificate of authority issued by the MB, under its seaI. The
MB shall be satisfied from the evidence submitted to it: (RPC)
! All requirements of law have been complied with
! Public interest and economic conditions justify the authorization
! The amount of capital as well as the integrity of the organizers reasonable
assure the safety of deposits and the public interest
- The SEC shall not register the by-laws of any bank or any amendment unIess
accompanied by a certificate of authority issued by the MB, under its seaI.
CHAPTER 2: ORGANIZATION, MANAGEMENT & ADMINISTRATION OF BANKS, QUASI-
BANKS AND 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. Funds are obtained from the public, 20 o more persons
3. Minimum capital requirements by MB are satisfied
B. Capabilities
! The MB shall take into consideration their apability in terms of their financial
resources and technical expertise and integrity.
1. Bank's ownership structure
2. Director's and senior management
3. ts operating plan
4. nternal control
5. ts projected financial condition and capital base
C. Capital Requirements
1. Banks shall comply with the required minimum capital by MB:
Universal 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
n 1st, 2nd & 3rd class cities and 1st class minicipalities- 6.5M
n 4th, 5th & 6th classcities and in the 2nd, 3rd & 4th class municipalities-
3.9M
n 5th & 6th class municipalities- 2.6M
2. At least 25% of the total authorized capital stock shall be subscribed 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.
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D. ncorporators/ Subscribers
1. Must be persons of integrity and of good credit standing in the business
community. Subscribers must have adequate fonancial strength 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
organizing or investing in the proposed bank.
*if there is excess, may be listed among the original subscribers in the Articles of
Corp.
QUERY: MAY COOPERATIVES ORGANIZE 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 subject 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 to branch out shall be responsible for all business conducted
in such branches because a bank and its offices shall be treated as one unit.
II. StockhoIdings
A. Treasury Stocks
1. No bank shall
! Purchase/ acquire shares of its own capital stock 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
private sale.
2. At common law, a coprpration has no lien upon the shares of stockholders for
any indebtedness of the corporation.
3. Sec.35 of the US National Banking At of 1864, if banking corporations were given
a lien on their own stock for the indebtedness of the stockholders, the prohibition
against granting loans or discounts upon the security of the stock would become
laregly ineffective.
B. Foreign Stockholdings
1. Foreign inividuals an non-bank corporations may own or control up to 40% of the
voting stock of a domestic bank. t shall apply t Filipinos and domestic non-bank
cprporations.
QUERY: PROVISION IS AMBIGUOUS. IF IT APPEARS THAT FPREIGN INDIVIDUALS AND
NON-BANK COPORATINS MAY ONLY CONTROL UP TO 40% OF THE VOTING STOCK.
ON 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 inividuals 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 them shall not
exceed 40% of the outstanding voting stock of the bank. The percentage of foreign-owned
voting stock shall be determined by the citizenship of the individual stockholders in the bank.
-Filipino individual and domestic non-bank corporation may each own up to 40% o the voting
stock of a domestic bank. There shall be no aggregate ceiling on the ownership by such
individuals and corporations in a domestic bank.
2. The percentage of foreign-owned voting stock shall be determined by the
citizenship of the individual stockholders in the bank shall follow the citizenship
of the controlling stockholders of the corporation, irrespective of the place of
incorporation.
*CONTROLLNG STOCKHOLDER- refer to individuals holding more than 50% of
the voting stock of the corporate stockholders of the bank.
"# At least 60% of voting stock of any commercial bank shall be owned by Filipino
citizens. For thrift banks, at least 40% of its voting stock shall be owned by
Filipinos. n rural banks,all of the capital stock.
NOTE: n determining the nationality of banks, the CONTROL TEST is applied. The following
tests do not:
1. War-time test
2. nvestment test
3. Place of incorporation test
4. Grandfather rule
5. Principal place of usiness test
C. Acquisition of Voting Stock in a Domestic Bank
1. Within 7years from the effectivity of the GBL and subject 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 authorize any foreign bank, which prior to the
effectivity of the GBL availed itself of the privilege to acquire upto 60% of the
voting stock of a bank under the 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 voting stock thereof.
3. MB shall adopt measures necessary to ensure that at all times the control of 70%
of the resources or assets of teh entire banking system is held by banks which
are at keast majority-owned by Filipinos.
D. Family Grous or Related nterests
$# Stockholdingsn of individuals related to each other within the fourth degree of
consanguinity or affinity, legitimater or common-law shall be considered family
groups or related interests and must be fullt disclosed in all transactions by
such an individual with the bank.
%# Two or more corporations 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 transactions by such corporations or related groups of persons
with the bank.
III. Board of Directors
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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 for any lawful purpose
2. NDEPENDENT DRECTOR- mean a person other tha an officer or employee of
the bank, its subsidiaries or ffiliates or related interests.
*Non-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 not been an officer or employee of the bank/quasibank/trust entity, its
subsidiaries 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 institution's majority stokholder
c. not a majority shareholder of the institutions, any of its related ompanies or of its
majority shareholder
d. not a relative w/n 4th degree of consanguinity or affinity, legitimate or common law
of any director,oficer or majority shareholder of the bank/quasibank/trust entity, its
subsidiaries and affiliates or related companies
e. not acting as a nominee or representatve of any director or substantial holder
f. free from any business or other relationship which could materially interfere with the
exerise of his judgment
B. Directors of Merged or Consolidated Banks
! The number of directors shall not excedd 21.
C. Meetings
1. May be conducted throuh modern technologies such as teleconferencing and
video-conferencing
*Banks shall include in theor bylaws a provision taht meetings of their board of
directors shall be held only within the Philippines.
2. Corporate officers, quorum:
! mmediately after election, directors must formally organize the election of the
a. president who shall be thedirector
b. treasurer, who may or may not be a director
c. secretary who shall 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 treasurer at the
same time.
*Directors or trustees cannot attend ot vote by proy at board meetings.
D. Compensation and other Benefits of Directors and Officers
1. MB may regulate the payment by the bank to its deirectors and officers of
compensation, allowance, fees, bonuses, stock options, proit sharing and fringe
benefits only in the exceptional cases and when the circumstances warrant, such
as but not limited 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 reasonable per
diems. Provided, taht any such compensation other than per diems maybe
granted to directors by the vote of the stockholers representing at least a
majority of the outstanding capitl stock at a regular or special stockholder's
meeting. t shall not exceed 10& of the net income before income tax of the
corporation durng the preceeding year.
IV. Fit and Proper RuIe
A. Powers of the MB
1. To maintain the quality of bank management and afford better protection to
depositors and the public in general.
-MB shall prescribe,pass upon and review the qualifications and disqualifications
of individuals elected or appointed bank directors or officers and disqualify those
found unfit.
2. After due notice to the board of directors of the bank, the MB may disqualify,
suspend or remove any bank director or officer who commits or omits an act
which render himunfit for the position.
3. f found fit and proper, shall be given to his integrity, experience, education,
training and competence.
B. Disqualification
a. Permanently Disqualified Directors
1. Have been convicted by final judgment of a court for offenses involving
dishonesty or breach of trust (ex. Estafa, extortion, forgery, malversation,
swindling, BP22)
2. Have been convicted by final judgment of a court sentecing them to serve a
maximum term of imprisonment of more than 6 years.
3. Have 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 emplyees 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 violation of banking
law, rules an regulaitons
7. Those directors, officers or emplyees 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. Person who refuses to fully disclose the extent of their business interests to
the appropriate suoervising and examining department.
2. Directors who have been absent or who have not participated in more than
50% of all meetings, both regular and special, and those who failed to
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physically attend at east 25% of all meetings in an year except those with
notarized certification executed by the corporate secretary.
3. Persons who are deinquent in the payment of their obligations:
a. DELNQUENT N THE PAYMENT OF OBLGATONS- 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 institutions, underdifferent credit lines or loan
contracts, ar past due.
b. Obligations 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 partner
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 judgment of a court for offenses involving
dishonesty or breach of trust (ex. Estafa, extortion, forgery, malversation,
swindling, BP22)
5. Directors of officers of closed banks/quasibanks/trust entities pending their
clearance by the MB
6. Directors disqualified for failure to observe/discharge their duties &
responsibilities
7. Directors who failed to attend the special seminar for board of directors
8. Persons dismissed/terminated from employment for cause.
9. Those under preventive suspension
10. Persons with derogatory records as certified by, or on the official files of, the
judiciary, National Bureau of nvestigation, Philippine 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 suspension from office or fine is imposed, such is found to
be administratively liable.
C. Disqualification/ Prohibitions under the Corporation Code
Sec.27. No person convited by fianl judgment of an offense puishable by imprionment
for a perios exceeding 6years or a violation of this Code within 5years prior to date of
is electiom or appointment shall qualify as a director, trustee or officer of any
corporation.
D. Disqualification? Prohibitions under NCBA
V. Banking Days and Hours
A. Number of Days and Hour
1. Shall transact business on all working days for at least 6 hours a day, even
before 8am or after 8pm. May open for business on Sat, Sun or holidays for
at least 3 hours a day.
2. f so, must repot to the Bangko Sentrl the additional days
3. Working days mean Mon-Fri excpet holidays.
4. Branches at international airport or major fish port are allowed to operate on
flexible banking hours provided hat wil inform BSP of the schedule of the
banking hours that is not less than 6 hrs a day.
VI. Automated TeIIer 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 measures 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 activity and should confine their
itinerary to Metro Manila until futher notice.
2. Shall secure insurance coverage or adopt a self-insurance scheme to
protect itself against losses of whatever nature in ita mobile ATM
oprations
3. Banks hall 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 be chosen by a bank etc. From a list of certified public
accountants acceptable to 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
bank etc. To review the internal audit and control system of teh bank etc,
and to submit a report of such audit.
VIII. FinanciaI Statements
! Every bank etc. Shall submit to the appropriate supervising and examining dept.
Of the BSP fianncial statements.
! t shall be of a specific date designated by BSP and shall show actual financial
conditions of the institution submitting the statements, and of its branhes, offices,
subsidiaries and affiliates,
! and shall contain such informations as required in the BSP regualtions.
PUBLCATON:
! n English or Filipino
! At least once every quarter in a newspaper of general circulation in the city or
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 statements
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! f 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 the
statement of financial condition.
NOTES: page 54-55 (MPORTANT)
IX. PubIication of CapitaI Stock
! t shll not publish the amount of its authorized or subscribed capital stock without
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 surplus of its had office.
X. SettIement of Disputes
! BSP shall be consulted by other gov. Agencies in actions and proceedings
brought before them involving controversies 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. Unsettles Labor Disputes
! The banking industry is indispensable to the national interest.
! f unsettled afer 7 days shall be reported by the BSP to the Sec. Of Labor who
may assume jurisdiction over the dispute and decide it or certify the same.
! 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
The bank shal disclose pertinent info:
1. Cause of the strike/lockout and bank management's position on its legality
2. Bank oprations affected
XII. Laws Governing other Types of Banks

! Thrift Banks Act, Rural Banks Act, Cooperative Code
! For slamic banks- special laws
! For purposes of prescribing the minimum ration which the net worth of a thrift
bank must bear to its total risk assets, the provisions of the Gbl shall govern.
CHAPTER 3. DEPOSIT FUNCTIONS OF BANKS
Demand deposits are all those liabilities of the BSP and other banks which are denominated
in Phil. Currency and are subject to payment in legal tender upon demand by presentation of
checks.
The followings are prohibited from maintaining demand deposits or current accounts 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 immediate responsibility in the handling of
transactions/records pertaining to demand deposits or current accounts.
ncludes also;
The spouse, relatives within 2
nd
degree of consanguinity and affinity of the officers and
employee covered by the prohibition.
DUTY OF BANK TO HONOR CHECKS
Where the bank possesses funds of a depositor it is bound to honor his checks to the
extent of the amount of his deposits. Failure of the bank to pay the check, entitles the drawer to
substantial damage without any proof of actual damages.
RESPONSBLTY 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 SGNATURES
A bank is bound to know the signatures of its customers.
NO OBL. TO PAY PARTAL 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 what the
drawer has on deposit.
WTHDRAWALS
BAKS ARE PROHBTED FROM SSUNG/ACCEPTNG Withdrawals slips without
requiring the depositors to present their passbooks and accomplishing necessary withdrawal
slips except for banks authorized by BSP to adopt the no passbook withdrawal system.
Negotiable order of withdrawal (NOW) are interest bearing deposits of accounts
that combine the payable on demand feature of the checks and investment feature of a savings
acct.
Time deposits one the payment of which cannot legally be required within such a specified
number of days.
NEGOTABLE CERTFCATES OF TME DEPOSTS (NCTD's)
a. Universal banks / commercial banks may issue NCTDs without approval of BSP
b. Thrift banks/Rural banks/Cooperative banks need approval of BSP
NON NEGOTABLE CTD - Banks may issue long-term negotiable tax exempt certificates of
time deposit without approval of the BSP.
QUAS BANKNG FUNCTONS:
Essential elements of quasi-banking are:
A. borrowing of funds for the borrower's own account;
B. 20 or more lenders at any one time;
C. Methods of borrowing are issuance, endorsement, or acceptance of debt instruments
of any kind, other than deposits
D. The purpose of which is (1) relending, or (2) purchasing receivables or other
obligations

Any person, natural or juridical may deposit with such Phil. Bank in good standing foreign
currencies which are acceptable as part of the international reserve except those which are
required by the central bank to be surrendered.
7 , P a g e
Anonymous accounts or accounts under fictitious name should not be kept allowed.
. Administration of deposits
All banking institutions are required to set a minimum of 3 specimens of their depositors
and to update the specimen of signatures every 5 years or sooner, at the discretion of the
bank.
Minors are vested with special capacity and power to make savings, and withdraw the
same without the assistance of their parents or guardians, provided the f requirements are
met;
1. at least 7 years of age;
2. able to read and write;
3. have sufficient discretion;
4. not otherwise disqualified by any other incapacity;
Parents may nevertheless deposit for their minor children and guardians for their wards.

Corporations
a. ncorporation Stage payment of subscription is in cash, the SEC requires a bank
certificate of deposit of paid-up capital notarized in place where signed.
b. Post ncorporation in opening a bank account, the board of directors issues 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 clearing cut off time for its head office not earlier than 2
hours before the start of clearing at the BSP and not earlier than 3-1/2 hours before the
start of clearing for all its branches, agencies, and extension office doing business in the
Philippines. Provided, further that banks are located in areas where there are no BSP
regional/clearing arrangement may set a clearing cut-off time not earlier than 2 hours
before the start of their local clearing after which time, deposits received shall be booked
likewise.
. Survivorship Agreement
Definition:
Joint owners of a deposit agree that either of them could withdraw any part or the whole of
said account during the lifetime of both, and the balance, if any, upon the death of either,
belonged to the survivor.
Although survivorship agreement is per se not contrary to law, its operation or effect may
be violative of the law.
V. Duties of Banks
A. METICULOUS CARE
A bank is required to take meticulous care of the deposits of its clients, who have the
right to expect high standards of integrity and performance from it.
n every case the depositor expects the bank to treat his account with the utmost
fidelity, whether such account consists only of a few hundred pesos or of millions.
B. PAYMENT TO PROPER PARTY
C. IN CASE OF DEATH OF DEPOSITOR
NationaI revenue code provides:
f a bank has knowledge of the death of the depositor, it shall not allow any withdrawal
from said deposit account unless the commissioner has certified that the taxes imposed
thereon by this title have been paid. Provided, however, that the administrator of the estate
or any 1 of the heirs of the decent may upon authorization of the commissioner withdraw an
amount not exceeding 20,000 without the said certification.
V. Secrecy of bank Deposits
Purposes
a. to give encouragement to the people to deposit their money in banking
institutions;
b. to discourage private hoarding so that the same may be properly utilized by
banks in authorized loans to assist in the economic development of the
country.
R.A. 8367 Absolute Confidentiality
All deposits of whatever nature with an Association in the Philippines are herby
considered as of an absolutely confidential nature and may not be examined, inquired
or looked into by any person, government official, bureau or office except upon;
1. written permission of the depositor;
2. in case of impeachment;
3. upon order of a competent court in cases of bribery or dereliction of duty of public
officials;
4. in cases, where the money deposited or invested is the subject matter of the
litigation.
Authority to inquire into bank deposits under the ANT MONEY LAUNDERNG ACT
The AMLC may inquire into or examine any particular deposit or investment
with 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. there is probable cause that the deposits or investments are related to an
unlawful activity;
b. a money laundering offense.
Authority of the Commissioner of nternal Revenue to inquire into deposits
n cases;
a. a decedent to determine his gross estate;
b. any taxpayer who has filed an application for compromise of his tax 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
. Equity nvestments of a Universal Bank
a. Allied or non-allied
i. Allied enterprises: financial or non-financial
ii. Total investment shall not exceed 50% of the net worth of the
bank
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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-in
surplus, retained earnings and undivided profit, net of valuation,
reserves and other adjustments
b. Acquisition is subject to prior approval of the Monetary Board
. Equity investments of a Universal Bank in Financial Allied Enterprises
a. Can own up to 100% of the equity in a thrift bank, a rural bank or others
within this category
b. A publicly-listed universal or commercial bank can own only one other
universal or commercial bank
c. Financial Allied: leasing companies, banks, investment houses, financing
companies, credit card companies, insurance companies, holding company,
etc.
V. Equity nvestments 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, insurance agencies, home building and home
development
c. Rural/Cooperative Banks may invest, as a non-financial allied undertaking
in the ff:
i. Warehousing and postharvest facilities
ii. Farm equipment distribution
iii. Transportation of agricultural products
iv. Marketing of agri products
v. Leasing
V. nvestments in Non-Allied Enterprises
a. Shall not exceed 35% of the total equity in that enterprise nor shall it exceed
35% of the voting stock
b. Only universal banks can investment in non-allied enterprises:
i. ndustrial park projects, financial and commercial complex
projects, activities in agri, mining, manufacturing,etc.
V. nvestments in Quasi-Banks
a. Shall not exceed 40% equity
Operations of Commercial Banks
. Powers
a. Powers incident to corporations
b. Such powers necessary to carry on the business of commercial banking:
i. Accepting drafts and issuance of letters of credit
ii. Accepting or creating demand deposits
iii. Receiving deposit substitutes
iv. Extending credit
v. Buying and selling foreign exchange and gold or silver
vi. Discounting negotiating promissory notes, etc.
. Letters of Credit
a. 3 relationships created: bank and buyer, bank and seller, buyer and seller
b. ndependence Principle- assures the seller of prompt payment even if buyer
has not yet reimbursed as long as the seller presents the necessary
documents
. nvestments of a Commercial Bank
a. Only equities in allied enterprises: either financial or non-financial
b. Total investments in 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 bank.
V. nvestments in Financial Allied
a. 100% of the equity of a thrift bank or a rural bank
b. n other financial allied enterprises, investment shall only be a minority
holding
V. nvestments in non-financial allied
a. May own up to 100%
Risk-Based Capital
. Minimum Ratio- monetary board shall prescribe; ration of the net worth of the
bank to its total risk assets which may include contingent accounts
a. May be altered or suspended for a maximum of one year when necessary
b. Uniformly applied for banks in the same category
. Effect of Non- Compliance
a. Limit or prohibit the distribution of net profits
b. Restrict or prohibit acquisition of major assets
Limits on Loans, Credit Accommodations and Guarantees
. Single Borrower's Limit- shall not exceed 20% of the net worth of the bank
a. Except:
i. 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 10% provided the additional loans are
secured
. SBL should include:
a. Direct liability of the maker of paper sold or discounted with the bank
b. f the borrower owns ac majority interest in a corporation, the liabilities of
said corporation is included
c. Liabilities of subsidiaries of a corporation who is borrowing from the bank
d. n case of partnership or association, the liabilities of the members thereof
. SBL should exclude:
a. Loans secured by the BSP or government
b. Loans covered by assignment of deposits maintained in the bank
c. Loans under letters of credit covered by margin deposits
d. Loans specified as non-risk items
V. 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 limits
herein prescribed
V. Contingent Accounts of borrowers may be included among those subject to the
limits
V. Assignment of Credit- agreement by virtue of which the owner of a credit, by a
legal cause, such as sales, dation in payment, donation, and without the need of
the consent of the debtor, transfers his credit to another who acquires the power
to enforce it to the same extent as the creditor could have.
V. Pacto Commissorio- automatic appropriation of the pledged or mortgaged
property by the creditor in payment of the loan upon its maturity. t is not allowed
in assignment of deposits.
DOSR
. 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
. The approval shall entered on the records of the bank
9 , P a g e
III. Arms Length Rule-Dealings with DOSR shall be upon terms not less favorable to
the bank
V. Directors:
a. Names in the articles of incorporation
b. Elected in meetings of the stockholders
c. Elected to fill vacancies
V. Officers:
a. Pres, VP, EVP, Sr. VP, GM, Secretary, Treasurer, Trust Officer
b. Chairman, vice-chairman or any other position who performs functions of
management
V. Stockholder- stockholder or record in the books of the bank
a. ncludes:
i. Spouse and/or relative within the 1
st
degree or consanguinity or
affinity
ii. Corporation owned by the stockholder or his wife
V. Related nterests
a. Spouse and/or relative within the 1
st
degree or consanguinity or affinity
b. partnership where DOSR of those in a) above are general partners
c. co-owner with a DOSR or those in a) of a property used as a security
d. Corporation or association where the DOSR or those in a) are is also a
director
e. Corporation wholly or majority owned or owned by at least 20% by the
DOSR or those in a)
V. Effect of Violation- after due notice, the office of the person violating shall be
declared vacant and shal be subject to the penal provisions of NCBA
Securities on Loans
. Secured by Real Estate
a. Shall not exceed 75% of the appraised value plus 60% of the insured
improvements
. Secured by Chattels and ntangible Properties
a. Shall not exceed to 75%
Grant and Purpose of Loans
. 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. f the purpose stated was not followed, the bank may terminate the loan and
demand immediate repayment
. Requirements:
a. Statement of assets and liabilities
b. Statement 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 period under
Art. 1198 of the Civil Code
. Reason for Stringent Rules in Granting Loans- The bank invests the money it
holds in trust for the depositors. For this reason, a bank is expected to ascertain
the identities of the persons transacting with them to protect both the interest of
the bank and the depositors.
V. Unsecured Loans or Other Credit Accommodations- The MB is authorized to
issue regulations with respect to unsecured loans
V. Other Security Requirements- The MB may prescribe further security
requirements shall be subject to.
V. Authority to Prescribe Terms and Conditions of Loans
V. Amortization on Loans
a. Shall be adapted to the nature o the operations to be financed
b. With those whose maturities are more than 5 years- periodic amortization
but must be made annually
c. Loans are used for purposes not initially producing revenue- amortization
may be deferred until such time as said revenues are sufficient but in no
case shall it be 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 when 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 interest
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
V. Prepayment of Loans- prior to the maturity date, borrower may pay subject to
such reasonable terms agreed upon with the bank
X. Development Assistance ncentive- 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 regulated by the MB and prescribe
conditions and limitations
X. Banks cannot extend peso loans to non-residents
X. 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 n Lending (RA 3765- Disclosure of Finance Charges)
. Policy- protect the citizens from a lack of awareness of the true cost of credit by
assuring a full disclosure of such cost
. Disclosure shall include:
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. Amount to be financed
e. Finance charge
. Definitions:
a. Credit-
i. any loan, mortgage, deed of trust, advance or discount
ii. Any conditional sales contract
iii. Rental-purchase contract
b. Finance Charge- interest and fees incident to the extension 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
V. Penalty- either civil or criminal (1k-5k fine or imprisonment for 6-12 months, or
both)
V. Government is exempted from the punishment or penalty
Foreclosure of Real Estate
10 , P a g e
. The mortgagor or debtor has the right within one year after the sale of the real
estate, to redeem the property by paying the amount due in the mortgage w/
interest and all the cost and expenses
. However, the purchaser at the auction shall have the right to take possession
immediately after the date of the confirmation of the auction sale
. Any petition in court to restrain the auction shall only be given due course upon
the filing of a bond in an amount fixed by the court
V. Juridical Persons shall have the right to redeem the property until, but not after,
the registration of the certificate of foreclosure with the Register of Deeds within 3
months
V. Equity of Redemption v. Right of Redemption
a. Right of Redemption exists only in extrajudicial foreclosure sale
i. n a judicial foreclosure sale where the mortgagee is the PNB or a
banking institution, right of redemption exits
ii. Equity of Redemption- right of the mortgagor to extinguish the
mortgage and retain ownership by paying the secured debt within
a period not less than 90 days nor more than 120 days after the
judgment becomes final. (Rule 68, Rules of Court)
iii. Right of Redemption may be extended
Major nvestments
. The MB shall establish a criteria for reviewing major acquisitions by a bank
. Ceiling on nvestments
a. Acquire real estate necessary for its own use in the conduct of its business
i. Bank premises- land, buildings, construction, leasehold rights,
improvement, fixtures, furniture
ii. Real property, quipmet, chattel purchased by the bank in its name
b. Total investment in real estate including improvements shall not exceed
50% of combined capital accounts
c. nvestments by a bank in a real estate corporation shall be considered as
part of the total investment in real estate by the bank
. 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 to it in good faith by way of security of debts
ii. Conveyed to it in satisfaction of debts previously contracted
iii. Purchased at sales under judgments, decrees, mortgages, or
trust deeds held by it
b. Real Property acquired under this provision shall be disposed by the bank
within a period of 5 years
c. However, it may continue to hold such property beyond the period given if
the limitations given in the previous provision are not yet reached.
Other Banking Services
. Receive in custody funds, documents and other objects
. Act as financial agent and buy and sell for their customers
. Make collection and payments for the account of others
V. Act as managing agent, adviser, consultant or administrator of an investment
management with the approval of the MB
V. Rent out safety deposit boxes
V. Safety Deposit Box- Special Kind of Deposit because it cannot be characterized
as a contract of lease since the guard key of the box remains with the bank.
V. f a box is rented by two persons, the agreement between them shall govern
V. The SC said that the rent of a safety deposit box is that of a bailor an bailee
Electronic Transactions
. BSP shall have full authority to regulate the use of electronic devices used in
connection with the operations of a bank including the delivery of services and
products to customers
. Outsourcing of T systems- can be done with prior approval of the MB except:
a. Strategic planning for the use of T
b. Determination of system functionalities
c. Change management inclusive of quality assurance and testing
d. Service level and contract management
e. Security policy and administration
Outsourcing of other functions
. With approval of 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 deposit statement, bank loan statements, bank forms and
promotional materials
d. Credit card services
e. Credit investigation
f. Janitorial services
g. Procurement services
h. Legal services
Questions:
Whether or not an alien-owned bank can acquire ownership of a residential lot by virtue of a
deed of transfer as settlement of a debt
No. for the purpose of the constitution is to place and keep in the hands of the people
the ownership of private lands in order not to endanger the integrity of the nation
Chapter 5
Sec. 54. Prohibition to Act as Insurer. - A bank shall not directly engage in insurance business
as the insurer.
*ncludes:
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 vocation and
not as merely incidental to any other legitimate business or activity of the surety
c) doing any kind of business, including a reinsurance business, specifically recognized
as constituting the doing of an insurance business within the meaning of the nsurance
Code
d) doing or proposing to do any business in substance equivalent to any of the foregoing
in a manner designed to evade the provisions of the nsurance Code
Sec. 55. Prohibited Transactions. -
55.1. No director, 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 fraudulent transaction,
thereby affecting the financial interest of, or causing damage to, the bank or any person;

(b) Without order of a court of competent jurisdiction, disclose to any unauthorized person any
information relative to the funds or properties in the custody of the bank belonging to
private individuals, corporations, or any other entity: Provided, That with respect to bank
deposits, the provisions of existing laws shall prevail;
(c) Accept gifts, fees, or commissions or any other form of remuneration in connection with the
approval of a loan or other credit accommodation from said bank;

(d) Overvalue or aid in overvaluing any security for the purpose of influencing in any way the
actions of the bank or any bank; or
(e) Outsource inherent banking functions.
" refers to any 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 deposit
transactions of the former
" intended to ensure secrecy of bank deposits
55.2. No borrower of a bank shall -
(a) Fraudulently overvalue property offered as security for a loan or other credit 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 extending
the period thereof;
(c) Attempt to defraud the said bank in the event of a court action to recover a loan or other credit
accommodation; or
(d) Offer any director, officer, employee or agent of a bank any gift, fee, commission, or any other
form of compensation in order to influence such persons into approving a loan or other
credit accommodation application.
55.3. No examiner, officer or employee of the Bangko Sentral or of any department, bureau, office,
branch or agency of the Government that is assigned to supervise, examine, assist or render
technical assistance to any bank shall commit any of the acts enumerated in this Section or aid
in the commission of the same.

The making of false reports or misrepresentation or suppression of material facts by personnel
of the Bangko Sental ng Pilipinas shall be subject to the administrative and criminal sanctions
provided under the New Central Bank Act.

55.4. Consistent with the provisions of Republic Act No. 1405, otherwise known as the Banks Secrecy
Law, no bank shall employ casual or non regular personnel or too lengthy probationary
personnel in the conduct of its business involving bank deposits.
Sec. 56. Conducting Business in an Unsafe or Unsound Manner - n determining whether a
particular act or omission, which is not otherwise prohibited by any law, rule or regulation
affecting banks, quasi-banks or trust entities, may be deemed as conducting business in an
unsafe or unsound manner for purposes of this Section, the Monetary Board shall consider any
of the following circumstances:
56.1. 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 the institution; .

56.2. The act or omission has resulted or may result in material loss or damage or abnormal
risk to the institution's depositors, creditors, investors, stockholders or to the 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 the discharge by the
director or officer of his duties and responsibilities through manifest partiality, evident
bad faith or gross inexcusable negligence; or

56.4.The act or omission involves entering into any contract or transaction manifestly and
grossly disadvantageous to the bank, quasi-bank or trust entity, whether or not the
director or officer profited or will profit thereby.
Whenever a bank, quasi-bank or trust entity persists in conducting its business in an unsafe or
unsound manner, the Monetary Board may, without prejudice to the administrative sanctions
provided in Section 37 of the New Central Bank Act, take action under Section 30 of the same
Act and/or immediately exclude the erring bank from clearing, the provisions of law to the
contrary notwithstanding.

Sec. 57. Prohibition on Dividend Declaration. No bank or quasi-bank shall declare dividends,
if at the time of declaration:
57.1. ts clearing account with the Bangko Sentral is overdrawn; or

57.2. t is deficient in the required liquidity floor for government deposits for five (5) or more
consecutive days, or .

57.3. t does not comply with the liquidity standards/ratios prescribed by the Bangko Sentral
for purposes of determining funds available for dividend declaration; or

57.4. t has committed a major violation as may be determined by the Bangko Sentral.
Sec. 64. Unauthorized Advertisement or Business Representation. No person, association, or
corporation unless duly authorized to engage in the business of a bank, quasi-bank, trust entity,
or savings and loan association as defined in this Act, or other banking laws, shall advertise or
hold itself out as being engaged 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," "trust
corporation," "trust company" or words of similar import or transact in any manner the business
of any such bank, corporation or association.
Sec. 67. Conservatorship. The grounds and procedures for placing a bank under
conservatorship, as well as, the 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
the New Central Bank Act: Provided, That this Section shall also apply to conservatorship
proceedings of quasi-banks.
*Grounds for appointment of conservator
Whenever, on the basis of a report submitted by the appropriate supervising or examining
department, the Monetary Board finds that a bank or quasi-bank is in a state of:
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1. continuing inability, or
2. unwillingness to maintain a condition of liquidity deemed adequate to protect the
interests of depositors and creditors,
the Monetary Board may appoint a conservator with such powers as the Monetary Board shall
deem necessary to:
1. take charge of the assets, liabilities, and the management 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 shall have the
power to overrule or revoke the actions of the previous management and board of directors of
the bank or quasi-bank.
*Liquidity the ability of an asset to be converted into cash quickly and without any price
discount
*Solvency the condition that exists when liabilities amount to less than total assets, thus
providing the ability to pay debts
*Qualifications of conservator:
1. competent
2. knowledgeable in bank operations and management
*Period of conservatorship shall not exceed 1 year
*Termination of conservatorship:
1. The Monetary Board shall terminate the conservatorship when it is satisfied that the
institution can continue to operate on its own and the conservatorship is no longer
necessary.
2. t should likewise be terminated should the Monetary Board, on the basis of the report
of the conservator or of its own findings, determine that the continuance in business of
the institution would involve probable loss to its depositors or creditors, in which case
the provisions on receivership and liquidation shall apply.
*Powers of conservator cannot impair the obligations of contracts the law merely gives him the
power to revoke contracts that are, under existing law, deemed to be defective.
Sec. 68. Voluntary Liquidation. n case of voluntary liquidation of any bank organized under
the laws of the Philippines, or of any branch or office in the Philippines of a foreign bank, written
notice of such liquidation shall be sent to the Monetary Board before such liquidation shall be
sent to the Monetary Board before such liquidation is undertaken, and the Monetary Board shall
have the right to intervene and take such steps as may be necessary to protect the interests of
creditors.
" may be undertaken by the bank itself through its board of directors, by a trustee appointed by
the bank, or by a receiver appointed by the bank
" no voluntary dissolution shall be undertaken by a bank without prior approval of the Monetary
Board, provided further, that it shall be accompanied by a liquidation 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 the ordinary course of business
2. has insufficient realizable assets, as determined by the Bangko Sentral, to meet its
liabilities
3. cannot continue in business without involving probable losses to its depositors or
creditors
4. has willfully 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 institution
*Powers of a receiver:
a. to bring and defend, in such capacity, actions in 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, person, or
corporation of which he is the receiver
e. to compound for and compromise the same
f. to make transfers
g. to pay outstanding debts
h. to divide the money and other property that shall remain among the persons legally
entitled to receive the same
i. generally to do such acts respecting the property as the court may authorize
*Prohibited acts:
Any director or officer of a bank declared insolvent or placed under receivership by the
Monetary Board shall not commit any of the ff:
a. refusing to turn over the bank's records and assets to the designated receiver
b. tampering with bank records
c. appropriating for himself or another party, or destroying or causing misappropriation
and destruction of the bank's assets
d. receiving or permitting or causing to be received in said bank any deposit, collection of
loans, and/or receivables
e. paying out 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 property 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 receivership. This is to prevent
unwarranted dissipation of the bank's assets and is a valid exercise of police power to protect
the creditors, depositors, stockholders, and the general public. A hearing may be subsequent to
the closure.
*Effects of receivership and liquidation:
1. retention of juridical personality
2. not liable to pay interest
3. assets are deemed under custodia legis
4. stay of execution of judgment
5. restriction of bank's capacity to act
6. exclusive jurisdiction of liquidation court
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Sec. 70. Penalty for Transactions After a Bank Becomes Insolvent. Any director or officer of
any bank declared insolvent or placed under receivership by the Monetary Board who refuses to
turn over the bank's records and assets to the designated receivers, or who tampers with banks
records, or who appropriates for himself for another party or destroys or causes the
misappropriation and destruction 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 or
permits or causes to be transferred any securities or property of said bank shall 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 bank on
the ground that the lands subject of said contract presently commanded a much higher price
than when it was sold. s the revocation valid?
" No. Power of conservator cannot impair the obligations of contracts. A contract of sale
entered into by a bank cannot be revoked if at the time of the transaction, the price agreed upon
was reasonable.
A buyer offered to buy the property of a bank which the latter accepted. However, the
bank became insolvent before the buyer learned of the acceptance. Was there a perfected
contract?
" None. The accepted offer became ineffective when the bank became insolvent before the
bank's acceptance 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 said
resolution, for which reason O bank is ready to accept its liability for the payment to C of the
balance of the principal amount deposited with it. s O bank liable for interest thereon during the
period it was closed?
" No. What enables a bank to pay stipulated interest on money deposited with it is that thru the
other aspects of its operation, it is able to generate funds to cover the payment of such interest.
f it is 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. thru establishments of branches governed by Foreign Bank
Liberazation Act.
Offshore Banking - governed by Offshore Banking System Decree
- conduct of banking transactions in foreign currency involving receipt of funds
from external sources and its utilization.
Offshore banking unit - branch, subsidiary, affiliate of a foreign banking corporation authorized
to transact offshore banking business in Phil.
Notes: Corporation Code
Sec. 133. Doing business without a Iicense foreign corporation transacting business in Phil.
may maintain or intervene in any action, suit or proceeding in any court or adm. Agency n Phil
but cannot sue before Phil. courts though on any valid cause.
- f "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 abide
by the decisions of our courts, even if adverse to it.
- Primary purpose of Statute: to compel foreign corp. if it desires to do business
here, to submit itself to the jurisdiction of courts of the 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 execute and file with SEC an agreement.
- f summons be made with SEC, latter shall transmit it by mail to the head office of
such bank, within 10 days.
- n 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 may authorize foreign bank to acquire up to
100% of voting stock of ONLY one bank organized under laws of RP.
2. Within same period, MB may authorize those foreign bank which prior to effectivity 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 control of 70% of resources and assets of entire
banking system is held by banks which 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 treated as one unit for purpose of GBL; and
all reference to Phil. branches of foreign banks shall be held to refer to such unit.
- To protect interests of depositors 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 rights
to assets of such branch.
Summons and LegaI Process:
f served on agent or head of foreign bank,
- our courts acquires jurisdiction over such bank.
- binds the bank which it represents.
f 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.
n absence of agent or head; or no person authorized ,
- summons and legal process and notices be made upon Bangko Sentral Deputy
Governor n-Charge of the supervising and examining departments. The latter
upon receipt, shall transmit by mail to president or secretary of bank at its head
or principal office a duly certified copy.
- Sending of copy is necessary part of services and shall 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 Iicense of Foreign Bank:
- By Monetay Board.
- f insolvent, in imminent danger, or its continuance will involve probable loss to
those it transacts business with.
- After revocation, it cannot transact 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. LiberaIized Entry of Foreign Banks:
Purpose:
1. to create more competitive environment.
2. to encourage greater foreign participation
PoIicies:
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 industrialization.
Modes of Entry:
a. acquiring up to 60% of voting stocks of an existing bank
b. investing up to 60% of voting stocks of new banking subsidiary incorporated under
Phil. laws.
c. Establishing branches with full banking authority.
- FB may avail 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 listed 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 allowed on recommendation by MB and approval of
President.
- FB may open 3 branches in location of their choice, 3 branches in locations
designated by MB to insure balanced economic development in all regions.
Guidance for ApprovaI: MB shaII
1. ensure geographic representation.
2. consider strategic trade and investment relationship between Phil. and country of FB.
3. study capacity, global reputation and stability in competitive environment of applicant.
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 held by domestic bank majority owned
by Filipinos
2. prevents dominant market position by one bank
3. secures the listing in SEC of shares of stocks
CapitaI Requirements:
1. Locally ncorporated Subsidiaries
- minimum capital equal to that prescribed by MB for domestic banks of same
category.
2. Foreign Bank Branches (entry under the 3
rd
mode)
- not less than US dollar equal to P210,000,000 and shall be entitled to 3 branches
! capital shall include those permanently assigned plus net due to head
office outside the Philippines, 15% of which shall be inwardly remitted
and converted into Philippine currency, provided that amounts invested
in productive or export activities shall not be subject to conversion.
EstabIishment of AdditionaI Branches
1. FB can open three additional branches by inwardly remitting and converting into
Philippine currency as permanently assigned capital, P35 Million per additional
branch.
Head Office Guarantee- shall guarantee prompt payment of all liabilities of its Philippine
branches
Board of Directors- aliens may become members of the Board of a bank to the extent of the
foreign participation in the equity of said bank.
Equal treatment- foreign banks shall also be subject to limitations imposed upon a Philippine
bank such as the SBL, capital to risk asset ratio, development loans incentives etc.
Trust Operations
I. Authority to engage
- only a stock corporation or a person duly authorized by the MB shall act as a
trustee
- the cardinal principle is fidelity
- Trust business- refers to any activity resulting from a trustor-trustee relationship
involving the appointment of a trustee 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 an
enterprise
- No transaction within the same trust entity will be allowed except when the
transaction is authorized by the trustor and the relationship of the trustee and the
other party involved is fully disclosed
III. Registration of ArticIes of incorporation and by-Iaws
- The SEC shall not register the same or any amendment thereto, unless
accompanied by a certificate of authority issued by the BSP
IV. Minimum CapitaI- trust entity shall comply with the minimum paid-in capital requirements
which will be determined by the MB.
V. Powers of a trust entity:
- Powers incident to a corporation
- 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 will if named as the executor
- Act as the administrator of any deceased person
- Accept and execute and trust for the holding and administration of any estate
including 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 trustee
- Purchase or acquire property or debt instruments to those related to the trustee
- nvest in equities which the trustee owns 50% of the capital
- Sell transfer assign or lend from one trust account to another
VII. Deposit for faithfuI performance of trust duties
- Before transacting any business, there shall be a deposit made with the BSP
cash or securities approved by the MB an amount not less that P500,000
- This deposit can be increased 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 trust entity has the right to collect the interest earned on such deposit
- All claims arising out of the trust business shall have priority over all other claims
as regards the deposits.
Bond of certain person required for the faithfuI performance of duties
. Requirements
a. Those appointed by the court shall file a bond in such sum as the court may
require
b. Upon application in the court, the subject 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. The reduced bond shall be adequate to secure the proper administration of
the property
. Exemption from Bond Requirement
a. Trust entities required by the court to be an administrator, etc are not
required to give a bond
Operations of Trust Entity
I. Separation of Trust Business from GeneraI Business
- Shall be kept physically separated and distinct from the accounts of the general
business of the trust entity
II. Investment Iimitations of a trust entity
- Limited to those loans or investments prescribed by law, MB or any court of
competent jurisdiction, unless directed by the instrument creating the trust
III. ReaI Estate acquired by a trust entity
- Unless otherwise directed by the trustor or the nature of the trust, real estate
acquired by the trust entity shall be acquired, hold, or conveyed under the ff
circumstances:
! Mortgaged to it in good faith by way of security for debts
! Conveyed to it in satisfaction of debts previously contracted
! Purchased at sales under judgments, decrees, mortgages, or trust deeds
- These properties shall be conveyed within 5 years
- However, it may continue to hold it beyond the period when:
! t shall not exceed 50% of the combined capital accounts of the entity
! The investment of a bank in another corporation engaged in real estate
shall be considered as part of the total investment
IV. Investment in non-trust funds
b. Shall be governed by the GBL an other applicable laws
V. Sanctions and PenaIties- those who violate the pertinent provisions of the GBL shall be
subject to sanctions and penalties
V. Exemption of Trust Assets from claims
Those assets held by a trust entity shall not be subject to any claims other those of the
parties interested in the trusts
V. Establishment of Branches
Shall be in the place of business stated in the articles of incorporation
Additional branches can be established with the approval of the MB
The trust entity and its branches should be considered as one unit
V. Advertisement of Services
n a dignified manner
Ready and willing to give full disclosure of services being offered
Conduct its dealings with transparency
V. Money of Government
Banks may not receive or hold as trustee any money from the government
! Except: government-owned banks with respect to the ff:
# Funds of LGUs for long term investments in securities and other
evidences guaranteed by the national government.
# Funds of the government which are authorized by special laws to
be placed in trust
Chapter 7
The Bangko SentraI ng PiIipinas
. Creation, Responsibilities and corporate Powers of the Banko Sentral
A. Declared Policy of the state
The State shall maintain a central monetary authority that shall function and
operate as an independent and accountable body corporate in the
discharge of its mandated responsibilities concerning money, banking and
credit. n line with this policy, and considering its unique functions and
responsibilities, the central monetary authority established under the NCBA,
while being a government owned corporation, shall enjoy fiscal and
administrative autonomy. (Section 1, NCBA)
B. Creation of the bangko Sentral ng Pilipinas
Section 2 & 4 of NCBA:
SECTON 2 Creation of the Bangko Sentral. There is hereby established
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
subscribed by the Government of the Republic,
Ten Billion of which shall be fully paid for by the government upon effectivity
of this act
n such manner and form as the Government, through the Secretary of
Finance and the Secretary of Budget and Management, may thereafter
determine.
SECTON 4 Place of Business. The Bangko SEntral shall have its
principal place of business in Metro Manila, but may maintain branches,
agencies and correspondents in such other places as the proper conduct of
its business may require.
Mandate by the Constitution:
The Congress shall establish an independent central monetary authority,
the members of whose governing 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 prescribed by law. The authority
shall provide policy direction in the areas of money, banking, and credit. t
shall have supervision over the operations of banks and exercise such
regulatory powers as may be provided by law over the operations of finance
companies and other institutions performing similar functions.
Until the congress otherwise provides, the Central bank of the Philippines
operating under existing laws, shall function as the central monetary
authority.
C. Responsibility and Primary Objectives of the bangko Sentral
1. Responsibility of BSP - provide policy directions in the areas of money,
banking, and credit.
2. t shall have supervision over operations of banks.
3. t shall also exercise regulatory powers over the operations of finance
companies and non-bank financial institutions performing quasi-banking
functions, and institutions performing similar functions.
4. Primary objective of BSP maintain price stability conducive to a balanced
and sustainable growth in the economy.
5. t shall also promote and maintain 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 contracts
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 and hold assets and incur liabilities in connection with its operation
as authorized by the NCBA, or a s essential to the proper conduct of such
operations
7. Compromise, condone, or release any claim of or settled liability to the
Bangko Sentral , regardless of the amount involved, under such terms and
conditions as maybe prescribed by the monetary board.
E. Power to Prosecute
BSP has no power to prosecute; it is a government corporation created
principally to administer the monetary and banking System of the
Philippines and not a prosecution 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 artificial person limited to its statutory powers. The closest it can
get to prosecuting is its power to sue and be sued (civil cases only).
Prosecution of violation of banking laws is not exclusive to BSP, anyone can
denounce this to any prosecuting 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
reserve position. Underlying this commitment however is the government's
strict and faithful adherence to basic principles of fairness and decency
under the Bill of Rights. Hence BSP circulars/ memoranda must be
implemented in a manner that would not only safeguard or harmonize them
with government programs designed to uplift or promote the country's level
of production and employment, but at the same time avoid irreparable or
grave prejudice to participants of said program.
Thus in case banks or banking institutions already faithfully complied with
BASP's directives, BSP is stopped from enforcing circulars that would deny
banks or banking institutions of their rights.
. Authority of the Bangko Sentral
A. Supervisory Powers of the bangko Sentral
Supervisory powers include the following:
. ssuance of rules of conduct or the establishment of standards of
operation for uniform application to all institutions and functions
covered.
. Conduct of examination to determine compliance with the laws and
regulations if the circumstances so warrant and determined by the
monetary board.
. Overseeing to ascertain that laws are complied with.
V. Regular investigation which shall not be oftener than once a year
V. nquiry into the solvency and liquidity of the institution
V. Enforcing prompt corrective action.
B. Phase out of Bangko Sentral Powers 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 building and loan associations to
the Home nsurance and Guarantee Corporation.
C. Policy Direction; Ratios, Ceilings and Limitations
BSP shall provide policy direction in the areas of Money, Banking and Credit
Monetary Board may prescribe ratios, ceilings, and limitations or other forms
of regulation on the different types of accounts and practices of banks and
quasi-banks which shall conform to internationally accepted standards,
including those of the Bank of nternational Settlements.
Monetary Board may exempt particular categories of transactions from such
ratios, ceilings and limitations, but not limited to exceptional cases or to
enable a bank or quasi-bank under rehabilitation or during a merger or
consolidation to continue business with safety to its creditors, depositors
and the general public.
. The Monetary Board
The powers and functions of the bangko Sentral 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 of 6 years. The members are:
Governor
! Chairman of the monetary board
! Appointment subject to confirmation of the Commission on
Appointments
! f governor cannot attend a meeting of the board, he shall
designate a Deputy Governor to act as his alternate. n such
event, the Monetary Board shall designate one of its members as
acting chairman.
A member of the cabinet to be designated by the President.
! Whenever such cabinet cannot attend a meeting of the board, he
shall designate a Undersecretary in his department to attend as
his alternate.
5 members shall come from the private sector, all of whom shall serve full-
time.
! Of the members 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. Qualifications of the Members of the monetary Board
&# Natural born citizen
&&# 35 yrs old; chairman 40yrs old
&&&# Good moral character
&'# Known probity and patriotism
'# Unquestionable integrity
'&# Recognized competence in social and economic disciplines.
D. Disqualifications of Monetary board Members
&# Disqualifications imposed by RA 6713
(An act establishing a code of conduct and ethical standards for public
officials and employees)
&&# Being a director, officer, employee, consultant, lawyer., agent,
stockholder of any bank or any other institution under the supervision
of the bangko Sentral; he must resign first to assume office as member
of the monetary board
&&&# Holding public office or public employment during their tenure.
&'# Person connected directly with any multilateral banking or financial
institution.
'# Having a substantial interest in any private bank in the Philippines,
within 0ne year prior to his appointment
'&# 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 the Government to such
nstitution. (section 9 NCBA)
E. Grounds for removal of Monetary Board members
The president may remove any member of the monetary board for these
reasons :
&# Member is subsequently disqualified under section 9 of NCBA
&&# Physically or mentally incapacitatedtaht he cannot properly discharge
his duties and responsibilities as such incapacity a\has lasted for more
than 6 months.
&&&# Guilty of fraudulent or illegal acts or which are manifestly opposed to
the aims and interests of the bangko sentral.
&'# Member no longer possesses the qualifications.
F. Meetings, Quorum, Decisions and Proceedings of the Monetary board
&# 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 board
&&# Presence of 4 members constitutes a quorum. Provided that the
governor is always among those 4
&&&# Decisions of MB shall require concurrence of 4 members.
i. Exceptions ( 5 votes are needed in these cases):
! Sec 61 GBL - n allowing banks to delay publication of its
statements of financial condition in periods of national or local
emergency, or imminent panic which directly monetary and
banking stability, upon application of a bank.
19 , P a g e
! Section 28 NCBA. Examination and Fees. The supervising and
examining department head, personally or by deputy, shall
examine the books of every banking institution 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 interval of at least twelve
(12) months between annual examinations.
! 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 constructive
measures to forestall, combat, or overcome such a crisis or
emergency, 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 suspend or restrict sales of
exchange by the Bangko Sentral, and may subject all transactions
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 effective
exchange rate or rates.
! Section 84. Emergency Loans and Advances. n periods of
national and/or local emergency or of imminent financial panic
which directly 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 extraordinary loans or
advances to banking institutions secured by assets as defined
hereunder: Provided, That while such loans or advances are
outstanding, the debtor institution shall not, except upon prior
authorization by the Monetary Board, expand the total volume of
its loans or investments.
The Monetary Board may, at its 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, could 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 emergency loan or advance shall not exceed
the sum of fifty percent (50%) of total deposits and deposit
substitutes of the banking institution and shall be disbursed in two
(2) or more tranches. The amount of the first tranche shall be
limited 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 their applicable loan values
and other unencumbered first class collaterals which the
Monetary Board may approve: Provided, That if as determined by
the Monetary Board, the circumstances surrounding the
emergency warrant a loan or advance greater than the amount
provided hereinabove, the amount of the first tranche may exceed
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 securities and unencumbered first class
collaterals approved by the Monetary Board, and the principal
stockholders of the institution furnish an acceptable undertaking
to indemnify and hold harmless from suit a conservator whose
appointment the Monetary 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 assets
of the banking institution certified by its external auditor to be
good and available 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 undertaking to indemnify and
hold harmless from suit a conservator whose
appointment the Monetary Board may find necessary at
any time; and
(b) provide acceptable security which, in the judgment
of the Monetary Board, would be adequate to
supplement, where necessary, the assets tendered by
the banking institution to collateralize the subsequent
tranche.
n connection with the exercise of these powers, the prohibitions
in Section 128 of this Act shall not apply insofar as it refers to
acceptance as collateral of shares and their acquisition as a result
of foreclosure proceedings, including the exercise of voting rights
pertaining to said shares: Provided, however, That should the
Bangko Sentral acquire any of the shares it has accepted as
20 , P a g e
collateral as a result of foreclosure proceedings, the Bangko
Sentral shall dispose of said shares by public bidding within one
(1) year from the date of consolidation of title by the Bangko
Sentral
G. Deputy Governors may Attend Meetings of 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 president at an amount commensurate to the
importance and responsibility attached to the position.
. Personal or Pecuniary nterest
Any member of the MB with personal 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 matter is taken up. The decision
taken on the matter shall be made public. The minutes shall reflect the
disclosure made and the retirement of the member concerned from the
meeting.
J. Scope of the Authority of the Monetary Board
a. ssue rules and regulations it considers necessary for the effective
discharge of the responsibilities 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 as it
may deem necessary or convenient for this purpose.
c. Establish a Human Resource management system which shall govern the
selection, hiring, or dismissal of all personnel. Such system shall aim to
establish professionalism and excellence in all levels of BSP in accordance
with the sound principles of management.
&# 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 of the Bangko Sentral's human resource
development program: Provided, That the Monetary Board shall make
its own system conform as closely as possible with the principles
provided for under Republic Act No. 6758: Provided, however, That
compensation and wage structure of employees whose positions fall
under salary grade 19 and below shall be in accordance with the rates
prescribed under Republic Act No. 6758.
&&# On the recommendation of the Governor, appoint, fix the
remunerations and other emoluments, and remove personnel of the
Bangko Sentral, subject to pertinent civil service laws: Provided, That
the Monetary Board shall have exclusive and final authority to promote,
transfer, assign, or reassign personnel of the Bangko Sentral and
these personnel actions are deemed made in the interest of the service
and not disciplinary: Provided, further, That the Monetary Board may
delegate such authority to the Governor under such guidelines as it
may determine.
(# 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 Bangko Sentral in accordance with applicable laws and regulations;
and
e. indemnify its members and other officials of the Bangko Sentral, including
personnel of the departments performing supervision and examination
functions against all costs 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 adjudged in such action or
proceeding to be liable for negligence or misconduct.
&# n 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 misconduct.
&&# The costs and expenses incurred in defending the
aforementioned action, 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 should 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 Members of the Monetary Board, Officials, Examiners, and
Employees of the Bangko Sentral
)# Members of the Monetary Board, officials, examiners, and employees
of the 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 exercise extraordinary
diligence.
!" Similar responsibility shall apply to members, officers, and employees of the
Bangko Sentral for:
i. the disclosure of any information of a confidential nature, or
any information on the discussions or resolutions of the
Monetary Board, or about the confidential operations of the
Bangko Sentral, unless the disclosure is in connection with
the performance of official functions with the Bangko Sentral,
or is with prior authorization of the Monetary Board or the
Governor; or
ii. the use of such information for personal gain or to the
detriment of the Government, the Bangko Sentral or third
parties: Provided, however, That any data or information
required to be submitted to the President and/or the
Congress, or to be published under the provisions of this Act
shall not be considered confidential.
V. The Governor and Deputy Governors of the Bangko Sentral
Governor shall be chief executive officer of the Bangko Sentral ng Pilipinas.
A. Powers and Duties of the Governor
a. prepare the agenda for the meetings of the monetary board and to
submit for the consideration of the monetary board the policies and
measures which he believes to be necessary to carry out the purposes
and provisions of this act
*# execute and administer the policies and measures approved by
the Monetary Board;
+# direct and supervise the operations and internal administration of
the Bangko Sentral. The Governor may delegate certain of his
administrative responsibilities to other officers or may assign specific
tasks or responsibilities to any full-time member of the Monetary Board
without additional remuneration or allowance whenever he may deem
fit or subject to such rules and regulations as the Monetary Board may
prescribe;
(# appoint and fix the remunerations and other emoluments of
personnel below the rank of a department head in accordance with the
position and compensation plans approved by the Monetary Board, as
well as to impose disciplinary measures upon personnel of the Bangko
Sentral, subject to the provisions of Section 15(c) of this Act: Provided,
That removal of personnel shall be with the approval of the Monetary
Board;
e. render opinions, decisions, or rulings, which shall be final and
executory until reversed or modified by the Monetary Board, on
matters regarding application or enforcement of laws pertaining to
institutions supervised by the Bangko Sentral and laws pertaining to
quasi-banks, as well as regulations, policies or instructions issued by
the Monetary Board, and the implementation thereof; and
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 Sentral
The Governor of the Bangko Sentral shall be the principal representative of
the Monetary Board and of the Bangko Sentral and, in such capacity and in
accordance 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 international
b. sign contracts entered into by the Bangko Sentral, notes and securities
issued by the Bangko Sentral, all reports, balance sheets, profit and loss
statements, correspondence and other documents of the Bangko Sentral. The
signature of the Governor may be in facsimile whenever appropriate

c. represent the Bangko Sentral, either personally or through counsel,
including private counsel, as may be authorized by the Monetary Board, in any
legal proceedings, action or specialized legal studies

d. delegate his power to represent the Bangko Sentral, as provided in
subsections (a), (b) and (c) of this section, to other officers upon his own
responsibility: Provided, however, That in order to preserve the integrity and the
prestige of his office, the Governor of the Bangko Sentral may choose not to
participate in preliminary discussions with any multilateral banking or financial
institution on any negotiations for the Government within or outside the
Philippines. During the negotiations, he may instead be represented by a
permanent negotiator.
C. Emergencies
)# n case of emergencies where time is sufficient to call a meeting of the
Monetary Board, the Governor of the Bangko Sentral, with the
concurrence of two (2) other members of the Monetary Board, may
decide any matter or take any action within the authority of the Board.
*# The Governor shall submit a report to the President and Congress
within seventy-two (72) hours after the action has been taken.
+# At the soonest possible time, the Governor shall 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 the
Board
The governor of the Bangko Sentral and the full-time members of the Board
shall:
a. limit their professional activities to those pertaining directly to their
positions with the Bangko Sentral.
*# not accept any other employment, whether public or private,
remunerated or ad honorem, with the exception of positions 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 financial system of the country.
E. Number and Functions of Deputy Governors
a. The 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 may be assigned to them by the Governor and
the Board.
23 , P a g e
b. n the absence of the Governor, a Deputy Governor designated by the
Governor shall act as chief executive of the Bangko Sentral and shall
exercise the powers 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 member pursuant to
provisions of special laws, a Deputy Governor as may be designated
by the Governor shall be vested with authority to participate and
exercise the right to vote in such meetings.
V. Operations of the Bangko Sentral
A. Research and statistics of the bangko Sentral
The Bangko Sentral shall prepare data and conduct economic research for
the guidance of the Monetary Board in the formulation and implementation
of its policies. Such data shall include, among others, forecasts of the
balance of payments of the Philippines, statistics on the monthly movement
of the monetary aggregates and of prices and other statistical series and
economic studies useful for the formulation and analysis of monetary,
banking, credit and exchange policies.
B. Scope of authority of bangko Sentral to Obtain data and nformation
a. The Bangko Sentral shall have the authority to request from
government offices and instrumentalities, or government-owned or
controlled corporations, any data which it may require for the proper
discharge of its functions and responsibilities.
*# The Bangko Sentral through the Governor or in his absence, a duly
authorized representative shall have the power to issue a subpoena for
the production of the books and records for the aforesaid purpose.
Those supply the bank with data requested or required, shall be
subject to punishment for contempt in accordance with the provisions
of the Rules of Court.
c. Data on individual firms, other htan banks, gathered by the Department
of Economic Research and other departments or units of the Bangko
Sentral shall not be made available to any person or entity outside of
the Bangko Sentral whether public or private escept under order of the
court or under such conditions as may be prescribed by the monetary
board: Provided however, that the collected data on firms may be
released to interested persons or entities: provided finally, theth the
case of data on banks, the provisions of section 27 shall apply.
C. 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
Sentral is hereby authorized to defray the costs of study, at home or abroad,
of qualified employees of the Bangko Sentral, of promising university
graduates or of any other qualified persons who shall be determined by
proper competitive examinations. The Monetary Board shall prescribe rules
and regulations to govern the training program of the Bangko Sentral.
D. Scope of the Supervision and Examination by the bangko Sentral
a. The BSP shall have supervision over, and conduct periodic or special
examination of, banking institutions and quasi-banks, including their
subsidiaries and affiliates.
i. Subsidiary more than 50% of the voting stock is owned by
a bank
ii. Affiliate 50% or less, is owned by a bank or which is
related or linked to such institution or intermediary through
common stockholders or such other factors as may be
determined by the MB.
b. The department heads and the examiners of the supervising and/or
examining departments are hereby authorized to
i. administer oaths to any director, officer, or employee of any
institution under their respective supervision or subject to
their examination and to
ii. compel the presentation of all books, documents, papers or
records necessary in their judgment to ascertain the facts
relative to the true condition of any institution as well as the
books and records of persons and entities relative to or in
connection with the operations, activities or transactions of
the institution under examination, subject to the provision 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, natural or juridical, in debt instruments
issued by the Government.
E. Restraining Order or njunction
a. Court cannot order restraining order prohibiting the BSP from
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 plainly arbitrary and made in bad faith and the
petitioner or plaintiff files with the 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 court 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.
V. Director, Officer or Stockholder and Related nterests
A. Contracting Loans
a. Any director, officer or stockholder who, together with his related
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 company
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 controlling
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 law,
whichever is lower,
shall be required by the lending bank to waive the secrecy of his deposits of
whatever nature in all banks in the Philippines.
b. Any information obtained from an examination of his deposits shall be
held strictly confidential and may be used by the examiners only in
connection with their supervisory and examination responsibility or by
the Bangko Sentral in an appropriate legal action it has initiated
involving the deposit account.
B. Prohibitions Against Personnel of the Bangko Sentral
(same as disqualifications of MB Member)
V. Examination of Banking nstitutions
A. Frequency of Examination
The supervising and examining department head, personally or by deputy,
shall examine the books of every banking institution 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
interval of at least twelve (12) months between annual examinations.
B. Affording Opportunity to Examine
Bank concerned shall afford the head of the appropriate supervising and
examining departments full opportunity to examine
Books
Cash and available assets
General condition
Anytime during the banking hours when requested by BSP
The reports on the examinations will not be open to the public unless
incidental to any proceedings authorized 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. t would be a percentage of its
average total assets during the preceding year as shown by its end of
month balance sheets, after deducting cash on hand and the amount due
from banks, including the bangko sentral and the banks abroad.
V. Administration
A. Operating Departments of the Bangko Sentral
The Monetary Board shall, in accordance with its authority under this Act,
determine and provide for such operating departments and other offices,
including a public information office, 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 offices shall be determined
by the Monetary Board.
B. Required Reports and Publications 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 90
days after end of month.
t shall contain the volume and compositions of its assets and liabilities
as of the last working day of the month.
b. MB shall publish the ff reports and submit them to the President and to
congress.
i. Analysis of economic and financial developments, including
the condition of net international reserves and monetary
aggregate. (90 days after end of each quarter)
ii. Preceeding year's budget and profit and loss statement of
the bankgo sentral showing 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 of semester)
iv. Abnormal movements in monetary aggregates and the
general price level. (as soon as practicable), and remedial
measures in response to such abnormal movements (not
later than 27 hours)
C. Annual Report of the Bangko Sentral
)# Before the end of March of each year, the Bangko Sentral shall publish
and submit to the President and the Congress an annual report on the
condition of the Bangko Sentral including a review of the policies and
measures adopted by the Monetary Board during the past year and an
analysis of the economic and financial circumstances which gave rise
to said policies and measures.
*# 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:
&# the monthly movement of monetary aggregates and their
components;
&&# the monthly movement of purchases and sales of foreign
exchange and of the international reserves of the Bangko
Sentral;
&&&# the balance of payments of the Philippines;
&'# monthly indices of consumer prices and of import and export
prices;
'# the monthly movement, in summary form, of exports and
imports, by volume and value;
'&# the monthly movement of the accounts of the Bangko
Sentral and of other banks;
'&&# the principal data on government receipts and expenditures
and on the status of the public debt, both domestic and
foreign; and
viii. the texts of the major legal and administrative measures
adopted by the Government and the Monetary Board during
the year which relate to the functions or operations of the
Bangko Sentral or of the financial system.
+# The Bangko Sentral shall publish another version of the annual report
in terms understandable to the layman.
(# Failure to comply with the reportorial requirements pursuant to this
article without justifiable reason as may be determined by the
Monetary Board shall cause the withholding of the salary of the
personnel 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.
X. Profits, Losses, and Special accounts
A. Fiscal Year
a. Profits or losses arising from any revaluation of the Bangko Sentral's
net assets or liabilities in gold or foreign currencies with respect to the
Philippine peso shall not be included 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 Philippines to any international or regional intergovernmental
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 nternational Reserve" and the
net balance 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 nternational Reserve account shall be neither credited nor
debited for any purposes other than those specifically authorized in this section.
B. Computation of Profits and Losses
Within the first thirty (30) days following the end of each year, the Bangko Sentral
shall determine its net profits or losses. n the calculation of net profits, the
Bangko Sentral shall make adequate allowance or establish adequate reserves
for bad and doubtful accounts.
C. Distribution of Net Profits
Within the first sixty (60) days following the end of each fiscal year, the
Monetary 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 shall be carried to surplus
b. the remaining fifty percent (50%) shall revert back to the National
Treasury, except as otherwise provided in the transitory provisions of
this Act.
D. Revaluation of Profits and Losses
a. Profits or losses arising from any revaluation of the Bangko Sentral's
net assets or liabilities in gold or foreign currencies with respect to the
Philippine peso shall not be included 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 Philippines to any international or regional intergovernmental
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 nternational Reserve" and the
net balance 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 nternational Reserve account shall be neither credited nor
debited for any purposes other than those specifically authorized in this section.
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 by
the transitory provisions of this Act.
The Revaluation of nternational Reserve (RR) account as of the effective date
of this Act of the Central Bank shall continue to be for the account of the same
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 transitory
provisions of this Act.
F. The Auditor
The Chairman of the Commission on Audit shall act as the ex officio auditor of
the Bangko Sentral and, as such, he is 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 appoint and fix salaries and number of personnel to
assist said representative in his work. The salaries and other emoluments shall
be paid by the Commission. The auditor of the Bangko Sentral and personnel
under him may be removed only by the Chairman 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.
X. Penalty for Violation
Unless otherwise herein provided, the violation of any of the provisions of this Act
shall be subject to Sections 34, 35, 36 and 37 of the New Central Bank Act. f the
offender is a director or officer of a bank, quasi-bank or trust entity, the Monetary
Board may also suspend or remove such director or officer. f the violation is
committed by a corporation, such corporation may be dissolved by quo warranto
proceedings instituted by the Solicitor General.
A. Penalty for Refusal to make Reports
Any officer, owner, agent, manager, director or officer-in-charge of any institution
subject to the supervision or examination by the Bangko Sentral within the purview of
this Act who, being required in writing by the Monetary Board or by the head of the
supervising and examining department willfully refuses to file the required report or
permit any lawful examination into the affairs of such institution shall be punished by a
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 more
than five (5) years, or both, in the discretion of the court.
B. Penalty for Willful Making of a False or Misleading Statement on a Material Fact
punished by a fine of not less than One hundred thousand 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
court.
C. Proceedings Upon and Penalty for Violation of NCBA and Other banking laws. Rules
Regulations, Orders or nstructions
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
regulation issued by the monetary board, shall be punished by a fine not
less than 50, 000 and not more than 200,000 or imprisonment 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
violates this Act or other pertinent banking laws being enforced or
implemented by the Bangko Sentral or any order, instruction, rule or
regulation issued 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 than Fifty thousand pesos (P50,000) nor more than Two
hundred thousand pesos (P200,000) or by imprisonment of not less than
two (2) years nor more than ten (10) years, or both, at the discretion of the
court.
D. Administrative Sanctions on Banks and Quasi Banks
a. Administrative violation and penalties:
Grounds for administrative sanctions imposable by the MB to any bank or
quasi-bank:
i. Any willful violation of its charter or by-laws
ii. Willful delay in the submission of required reports and
publications
iii. Refusal to permit examination into the affairs of the institution
iv. Willful making of false or misleading statement to the board or the
appropriate supervising and examining department examiners.
v. Any willful failure or refusal to comply with, or violation of any
banking law or any rder, instruction or regualtin issued by the
Monetary Board, or any order, instruction or ruling by the
governor
vi. Conducting business in an unsafe or unsound manner as may be
determined by the MB.
mposable sanctions:
i. Fines not exceeding 30,000 for each day of violation. Mb
would take into consideration the attendant circumstances,
such as the nature and gravity of the violation or irregularity
and the size of the bank.
ii. Suspension of rediscounting privileges or access to BSP
credit facilities
iii. suspension of lending or foreign exchange operations or
authority to accept new deposits or make new investments;
iv. suspension of interbank clearing privileges; and/or
v. revocation of quasi-banking license.
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 issue an order requiring the
institution and/or the directors and/or officers concerned to cease and
desist from the indicated practice or violation, and may further order
that immediate action be taken to correct the conditions resulting from
such practice or violation. The cease and desist order shall be
immediately effective upon service on the respondents.
c. The respondents shall be afforded an opportunity to defend their action
in a hearing before the Monetary Board or any 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
order. f no such hearing is requested within said period, the order shall
be final. f a hearing is conducted, all issues shall be determined on the
basis of records, after which the Monetary Board may either reconsider
or make final its order.
d. The Governor is hereby authorized, at his discretion, to impose upon
banking institutions, for any failure to comply with the requirements of
law, Monetary Board regulations and policies, and/or instructions
issued by the Monetary Board or by the Governor, fines not in excess
of Ten thousand pesos (P10,000) a day for each violation, the
imposition of which shall be final and executory until reversed, modified
or lifted by the Monetary Board on appeal.
Chapter 8: Currency, Monetary StabiIization and Functions of the BSP
. The Unit of Monetary Value
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 settled in Philippine currency
" parties may agree to settle such obligation in any other
currency at the time of the payment.
B. Currency, defined
-all Philippine notes and coins issued or circulating in accordance with the
NCBA.
C. Value of Currency
-has value because people are willing to accept it in exchange of goods,
services or payment of debts.
. ssue of Means of Payment
A. Exclusive ssue Power
(i) Bangko Sentral- SOLE power to issue currency
(ii) Monetary Board- may issue regulations to prevent circulation of
foreign currency, currency substitutes, or to prevent the
reproduction of facsimiles of Bangko Sentral notes.
(iii) Bangko Sentral- has authority to investigate, arrest, search and
seize for the purpose of maintaining the integrity of the currency.
(iv) Violation: imprisonment of not less than five years but not more
than ten years. n case the RPC provides for a greater penalty,
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 laws of
preferential application, the provisions of this Code shall be enforced not only within
the Philippine Archipelago, including its atmosphere, its interior waters and maritime
zone, but also outside of its jurisdiction, against those who:
1. Should commit an offense while on a Philippine ship or airship
2. Should forge or counterfeit any coin or currency note of the Philippine Islands or
obligations and securities issued by the Government of the Philippine Islands;chan
robles virtual law library
3. Should be liable for acts connected with the introduction into these islands of the
obligations and securities mentioned in the presiding number;
4. While being public officers or employees, should commit an offense in the exercise
of their functions; or
5. Should commit any of the crimes against national security and the law of nations,
defined in Title One of Book Two of this Code.
*Related Crimes under the RPC
1. Art. 163. Making and mporting and Uttering False Coins
2. Art. 164. Mutilation of Coins; mportation and 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 Documents Payable to Bearer;
mporting, and Uttering Such False or Forged Notes and Documents
5. Art. 167. Counterfeiting, mporting and Uttering nstruments Not Payable to Bearer
6. Art. 168. llegal Possession and Use of False Treasury or Bank Notes and Other
nstruments of Credit
7. Art. 169. How forgery is committed. The forgery referred to in this section may be
committed by any of the following means:
1. By giving to a treasury or bank note or any instrument, payable to bearer
or order mentioned therein, the appearance of a true genuine document.
2. By erasing, substituting, counterfeiting or altering by any means the
figures, letters, words or signs contained therein.
B. Liability for Notes and Coins
(i) Notes and coins issued by the BSP shall be liabilities of the BSP.
Such may be issued only against, and in amounts not exceeding,
the assets of the BSP. Such shall 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 assets 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 shall 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
cannot be compelled to accept the same.
*a check cleared and credited to the account of the creditor =
delivery of cash to such creditor.
*Related Civil Code Provisions
Art. 1249. The payment of debts in money shall be made in the currency stipulated,
and if it is not possible to deliver such currency, then in the currency which is legal
tender in the Philippines.
The delivery of promissory notes payable to order, or bills of exchange or other
mercantile documents shall produce the effect of payment only when they have been
cashed, or when through the fault of the creditor they have been impaired.
In the meantime, the action derived from the original obligation shall be held in the
abeyance.
Art. 1250. In case an extraordinary inflation or deflation of the currency stipulated
should supervene, the value 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 contrary.
D. Characteristics of the Currency
(i) Monetary Board, with approval of the President, shall prescribe:
1. Denominations
2. Designs
3. nscriptions
4. Other characteristics 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 President 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 availability 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 printed and minted. t shall also have the authority to
contract institutions, mints or firms for such operations.
(ii) Expenses incurred for the operations shall be for the account of
the BSP.
F. nterconvertibility of Currency
-BSP shall exchange, on demand and with no charge, Philippine currency of
any denomination to any other denomination of such currency. f BSP is
temporarily unable to do so, shall deliver the notes and coins of the
denominations which most nearly approximate those requested.
G. Replacement of Currency Unfit for Circulation
-shall be withdrawn and demonitized by the BSP from circulation and
replace them with adequate ones.
"shall not replace: notes and coins, the identification of which is
impossible; filed, clipped, perforated coins; notes which have lost 2/5 of their
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
(ii) Such notes called in for replacement shall remain legal tender for
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 period determined by the MB. Lapse of such period, the
notes and coins shall cease to be a liability of the BSP and shall
be demonitized. The called in notes and coins shall likewise be
demonitized.
. Domestic Monetary Stabilization
A. Guiding Principle on Monetary Stabilization
-the MB shall endeavour to control any expansion or contraction in
monetary aggregates which is prejudicial to the attainment or maintenance
of price stability.
B. Power to Define Terms
-MB shall formulate definitions of monetary aggregates, credit and prices
and shall make public such definitions and any changes thereof.
C. Action When Abnormal Movements Occur in the Monetary Aggregates,
Credit, or Price Level
(i) Whenever abnormal movements in the monetary aggregates, in
credit, or in prices endanger the stability of the Philippine
economy or important sectors, the MB shall:
a) Take appropriate remedial measures
b) Submit a report to the President and the Congress (also
made public, a description and analysis:
1. Causes of the rise or fall of such 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 measures 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 such 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
disturbances have disappeared or have been controlled.
V. nternational Monetary Stabilization
A. nternational Monetary Stabilization
-preserved by the BSP
-maintain convertibility into other currencies primarily for foreign trade and
invisibles.
B. nternational Reserves
-Purpose: to maintain the international stability and convertibility of the
Philippine Peso (adequate to meet foreseeable net demands on the BSP for
foreign currencies.)
-MB shall judge such adequacy based on: prospective receipts and
payments of ForEx by the Philippines.
-MB shall pay special 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
Philippines
30 , P a g e
3. ForEx assets and liabilities of all other persons and entities in
the Philippines
C. Composition of the nternational 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 banks 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 particular consideration to the prospects of continued
strength and convertibility of the currencies
c. Give particular consideration to the anticipated demands
(iii) The MB shall issue regulations determining the other
qualifications which the ForEx must meet in order to be included
in the international reserves of the BSP.
(iv) BSP is free to convert any asset in its international reserves into
other assets 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 international reserves appear to be imminent in falling to
such level, or
3) The international 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 measures
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) f such actions fail, the MB shall propose to the President, with
notice to the Congress, additional action it deems necessary to
restore international balance of payments in the Philippines
(iii) The MB shall submit periodic reports until the threat to
international monetary stability has disappeared.
E. Means of Action
-MB shall rely on its moral influence and the powers granted to it under the
NCBA.
V. Operations in Gold and Foreign Exchange
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 as
determined by the MB.
B. Purchases and Sales of ForEx
-by the BSP
-with the following entities or persons only:
1. Banking institutions within the Philippines
2. Government and its subdivisions and instrumentalities
3. Foreign governments
4. nternational Financial nstitutions
5. Others authorized by the MB
-the BSP may buy or sell any quantity of ForEx upon demand or request by
any banking institution in the Philippines. Provided, that such are freely
convertible into gold or US dollars. (not applicable to demands for foreign
notes and coins)
-exchange transactions shall be based on the NCBA.
C. Foreign Asset Position of the Bangko Sentral
-BSP shall maintain NET POSTVE FOREGN ASSET POSTON (Gross
ForEx assets>Gross ForEx liabilities.
-f ForEx liabilities (in Pesos) > twice the ForEx assets (in Pesos), BSP shall
report to the Congress the origin of the liabilities and the manner it shall be
paid. (made within 60 days from the date of the occurrence.
D. Emergency Restrictions on Exchange Operations
n order to:
(i) Achieve the primary objective of the BSP
(ii) Protect international reserves in the imminence or during and
exchange crisis
(iii) Give time to the MB and the Government to take measures to
forestall or overcome such crisis
5 members of the MB and the President of the Philippines may:
1. Temporarily suspend sales of exchange
2. Subject all gold and ForEx transactions to license
3. Require that any ForEx obtained 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 nconvertible Currencies
-shall be avoided
-may acquire more than the minimum balance necessary to cover current
demands for such 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 deviation limits from the exchange rates
-MB shall determine the rates for other types of ForEx transactions. But the
margins between the effective exchange rates and the rates established
may not exceed the margins for spot exchange by more than 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 entities. The
BSP may also act as agent for such.
-MB may authorize the BSP to pledge any gold or other assets as securities
against loans which it receives from foreign entities.
V. Regulation of Foreign Exchange Operations Of the Banks
A. Foreign Exchange Holdings of the Banks
-MB may require the banks to sell to the BSP 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 and liabilities of banks and consider the
bank's networth, outstanding liabilities, or other ratios it may deem
appropriate. Such determination shall be applied in all banks uniformly.
B. Requirement of Balanced Currency Position
-MB may require 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-spot Exchange Transaction
-MB may issue regulations on such transaction to restrain banks from
speculating future fluctuations in ForEx
D. Othe Exchange Profits and 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 banking risks
3. Exchange risks not assumed by the BSP regarding non-spot exchange
transaction
E. nformation on Exchange Operations:
a. Banks shall report to the BSP 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 other persons and entities to report to it all
transactions as stated above. t shall prescribe the form such
declarations must be made. The BSP may inspect such declarations
for verification.
V. Loans To Banking And Other Financial nstitutions
A. Guiding Priciples
-rediscounts, discounts, loans and advances which the BSP is authorized to
extend shall be used to influence the volume of credit consistent with the
objective of price stability.
B. Authorized Types of Credit Operations
-carried on by the BSP with banks
a. Commercial Credits- BSP may rediscount, discount, buy and sell bills,
acceptances, promissory notes and other credit instruments with maturities
of not more than 180 days from the date of rediscount, discount or
acquisition and resulting from transactions related to:
1. The importation, exportation, purchase or sale of readily
saleable goods and products, or their transportation within the Philippines;
or
2. The storing of non-perishable goods and products, duly insured
and deposited.
b. Production Credits- *same* with maturities of not more than 360 days
*same* and resulting from transactions related to the production or
processing of agricultural, animal, mineral or industrial 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 rediscounted in accordance with BSP rules and regulations.
- when necessary, BSP may provide funds from non-
inflationary sources; MB shall prescribes for additional
safeguards for the same.
d. Advances- BSP may grant advances against the following 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. Production 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. Negotiable treasury bills, cert of indebtedness, notes and other
negotiable obligations of the Govt maturing within 3 yrs from the
date of the advance
7. Negotiable bonds issued by the Govt and its subdivisions and
instrumentalities having maturities of not more tan 10 years from
the date of the advance
Notes:
(i) The rediscounts, discounts, loans and advances made in accordance with the above
provisions may not be renewed or extended unless extraordinary circumstances fully
justify such renewal or extension.
(ii) Advances made against the collateral in 6 and 7 may not exceed 80% of the current
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. Emergency Loans and Advances
A. Nature of Emergency Loans or Advances
-intended to assist a bank with serious liquidity problems arising from causes beyond
the control of the management.
-discretion of MB
-only a temporary remedial measure
-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 financial 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 outstanding, the debtor cannot expand the total volume of its
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 normal times to assist a
bank in a precarious financial condition brought by unforeseen events or though
foreseeable, cannot be prevented.
-MB must first ascertain 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 tranches
D. First Tranche
1. Limited to 25% of the total deposits or deposit substitutes
32 , P a g e
-secured by govt securities and other unencumbered first class collaterals the MB may
approve
2. f MB determined that the emergency warrant a greater loan, it may exceed 25%
-must be secured by govt securities and other unencumbered first class collaterals the
MB may approve.
-principal stockholders must furnish an acceptable undertaking to indemnify and hold
harmless from suit a conservator appointed 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 assets certified by an
external auditor to be good and available for collateral purposes.
E. Second Tranche
-vote of 5 MB members may authorize the release of a second tranche on condition
that the principal stockholders of the institution:
1. Furnish the undertaking the same as in number 2 above
2. Provide acceptable security adequate (in the opinion of the MB) to supplement the
assets tendered by the bank to collateralize the subsequent tranche.
F. Shares as Collateral
Section 128. Prohibitions. The Bangko Sentral shall not acquire shares of any kind or accept
them as collateral, and shall not participate in the ownership or management of any enterprise,
either directly or indirectly.
The Bangko Sentral shall not engage in development banking or financing: Provided, however,
That outstanding loans obtained or extended for development financing shall not be affected by
the prohibition of this section.
-This provision shall not be applicable to acceptance as collateral of shares and their
acquisition as a result f foreclosure proceeding. f the BSP acquired any of such shares, such
shall be disposed in a public bidding within one year from the date of consolidation of title by the
BSP.
G. Overdraft
-shall be eliminated within 5 consecutive banking days
X. Credit Terms
A. nterest and Rediscount
-The BSP shall collect interest and other charges on loans it extends
notwithstanding the closure, receivership or liquidation of the bank. This
shall apply prospectively.
-The MB shall fix the interest and rediscount rates (applied uniformly to
banks of the same category)
B. Endorsement
-the documents rediscounted, discounted, bought or accepted as collateral
by the BSP shall bear the endorsement of the bank.
C. Repayment of Credits
a. The collaterals must be withdrawn by the bank on maturity date or
upon the liquidation of the obligation which they represent
b. Banks have the right to withdraw such collaterals upon payment of the
debt and its interest
D. Other Requirements
-MB may prescribe additional requirements to obtain 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 its 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 advances 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 The Bangko Sentral
A. Principles of Open Market Operations
-made exclusively in accordance 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 of indebtedness issued by govt instrumentalities and
guaranteed by the Govt
-such evidences must be freely negotiable, regularly serviced, available to
the public in denominations of thousand pesos or more.
C. ssue and Negotiation of the BSP Obligations
-BSP may issue, place, buy and sell freely negotiable evidences of
indebtedness of the Bangko Sentral
- issuance of such certificates of indebtedness shall be made only in cases
of extraordinary movement in price levels.
-MB may determine the interest rates, maturities and other characteristics of
said obligations of the BSP and may denominate the obligations in gold or
foreign currencies.
-acquired by the BSP through purchases or redemptions.
-shall not be included among its assets, and shall be immediately retired
and cancelled.
X. Composition of the BSP's Portfolio
Review of the BSP's Portfolio
-by the MB in relation to its future credit policy
-shall consider whether a sufficiently large part of the portfolio consists of assets
with early maturities, in order that a contraction in BSP credit may be effected
promptly whenever the national monetary policy so requires
X. Bank Reserves
A. Reserve Requirements
-banks are required to maintain reserves against their deposit liabilities
-MB may also require all banks and/or quasi-banks to maintain reserves against
funds held in trust and liabilities for deposit substitutes
-proportional 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 determined 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 reserves is for the purpose of controlling the volume of
money
-BSP shall not pay interest 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, through the issuance, endorsement, or acceptance of debt instruments
for the borrower'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, bankers acceptances, promissory notes, participations, certificates
of assignment and similar instruments with recourse, and repurchase
agreements. The Monetary Board shall determine what specific instruments shall
be considered as deposit substitutes for the purposes of Section 94 of this Act:
Provided, however, That deposit substitutes of commercial, industrial and other
33 , P a g e
non-financial companies for the limited purpose of financing their own needs or
the needs of their agents or dealers shall not be covered by the provisions of
Section 94 of this Act.
C. Required Reserves Against Peso Deposit
-fixed by MB
-may alter the minimum reserve ratios
D. Required Reserves Against Foreign Currency Deposits
-fixed by MB
E. Reserves against Unused Balances of Overdraft Lines
-MB may establish minimum reserve requirements
F. ncrease in Reserve Requirements
-increase must be gradual
-shall not exceed four percentage points in any thirty-day period
-banks shall be notified in advance as to when it will take effect
G. Computation on Reserves
- calculated daily on the basis of the amount of the institution's reserves and the
amount of its liability accounts against which reserves are required to be
maintained
-holidays or non-banking days: the reserve position of the day immediately
preceding the same shall apply
-principal office + branches + agencies =SNGLE UNT
H. Reserve Deficiencies
-if reserve position is below the minimum required: shall pay the Bangko Sentral
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,
whichever is higher.
-excess may offset deficiencies (of the same week)
-MB may deny such privilege in case of abuse
-if a bank chronically 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
- MB may modify or set aside the reserve deficiency penalties provided in this
section, for part or the entire period of a strike or lockout affecting a bank or a
quasi-bank or of a national emergency affecting operations of banks or quasi-
banks. The MB may also modify or set aside reserved deficiency penalties for
rehabilitation program of a bank.
. nterbank Settlement
-BSP shall establish facilities for interbank clearing under prescribed rules and
regulations of the MB. BSP may charge fees.
-Deposit reserves- basis for check clearing and settlement of interbank balances
- any bank which incurs on overdrawing in its deposit account with the Bangko
Sentral shall fully cover said overdraft, including interest thereon at a rate
equivalent to one-tenth of one percent (1/10 of 1%) per day or the prevailing
ninety-one-day treasury bill rate plus three percentage points, whichever is
higher, not later than the next clearing day.
- settlement of clearing balances shall not be effected for any account which
continues to be overdrawn for five (5) consecutive banking days until such time
as the overdrawing is fully covered or otherwise converted into an emergency
loan or advance.
-the appropriate clearing office shall be officially notified of banks with overdrawn
balances.
J. Exemption from attachment
-deposits maintained by banks with the BSP as part of their reserve requirements
shall be exempted to satisfy a claim of any party except the Government, its
subdivisions and instrumentalities.
X. Selective Regulation of Bank Operations
[just for now]
Section 104. Guiding Principle. The Monetary Board shall use the powers granted to it under
this Act to ensure that the supply, availability and cost of money are in accord with the needs of
the Philippine economy and that bank credit is not granted for speculative purposes prejudicial
to the national interests. Regulations on bank operations shall be applied to all banks of the
same category uniformly and without discrimination.
Section 105. Margin Requirements Against Letters of Credit. The Monetary Board may at any
time prescribe minimum cash margins for the opening of letters of credit, and may relate the size
of the required margin to the nature of the transaction to be financed.
Section 106. Required Security Against Bank Loans. n order to promote liquidity and
solvency of the banking system, the Monetary Board may issue such regulations as it may deem
necessary with respect to the maximum permissible maturities of the loans and investments
which the banks may make, and the kind and amount of security to be required against the
various types of credit operations of the banks.
Section 107. Portfolio Ceilings. Whenever the Monetary Board considers it advisable to
prevent or check an expansion of bank credit, the Board may place an upper limit on the amount
of loans and investments which the banks may hold, or may place a limit on the rate of increase
of such assets within specified periods of time. The Monetary Board may apply such limits to the
loans and investments of each bank or to specific categories thereof.
n no case shall the Monetary Board establish limits which are below the value of the loans or
investments of the banks on the date on which they are notified of such restrictions. The
restrictions shall be applied to all banks uniformly and without discrimination.
Section 108. Minimum Capital Ratios. The Monetary Board may prescribe minimum ratios
which the capital and surplus of the banks must bear to the volume of their assets, or to specific
categories thereof, and may alter said ratios whenever it deems necessary.

ARTCLE X
COORDNATON OF CREDT POLCES BY GOVERNMENT NSTTUTONS

Section 109. Coordination of Credit Policies. Government-owned corporations which perform
banking or credit functions shall coordinate their general credit policies with those of the
Monetary Board.
Toward this end, the Monetary Board may, whenever it deems it expedient, make suggestions
or recommendations to such corporations for the more effective coordination of their policies
with those of the Bangko Sentral.

CHAPTER V
FUNCTONS AS BANKER AND FNANCAL ADVSOR
OF THE GOVERNMENT


ARTCLE - FUNCTONS AS BANKER OF THE GOVERNMENT

Section 110. Designation of Bangko Sentral as Banker of the Government. The Bangko
Sentral shall act as a banker of the Government, its political subdivisions and instrumentalities.
Section 111. Representation with the International Monetary Fund. The Bangko Sentral shall
represent the Government in all dealings, negotiations and transactions with the nternational
Monetary Fund and shall carry such accounts as may result from Philippine membership in, or
operations with, said Fund.
Section 112. Representation with Other Financial Institutions. The Bangko Sentral may be
authorized by the Government to represent it in dealings, negotiations or transactions with the
nternational Bank for Reconstruction and Development and with other foreign or 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 dealings, negotiations or
transactions.
Section 113. Official Deposits. The Bangko Sentral shall be the official depository of the
Government, its political subdivisions and instrumentalities as well as of government-owned or
controlled corporations and, as a general policy, their cash balances should be deposited with
the Bangko Sentral, with only minimum working balances to be held by government-owned
banks and such other banks incorporated in the Philippines as the Monetary Board may
designate, subject to such rules and regulations as the Board may prescribe: Provided, That
such banks may hold deposits of the political subdivisions and instrumentalities of the
Government beyond their minimum working balances whenever such subdivisions or
instrumentalities have outstanding loans with said banks.
The Bangko Sentral may pay interest on deposits of the Government or of its political
subdivisions and instrumentalities, as well as on deposits of banks with the Bangko Sentral.
Section 114. Fiscal Operations. The Bangko Sentral shall open a general cash account for
the Treasurer of the Philippines, in which the liquid funds of the Government shall be deposited.
Transfers of funds from this account to other accounts shall be made only upon order of the
Treasurer of the Philippines.
Section 115. Other Banks as Agents of the Bangko Sentral. n the performance of its
functions as fiscal agent, the Bangko Sentral may engage the services of other government-
owned and controlled banks and of other domestic banks for operations in localities at home or
abroad in which the Bangko Sentral does not have offices or agencies adequately equipped to
perform said operations: Provided, however, That for fiscal operations in foreign countries, the
Bangko Sentral may engage the services of foreign banking and financial institutions.
Section 116. Remuneration for Services. The Bangko Sentral may charge equitable rates,
commissions or fees for services which it renders to the Government, its political subdivisions
and instrumentalities.

ARTCLE
THE MARKETNG AND STABLZATON OF SECURTES FOR THE ACCOUNT OF THE
GOVERNMENT

A. THE SSUE AND PLACNG OF GOVERNMENT SECURTES

Section 117. Issue of Government Obligations. The issue of securities representing
obligations of the Government, its political subdivisions or instrumentalities, may be made
through the Bangko Sentral, which may act as agent of, and for the account of, the 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 shall not subscribe
to their issue except to replace its maturing holdings of securities with the same type as the
maturing securities.
Section 118. Methods of Placing Government Securities. The Bangko Sentral may place the
securities to which the preceding section refers through direct sale to financial institutions and
the public.
The Bangko Sentral shall not be a member of any stock exchange or syndicate, but may
intervene therein for the sole purpose of regulating their operations in the placing of government
securities.
The Government, or its political subdivisions or instrumentalities, shall reimburse 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 redemption of
the public debt shall also be effected through the Bangko Sentral.

B. BANGKO SENTRAL SUPPORT OF THE GOVERNMENT SECURTES MARKET

Section 120. The Securities Stabilization Fund. There shall be established a "Securities
Stabilization Fund" which shall be administered by the Bangko Sentral for the account of the
Government. chan robles virtual law library
The operations of the Securities Stabilization Fund shall consist of purchases and sales, in the
open market, of bonds and other evidences of indebtedness issued or fully guaranteed by the
Government. The purpose of these operations shall be to increase the liquidity and stabilize the
value of said securities in order thereby to promote investment in government obligations.
The Monetary Board shall use the resources of the Fund to prevent, or moderate, sharp
fluctuations in the quotations of said government obligations, but shall not endeavor 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 necessary to implement the
provisions of this section.
Section 121. Resources of the Securities Stabilization Fund. Subject to Section 132 of this
Act, the resources of the Securities Stabilization Fund shall come from the balance 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 Stabilization Fund shall retain
net profits which it may make on its operations, regardless of whether said profits arise from
capital gains or from interest earnings. The Fund shall correspondingly bear any net losses
which it may incur.

ARTCLE
FUNCTONS AS FNANCAL ADVSOR OF THE GOVERNMENT

Section 123. Financial Advice on Official Credit Operations. Before undertaking any credit
operation abroad, the Government, through the Secretary of Finance, shall request the opinion,
in writing, of the Monetary Board on the monetary implications of the contemplated action. Such
opinions must similarly be requested by all political subdivisions and instrumentalities of the
Government before any credit operation abroad is undertaken by them.
The opinion of the Monetary Board shall be based on the gold and foreign exchange resources
and obligations of the nation and on the effects of the proposed operation on the balance of
payments and on monetary aggregates.
Whenever the Government, or any of its political subdivisions or instrumentalities, 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 probable effects of the proposed
operation on monetary aggregates, the price level, and the balance of payments.
Section 124. Representation on the National Economic and Development Authority. n order
to assure effective coordination between the economic, financial and fiscal policies of the
Government and the monetary, credit and exchange policies of the Bangko Sentral, the Deputy
Governor designated by the Governor of the Bangko Sentral shall be an ex officio member of
the National Economic and Development Authority Board.

CHAPTER V
PRVLEGES AND PROHBTONS


ARTCLE
PRVLEGES

Section 125. Tax Exemptions. The Bangko Sentral shall be exempt for a period of five (5)
years from the approval of this Act from all 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, documents and transactions related to the conduct of
the business of the Bangko Sentral: Provided, however, That said exemptions shall apply only to
such taxes, fees, charges and assessments for which the Bangko Sentral itself would otherwise
be liable, and shall not apply to taxes, fees, charges, or assessments payable by persons or
other entities doing business with the Bangko Sentral: Provided, further, That foreign loans and
other obligations of the Bangko Sentral shall be exempt, both as to principal and interest, from
any and all taxes if the payment of such taxes has been assumed by the Bangko Sentral.
Section 126. Exemption from Customs Duties. The provision of any general or special law to
the contrary notwithstanding, the importation and exportation by the Bangko Sentral of notes
and coins, and of gold and other metals to be used for purposes authorized under this Act, and
the importation of all equipment needed for bank note production, minting of coins, metal refining
and other security printing operations shall be fully exempt from all customs duties and consular
fees and from all other taxes, assessments and charges related to such importation or
exportation.
Section 127. Applicability of the Civil Service Law. Appointments in the Bangko Sentral,
except as to those which are policy-determining, primarily confidential or highly technical in
nature, shall be made only according to the Civil Service Law and regulations: Provided, That no
qualification requirements for positions in the Bangko Sentral shall be imposed other than those
set by the Monetary Board: Provided, further, That, the Monetary Board or Governor, in
accordance with Sections 15(c) and 17(d) of this Act, respectively, may without need of
obtaining prior approval from any other government agency, appoint personnel in the Bangko
Sentral whose services are deemed necessary in order not to unduly disrupt the operations of
the Bangko Sentral.
Officers and employees of the Bangko Sentral, including all members of the Monetary Board,
shall not engage directly or indirectly in partisan activities or take part in any election except to
vote.

ARTCLE
PROHBTONS

Section 128. Prohibitions. The Bangko Sentral shall not acquire shares of any kind or accept
them as collateral, and shall not participate in the ownership or management of any enterprise,
either directly or indirectly.
The Bangko Sentral shall not engage in development banking or financing: Provided, however,
That outstanding loans obtained or extended for development financing shall not be affected by
the prohibition of this section.
Chapter 9 (incompIete)
F. Rights of the Entruster
1. The Entruster shall be entitled:
$ To the proceed of the sale of GD
$ To the return of the GD incase of non-sale\
$ To the enforcemet of all rights conferred on him in the trust receipt provided such
are not contrary to law
2. The Entruster may cancel the trust and take possession of the GD OR of the
proceeds at any time upon default or failure to comply with the terms and conditions or
agreement, and
$ Give notice to the Entrustee on or after default of the intention to SELL and may,
NOT LESS THAN 5 DAYS, after serving such, sell the GD at a PUBLC or
PRVATE SALE. The Entruster may be the purchaser.
$ Notice of Sale shall be deemed sufficient if given in writing and either:
, served personally to the entrustee, or
, sent by post-paid ordinary mail to the the entrustee's last known
bsiness address
% The proceeds of such sales shall be applied:
, To the payment of the expenses thereof
, To the payment of the expenses of re-taking, keeping and storing the
GD
, To the satisfaction of the entrustee's indebtedness to the entruster
% The Entrustee shall receive any surpus but shall be liable for
any deficiency to the Entruster
G. Entruster NOT ResponsibIe on SaIe by Entrustee
The Entruster, holding security interest or has given the entrustee the liberty to sell or
dispose of the GD, is NOT responsible as a principal or as a vendor in a sale or contract to sell
made by the entrustee.
H. ObIigations of the Entrustee
The entrustee shall:
1. Hold the GD and shall dispose of them in accordance with the terms and conditions
of the trust receipt;
2. Receive the proceeds in trust for the entruster and turnover the same to the entruster
to the extent of the amount owing the entruster or as appears on the trust receipt;
3. nsure the GOODS for their total value against loss from fire, theft, pilferage, or other
casualties;
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. Observe all other terms and conditions of the trust receipt not contrary to the
provisions of the law.
I. LiabiIity of Entrustee for Loss
$ Risk of Loss shall be borne by the Entrustee.
$ The loss of the GD pending their disposition, whether or not the entrustee is at fault or
negligent, it shall NOT extinguish his obligation to teh entruster for the value thereof
J. Rights of the Purchaser for VaIue and Good Faith
$ f the entrustee has the right to sell then a purchaser of value and good faith acquires
the GD free from the entruster's security interest
K. VaIidity of Entruster's Security Interest as Against Creditors
$ The Entruster's security interest in GD pursuant to the written terms of a trust receipt
shall be VALD against all creditors of the Entrustee for the duratioon fo the trust
receipt agreement
L. VioIation of the Trust Receipts Law (MaIum Prohibitum--intent is immateriaI)
$ 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
$ Failure to account, upon demand, for the goods received in trust is evidence of
conversion or misappropriation--constitutes estafa.
$ The Trust Receipts Law punishes dishonesty and abuse of confidence in handling of
money or goods to the prejudice 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, but to the public interest.
M. PenaIty
$ Punished under Art. 315 par. 1 (b) of the RPC or RA 3815
$ f vilaotion is committed by corporations, partnerships, associations, or other juridical
entities, penalty shall be imposed on the directors, officers, employees,or other
officials or persons therein responsible for the offense, w/o prejudice to the civil
liabilities
% Reason: Corporation and other juridical entities CANNOT be put into jail. But
they are LABLE for the civil liabilities because of the clause, "w/o prejudice to the
civil liabilities."
Chapter 10 (incompIete)
G. Duty to Indicate Insurance on Deposits
All banks shall indicate the coverage of the PDC in each passbook, CTD and/or cover
of checkbook for demand deposit/NOW accounts stating, inter alia, the maximum amount of
insurance.
VI. Assessment
A. Assessment Rate
- shall be determined by the Board of Directors
- shall not exceed 1/5 of 1% per annum; semi-assessment rate for each insured bank
shall be in the amount of the product of the assessment rate multiplied by the
assessment base but in no case shall it be less than P250. the assessment base shall
be the amount of the liability of he bank for deposits without any deduction for
indebtedness of depositors.
B. Certified Statement of Assessment Base and Assessment Due
(i) On or before July 31 of each year, each insured bank shall file with the Corp. a
certified statement 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 PDC 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 under the penalties of perjury.
(ii) On or before Jan. 31 of each year, each insured bank shall file with the PDC a
similar certified statement for the 6 months ending on the preceding Dec. 31 and
shall pay the amount of the semiannual assessment for the period ending in the
following June 30 which it is required to certify.
(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 insured
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 statement shall
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 accordance with (a)
above.
(v) f 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 assessment.
(vii) Any insured bank which fails to pay any certified statement may be compelled to
do so by mandatory injunction or other appropriate remedy .
C. Refund and Credit
PDC may:
1. refund to an B any payment of assessment in excess of the amount due
2. credit such excess toward the payment of the assessment next becoming due
from such bank and upon succeeding assessments until the credit is exhausted.
D. Termination
- PDC shall not terminate the insured status of any bank which continues to operate or
receive deposits
- Should any B fail or refuse to pay any assessment required, and should not correct
such failure of refusal within 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, PDC may, at its
discretion, file a case for collection without prejudice to the imposition of administrative
sanctions
E. Trust Funds
- means funds held by an insured bank in a fiduciary capacity and includes, without
being limited to, funds held as trustee, executor, administrator, guardian, or agent
- shall be insured like other forms of deposits, in an amount not to exceed P10,000 for
each trust estate, and when deposited by the fiduciary bank in another B, such funds
shall be similarly insured to the FB according to the trust estates represented
- the amount so held by other Bs on deposit shall not for the purpose of any certified
statement be considered to be a deposit liability of the FB, but shall be considered to
be a deposit liability of the B
F. Payment of Dividends and/or Interests
- no insured bank shall pay any dividend on its capital stock or interest on its capital
notes or debentures or distribute any of its capital assets while it remains in default in
the payment of any assessment due
- if such default is due to a dispute between the insured bank and PDC over the
amount of such assessment, this rule shall not apply if such bank shall deposit
security satisfactory to PDC for payment upon final determination of the issue
VII. Deposit Insurance Fund
- the permanent insurance fund shall be P3 billion
- the DF shall be the capital account of PDC and shall principally consist of the ff:
a. the PF
b. assessment collections, subject to the charges
37 , P a g e
c. reserves for insurance and financial assistance losses
d. retained earnings
- PDC may, within 2 years from the passage of the PDC Law, and every 5 years
thereafter, conduct a study on the need to adjust the amount of the PF, insurance
cover, assessment rate and assessment base, and thereafter make the necessary
recommendation to Congress
- All assessment collections and income from operations after expenses and charges
shall be added to the DF. Such expenses and charges are:
a. the operating costs and expenses of the Corp. for the calendar year
b. additions to reserve to provide for insurance and financial assistance
losses, net of recoverable amounts from applicable assets and
collaterals, during the calendar year
c. the net insurance and financial assistance losses sustained in said
calendar year
- n a suit, PDC 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 not 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 for
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
n case of commission of unsafe or unsound practices by an B or its officers, the
Board of Directors shall:
- submit the report of the examination to the MB to secure corrective action thereon
- if no such action is taken within 45 days from submission of the report, the BoD shall
motu proprio institute corrective action which it deems necessary (BoD may issue a
cease-and-desist order, and require the bank or its directors or agents concerned to
correct the practices or violations within 45 days)
- if the practice or violation is likely to cause insolvency or substantial dissipation of
assets or earnings of the bank, or is likely to seriously weaken the condition of the
bank or otherwise seriously prejudice the interests of its depositors and the Corp., the
period to take corrective action shall not be more than 15 days. The order may also
include the imposition of fines
What may be violated:
1. any provision of the PDC Law
2. any order, rule or instruction issued by PDC
3. any written condition imposed in connection with any transaction with or granted by
PDC
IX. Reports by Insured Banks
- each B shall make to PDC reports of conditions in such form and at such times as
the BoD may require such reports to be published in such manner not inconsistent
with any applicable law as it may direct
- PDC shall have access to reports of examination made by, and report of conditions
made to the BSP or its appropriate supervising dept., and the BSP shall also have
access to such reports made by and to PDC
- Each B shall keep and maintain a true and accurate record or statement of its daily
deposit transactions consistent with the standards set by the BSP and PDC
X. Prohibitions on PDIC PersonneI
- being an officer, director, consultant, employee or stockholder, directly or indirectly, of
any bank or banking institution except as otherwise provided by law
- receiving 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, information
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, any agency of govt.
authorized by law, or to any person authorized by either of them in writing to receive
such information
XI. LegaI Assistance
- PDC shall underwrite or advance litigation costs and expenses, or provide legal
assistance to its directors, officers, employees, or agents in connection with any civil,
criminal, administrative, or any other action to which such director etc. is made a party
by reason of or in connection with the exercise of authority or performance of
functions and duties " does not apply against actions initiated by PDC against such
director etc.
- Applies also to those who resigned, retired, or transferred to another agency, in
connection with acts done during their tenure or employment with PDC
XII. DeaIings by PDIC PersonneI with Banks
A. Designation as Directors and Officers of Banks
Members of the BoD and personnel of PDC may become directors and officers of any
bank or banking institution and of any entity related to such institution in connection with
financial assistance extended by PDC to such institution and when, in the opinion of the Board,
it is appropriate to make such designation to protect the interest of PDC.
B. Borrowing from Banks
- shall be prohibited only with respect to the particular institution in which they are
assigned, or are conducting an examination
- personnel are likewise prohibited from borrowing from any bank or banking institution
during the time that a transaction of such institution with PDC is being evaluated,
processed, or acted upon by such personnel
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 and appoint
PDC as receiver
- "receiver includes a receiver, commission, person, or other agency charged by law
with the duty to take charge of the assets and liabilities of a bank which has been
forbidden fro doing business in the Phil, as well as the duty to gather, preserve and
administer such assets and liabilities for the benefit of the depositors and creditors of
dais bank, and to continue into liquidation whenever authorized under the law, and 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 bank.
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 suspended
- the relevant provisions of the Articles of ncorporation and By-laws of the closed bank
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 subject to
attachment, garnishment, execution, levy or any other court processes
n addition to the powers of a receiver pursuant to existing laws, PDC is empowered
to:
1. bring suit to enforce liabilities to or recoveries of the closed bank
2. appoint and hire persons and entities of recognized competence in banking or finance
as its deputies and assistants, to perform such powers and functions of PDC as
receiver and liquidator of the closed bank
3. suspend or terminate the employment of officers and employees of the bank
" payment of separation pay or benefits shall be made only after the bank has
been placed under liquidation
4. pay accrued utilities, rentals and salaries of personnel of the bank for a period not
exceeding 3 months from available funds of the bank
5. collect loans and other claims of the bank, and for the purpose, modify, compromise
or restructure the terms and conditions of such loans or claims as ma be deemed
advantageous to the interest of the creditors and claimants of the bank
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 and
creditors
8. if the stipulated interest on deposits is unusually high compared with the prevailing
applicable interest rate, PDC 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 as are inherent and necessary for the effective discharge
of the duties of PDC as receiver
C. Suits fiIed by PDIC
(i) n all cases filed by PDC as receiver for the recovery of or involving any asset of
the closed bank, payment of all docket and other court fees shall be deferred
until the action is terminated with finality.
(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 closed bank.
D. Distribution of Assets
1. Before any distribution of assets of the closed bank, PDC shall charge against
such assets:
Reasonable receivership expenses (subject to approval of court)
Reasonable liquidation expenses
2. After payment of all liabilities and claims against closed bank, PDC shall pay any
surplus dividends at the legal rate of interest from the date of takeover to the date
of distribution, to creditors and claimants in accordance with legal priority before
distribution to the shareholders.
XV. Payment of nsured Deposits
A. Manner of Payment
1. Whenever 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 PDC by:
i. Cash
ii. Transferred deposit
2. Transfer deposit deposit in an insured bank made available to a depositor
by PDC as payment of insured deposit of such depositor in a closed bank.
Not to exceed two hundred fifty thousand (250,000)
3. A joint account shall be insured separately from any individually owned
deposit account.
4. Maximum insured deposits of Joint accounts shall be divided into as many
equal shares as there are co-owners, unless a different sharing is stipulated
in the document of deposit.
5. f an account is held by a juridical person jointly with an individual, it is
presumed that the maximum insured deposit belongs to the juridical person.
6. The aggregate of the interests of each co-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. PDC may require proof of claims to be filed before paying the insured
deposits.
2. t may require final determination by the courts if not satisfied to the viability
of the claim.
C. Settlement 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 to
grave abuse of discretion, gross negligence, bad faith, or malice shall
subject the directors, employees, or officers of PDC Responsible for the
delay to imprisonment 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, PDC shall be subrogated to all of the
rights of the depositor to the extent of such payment.
4. Such subrogation shall include the right to receive the same dividends from
the proceeds of the assets of the closed bank. But such depositor shall
retain his claim for any uninsured portion of his deposit.
D. Notice
1. PDC shall commence the determination of insured deposits due to
depositors of the closed bank upon its actual takeover of the closed bank.
2. PDC shall publish the notice once a week for at least 3 consecutive weeks
in a newspaper of general circulation or newspaper circulated in the
community where the closed bank or its branches are located.
E. Discharge
Payment of an insured deposit shall discharge PDC. And payment of a
transferred deposit by the new bank in which a transferred deposit has been
made available shall discharge PDC and the new bank.
F. Recognition of Owner
PDC 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 appearing on the records of the closed
bank under a name other than that of the claimant.
G. Withholding of Payment
PDC may withhold payment of such portions of the insured deposit of any
depositor in a closed bank as may be required to provide for 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 determination 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 shall be barred if:
He fails to file a claim within two years from actual take-over 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 PDC.
All rights of the depositor subrogated to PDC shall thereupon revert back to
the depositor. PDC shall be discharged from any liability.
XV. nvestment by PDC
A. Money of the PDC not otherwise employed shall be invested in obligations of the
Republic of the Philippines or by obligations guaranteed by it.
1. t shall not sell or purchase any such obligation for its own account or in its
own right and interest in any one time aggregating in excess of 100,000
without approval of the nsurance Commissioner.
2. nsurance Commissioner may waive the requirement of his approval as he
may determine.
B. The banking or checking account of PDC shall be kept in:
1. BSP
2. PNB
3. Any bank designated as fiscal agent or depository of RP
XV. Extension of Loans
A. n order to prevent an insured bank from closing, PDC may make loans, purchase the
assets, assume liability, or make deposits in such insured bank, upon such conditions
as the Board of Directors may prescribe, the operations of such bank is essential to
provide adequate banking service in the community or maintain financial stability in
the economy.
a. Such power may also be exercised in case of a closed insured bank if:
i. the resumption of the operations of said bank is vital to the
interest of the community
ii. Severe financial climate exists
b. Reopening of said bank is subject to the approval of the Monetary Board.
B. PDC 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 of a
closed insured bank in order to restore it to normal operation
40 , P a g e
a. Within 60 days from date of assistance, PDC shall submit a report to MB
C. PDC shall determine the actual payoff and liquidation thereof will be more expensive
than the exercise of its power prior to exercise of its powers.
D. PDC may grant financial assistance to insured banks, with systemic consequences
with a probable failure or closure, as may be necessary to prevent its failure or
closure. subject to the approval of the Monetary Board.
a. "systemic risk possibility that failure of one bank to settle net transactions
with other banks will trigger a chain reaction, depriving other banks of funds
leading to a general shutdown of normal clearing and settlement activity.
! Likelihood of a sudden unexpected collapse of
confidence in a significant portion of the banking or
financial system with potentially large real economic
effects.
E. PDC may not purchase the voting or common stock of an insured bank but it can
enter into or force agreements 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 banks 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.
XV. Borrowings
A. PDC 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 monetary policy, the interest
rate thereon shall not exceed the treasury bill rate.
B. When in the Judgment of the Board of Directors, the PDC has insufficient funds to
attain its purpose, PDC shall be authorized to borrow money, obtain loans, or arrange
credit lines or other credit accommodations from any bank designated as depository
or fiscal agent by the RP.
XV. ssuance of Bonds
With approval of the President of RP, PDC is authorized to issue bonds, debentures,
and other obligations necessary fro the purpose of settlement of insured deposits in
closed banks as well as for financial assistance.
a. BoD shall determine interest rate and other requirements of such obligation.
b. PDC shall provide appropriate reserves for the redemption of said
obligation.
XX. Reports and Audit
A. PDC shall annually make a report of its operations to the Congress as soon s
practicable after Jan 1
B. Financial transactions shall be audited by the COA in accordance 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, accounts, records, reports, files, and all other
papers belonging to PDC pertaining to its financial transactions. Except as to matters
relating to the Function of the PDC which shall be subject to visitorial audit only.
XX. Miscellaneous
A. Signs
a. nsured banks shall place signs in all place of business and in its statements
that its deposits are insured by PDC.
b. BoD may exempt from this requirement advertisements not relating to
deposits.
B. Merger or consolidation of insured banks
Upon consent of PDC, banks may:
1. Merge or consolidate with an uninsured bank
2. Assume liability to pay any deposits made in noninsured bank
3. Transfer assets to any noninsured bank
C. Protection Against Losses
a. PDC may require an insured bank to provide protection and indemnity
against burglary, defalcation, losses arising from discharge of duties, by
particular acts of its directors, employees, officres
b. BoD shall determine the bonding requirement referring to directors, officers,
anfd employees of an insured bank
c. f insured bank refuse to comply with any such requirement, PDC may add
the cost thereof to the assessment otherwise payable to such bank.
D. Directors, Officers and employees of nsured banks
41 , P a g e
a. No person shall be a director, officer, or employee of an insured bank who
has 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 penalty of
not more than 100 for every day of violation.
XX. Criminal Penalties
A. Punishable by prision mayor or a fine of 50,000-2,000,000,000 or both, any director,
officer, employee or agent of bank who:
1. Willful refusal to submit reports
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 connection 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. Splitting deposits deposit accounts with an outstanding balance
of more than the statutory 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 order issued by the MB
for the purpose of availing of the maximum deposit insurance
coverage.
6. Refusal to allow PDC to takeover a closed bank placed under its
receivership
7. Refusal to turnover or destroying or tampering bank records
8. Fraudulent disposal , transfer or concealment of any asset, property, liability
of the closed bank under the receivership of the PDC
9. Violation, or causing a person to violate, the exemption of garnishment, levy
attachment, or execution provided under the PDC Law and the NCBA
10. Willful failure or refusal to comply with, or violation of any provision of eh
PDC Law, or commission of any other irregularities and/or conducting
business in an unsafe or unsound manner.
XX. FNES
A. BOD is authorized to impose administrative fines for violation of any other instruction,
rule, or regulation issued by PDC, against a bank or any of its directors, officers, or
agents responsible for such act, omission, or violation. n no case such fine exceed
3times the amount of the damages or costs caused by the transaction for each day
that the violation subsist.

Chap 11 Anti- Money Laundering ( RA 9160)
I. CONCEPTS
A. PoIicies
i. To protect and preserve the integrity and confidentiality of bank accounts
ii. Ensure that the Philippines shall not be used as a money laundering site for
the proceeds of any unlawful activity.
iii. Cooperation in transnational investigation and prosecution of persons
involved in money laundering
B. Covered Institutions
i. Banks, non-banks, quasi-banks, trust entities ad all other institutions
regulated by the BSP
ii. nsurance companies and all other 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, common trust fund and pre-
need companies
v. Foreign exchange corporations, money changers, money payments,
remittance, and transfer companies
vi. Those administering or dealing in currency, commodities, financial
derivatives or other monetary instruments or property supervised by the
SEC
C. Covered and Suspicious transaction
i. Transaction 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. Amount is not commensurate with the client's financial capacity
d. Structured 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. Related to any 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 country
ii. Drafts, checks and notes
iii. Securities or negotiable instruments, bonds, commercial papers, deposit
certificates, trust certificates, custodial receipts, trading orders, transaction
tickets, confirmation of sale money market instruments
iv. Other similar instruments when title passes to another by endorsement,
assignment or delivery
E. UnIawfuI Activities
i. Kidnapping for ransom under Art.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, 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
vi. Jueteng and Masiao under PD 1602
vii. Piracy on high seas under RPC and PD 532
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 other
countries
F. Money Laundering Offense- is a crime whereby the proceeds of an unIawfuI
activity are transacted, thereby making them appear to have originated from
Iegitimate sources. It can be committed by the ff:
i. Any person knowing that any monetary instrument or property represents,
involves, or relates to, the proceeds of any unlawful activity, transacts or
attempts to transact said monetary instrument or property
ii. Any person knowing any monetary instrument or property 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 offense of
money laundering referred to above
iii. 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
II. Jurisdiction and Prosecution
A. Jurisdiction
i. Private persons- RTC
ii. Public persons and private persons in conspiracy with the former-
Sandiganbayan
B. Prosecution
i. Any person may be charged of both money 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 other remedies
III. Anti-Money Laundering Council
A. Composition
i. Governor of he BSP as chairman
ii. Commissioner of the nsurance Commission
iii. Chairman of the SEC
B. Functions
i. Require and receive covered or suspicious transaction reports from covered
institutions
ii. ssue orders addressed to the supervising authority of the institution to
determine the true owner of a covered or suspicious transaction report or
request assistance on the basis of substantial evidence
iii. nstitute civil forfeiture proceedings through the OSG
iv. Cause the filing of complaints with the DOJ or Ombudsman
v. nvestigate suspicious and covered transactions
vi. Apply before the CA ex parte, for the freezing of any monetary instrument or
property
vii. mplement measures as may be necessary to counteract money laundering
viii. Receive and take action any request of assistance from foreign states in
their own anti-money laundering operations
ix. Develop educational programs on the effects, methods, and means to
prevent money laundering
x. Enlist assistance from government instrumentality for any anti-money
laundering operation
xi. mpose administrative sanctions for violation of laws, rules, regulations and
orders issued pursuant thereto
xii. Establish a secretariat
a. Member of the Bar
b. 35 years of age
c. GMC
d. Unquestionable integrity and known probity
V. Prevention of Money Laundering
A. Customer Identification
i. nstitutions shall establish and record the true identity of its clients based on
office documents
ii. Maintain a system of verifying the identity and legal existence of their
clients
iii. Anonymous, fictitious an similar accounts are prohibited
iv. Peso 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
the owners
B. Record Keeping
i. Records of transactions shall be maintained and stored from 5 years from
the date of transaction
ii. For closed accounts, its records 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 longer period not
exceeding 10 days
ii. Should a transaction be determined a a covered and suspicious transaction,
it shall be required to report the same
iii. 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
iv. n case of violation of the prohibition above, they shall be criminally liable
v. Reporting to the AMLC 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 ex parte by the AMLC and after determination
that probable cause exists, may issue a freeze order
ii. Such order shall be for 20 days unless extended by the Court
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 cause 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 for ransom
b. Violations of Dangerous Drug Act of 2002
c. Hijacking and other violations of RA 6235
d. Destructive arson and murder including those perpetrated by
terrorists
V. Forfeiture
A. CiviI 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 forfeiture applies
B. CIaim 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. t shall be filed with the court which rendered the judgment of forfeiture
within 15 days from the order of forfeiture
C. Payment in Iieu of forfeiture
a. s allowed because forfeiture cannot be enforced due to the ff:
i. With due diligence, it cannot be located
ii. Substantially altered, destroyed, diminished in value or rendered
worthless by any act or omission attributable to the offender
iii. Concealed, removed, converted or transferred to prevent from
being found or avoid forfeiture
iv. Located outside the Philippine or outside the jurisdiction 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 executing 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 the order of a court in the requesting state
ordering the forfeiture
ii. Certification or affidavit of a competent officer of the requesting
stat that the conviction and order of forfeiture are final
C. Obtaining assistance from foreign state
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 order of forfeiture and must be accompanied by the order of the
RTC and an affidavit of the Clerk of Court that the conviction and forfeiture
are final
D. Limitations on request
a. When it contravenes the constitution
b. Prejudicial to the interest 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 laundering
offense
E. Requirement for request from a foreign state
a. Confirm that an investigation 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 institution believed to have any info
e. Ask from the institution for any info which may be of assistance to the
investigation 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 other info as may assist in the execution of the request
F. Authentication of documents
a. Signed or certified by a judge or 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
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
G. Extradition
a. Negotiate for the inclusion of money laundering offenses among
extraditable offenses
VII. Penalties
A. Crime of money Iaundering
a. Any person knowing that any monetary instrument or property represents,
involves, or relates to, the proceeds of any unlawful activity, transacts or
attempts to transact said monetary instrument or property
i. mprisonment of 7 to 14 years and a fine not less than P3M
b. Any person knowing any monetary instrument or property 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 offense of
money laundering 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. 6m-4years or fine not less than P100,000 not more than
P500,000, or both
B. FaiIure to keep records
a. 6m-1year or fine not less than P100,000 not more than P500,000, or both
C. MaIicious 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. f corporation- upon the responsible officers
iii. Juridical person- suspend or revoke its 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 ConfidentiaIity
a. 3-8years and fine P500,000- P1M
b. f disclosed to media- reporter, writer, publisher, manager, editor
VIII. Prohibitions against political harassment
A. shall not be used for political persecution or harassment or as an instrument to
hamper competition in trade and commerce
B. no case may be filed against and no assets shall be frozen or forfeited to the prejudice
of a candidate for electoral office during election period
X. Implementing rules and Regulations
A. The BSP, C, and SEC shall promulgate rules to effectively implement this Act. These
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 Senate President and the Speaker, respectively,
based on proportional representation of parties
B. Powers
a. Power to promulgate rules to overse the implementation of the law and to
review and revise the rules issued by the AMLC within 30 days from
promulgation
XI. Rules and Regulation for banks and non-financial institutions to combat money
laundering
1. Take reasonable measures to establish and record 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. special 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. Banks should avoid business with criminals
9. Programs against money laundering- employee training, audit function, development
of internal policies.
D. Distribution of Assets
3. Before any distribution of assets of the closed bank, PDC shall charge against
such assets:
Reasonable receivership expenses (subject to approval of court)
Reasonable liquidation expenses
4. After payment of all liabilities and claims against closed bank, PDC shall pay any
surplus dividends at the legal rate of interest from the date of takeover to the date
of distribution, to creditors and claimants in accordance with legal priority before
distribution to the shareholders.
XV. Payment of nsured Deposits
. Manner of Payment
1. Whenever 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 PDC by:
i. Cash
ii. Transferred deposit
2. Transfer deposit deposit in an insured bank made available to a depositor
by PDC as payment of insured deposit of such depositor in a closed bank.
Not to exceed two hundred fifty thousand (250,000)
3. A joint account shall be insured separately from any individually owned
deposit account.
4. Maximum insured deposits of Joint accounts shall be divided into as many
equal shares as there are co-owners, unless a different sharing is stipulated
in the document of deposit.
5. f an account is held by a juridical person jointly with an individual, it is
presumed that the maximum insured deposit belongs to the juridical person.
6. The aggregate of the interests of each co-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.
J. Proof of Claims
1. PDC may require proof of claims to be filed before paying the insured
deposits.
2. t may require final determination by the courts if not satisfied to the viability
of the claim.
K. Settlement Period and Penalties in Case of Failure to Settle
45 , P a g e
1. Failure to settle claim within six months from the date of filing claim due to
grave abuse of discretion, gross negligence, bad faith, or malice shall
subject the directors, employees, or officers of PDC Responsible for the
delay to imprisonment 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, PDC shall be subrogated to all of the
rights of the depositor to the extent of such payment.
4. Such subrogation shall include the right to receive the same dividends from
the proceeds of the assets of the closed bank. But such depositor shall
retain his claim for any uninsured portion of his deposit.
L. Notice
1. PDC shall commence the determination of insured deposits due to
depositors of the closed bank upon its actual takeover of the closed bank.
2. PDC shall publish the notice once a week for at least 3 consecutive weeks
in a newspaper of general circulation or newspaper circulated in the
community where the closed bank or its branches are located.
M. Discharge
Payment of an insured deposit shall discharge PDC. And payment of a
transferred deposit by the new bank in which a transferred deposit has been
made available shall discharge PDC and the new bank.
N. Recognition of Owner
PDC 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 appearing on the records of the closed
bank under a name other than that of the claimant.
O. Withholding of Payment
PDC may withhold payment of such portions of the insured deposit of any
depositor in a closed bank as may be required to provide for 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 determination 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 shall be barred if:
He fails to file a claim within two years from actual take-over 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 PDC.
All rights of the depositor subrogated to PDC shall thereupon revert back to
the depositor. PDC shall be discharged from any liability.
XV. nvestment by PDC
C. Money of the PDC not otherwise employed shall be invested in obligations of the
Republic of the Philippines or by obligations guaranteed by it.
1. t shall not sell or purchase any such obligation for its own account or in its
own right and interest in any one time aggregating in excess of 100,000
without approval of the nsurance Commissioner.
2. nsurance Commissioner may waive the requirement of his approval as he
may determine.
D. The banking or checking account of PDC shall be kept in:
1. BSP
2. PNB
3. Any bank designated as fiscal agent or depository of RP
XV. Extension of Loans
G. n order to prevent an insured bank from closing, PDC may make loans, purchase the
assets, assume liability, or make deposits in such insured bank, upon such conditions
as the Board of Directors may prescribe, the operations of such bank is essential to
provide adequate banking service in the community or maintain financial stability in
the economy.
a. Such power may also be exercised in case of a closed insured bank if:
i. the resumption of the operations of said bank is vital to the
interest of the community
ii. Severe financial climate exists
b. Reopening of said bank is subject to the approval of the Monetary Board.
H. PDC 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 of a
closed insured bank in order to restore it to normal operation
46 , P a g e
a. Within 60 days from date of assistance, PDC shall submit a report to MB
. PDC shall determine the actual payoff and liquidation thereof will be more expensive
than the exercise of its power prior to exercise of its powers.
J. PDC may grant financial assistance to insured banks, with systemic consequences
with a probable failure or closure, as may be necessary to prevent its failure or
closure. subject to the approval of the Monetary Board.
a. "systemic risk possibility that failure of one bank to settle net transactions
with other banks will trigger a chain reaction, depriving other banks of funds
leading to a general shutdown of normal clearing and settlement activity.
! Likelihood of a sudden unexpected collapse of
confidence in a significant portion of the banking or
financial system with potentially large real economic
effects.
K. PDC may not purchase the voting or common stock of an insured bank but it can
enter into or force agreements 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 banks 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.
XV. Borrowings
C. PDC 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 monetary policy, the interest
rate thereon shall not exceed the treasury bill rate.
D. When in the Judgment of the Board of Directors, the PDC has insufficient funds to
attain its purpose, PDC shall be authorized to borrow money, obtain loans, or arrange
credit lines or other credit accommodations from any bank designated as depository
or fiscal agent by the RP.
XV. ssuance of Bonds
With approval of the President of RP, PDC is authorized to issue bonds, debentures,
and other obligations necessary fro the purpose of settlement of insured deposits in
closed banks as well as for financial assistance.
a. BoD shall determine interest rate and other requirements of such obligation.
b. PDC shall provide appropriate reserves for the redemption of said
obligation.
XX. Reports and Audit
D. PDC shall annually make a report of its operations to the Congress as soon s
practicable after Jan 1
E. Financial transactions shall be audited by the COA in accordance 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, accounts, records, reports, files, and all other
papers belonging to PDC pertaining to its financial transactions. Except as to matters
relating to the Function of the PDC which shall be subject to visitorial audit only.
XX. Miscellaneous
E. Signs
a. nsured banks shall place signs in all place of business and in its statements
that its deposits are insured by PDC.
b. BoD may exempt from this requirement advertisements not relating to
deposits.
F. Merger or consolidation of insured banks
Upon consent of PDC, banks may:
4. Merge or consolidate with an uninsured bank
5. Assume liability to pay any deposits made in noninsured bank
6. Transfer assets to any noninsured bank
G. Protection Against Losses
a. PDC may require an insured bank to provide protection and indemnity
against burglary, defalcation, losses arising from discharge of duties, by
particular acts of its directors, employees, officres
b. BoD shall determine the bonding requirement referring to directors, officers,
anfd employees of an insured bank
c. f insured bank refuse to comply with any such requirement, PDC may add
the cost thereof to the assessment otherwise payable to such bank.
H. Directors, Officers and employees of nsured banks
a. No person shall be a director, officer, or employee of an insured bank who
has been convicted of any criminal offense involving dishonesty of breach of
trust.
47 , P a g e
b. Penalty for violation of this prohibition: the bank will be subject to penalty of
not more than 100 for every day of violation.
XX. Criminal Penalties
B. Punishable by prision mayor or a fine of 50,000-2,000,000,000 or both, any director,
officer, employee or agent of bank who:
1. Willful refusal to submit reports
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 connection 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. Splitting deposits deposit accounts with an outstanding balance
of more than the statutory 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 order issued by the MB
for the purpose of availing of the maximum deposit insurance
coverage.
6. Refusal to allow PDC to takeover a closed bank placed under its
receivership
7. Refusal to turnover or destroying or tampering bank records
8. Fraudulent disposal , transfer or concealment of any asset, property, liability
of the closed bank under the receivership of the PDC
9. Violation, or causing a person to violate, the exemption of garnishment, levy
attachment, or execution provided under the PDC Law and the NCBA
10. Willful failure or refusal to comply with, or violation of any provision of eh
PDC Law, or commission of any other irregularities and/or conducting
business in an unsafe or unsound manner.
XX. FNES
B. BOD is authorized to impose administrative fines for violation of any other instruction,
rule, or regulation issued by PDC, against a bank or any of its directors, officers, or
agents responsible for such act, omission, or violation. n no case such fine exceed
3times the amount of the damages or costs caused by the transaction for each day
that the violation subsist.
Chap 11 - Anti- Money Laundering ( RA 9160)
I. CONCEPTS
G. PoIicies
i. To protect and preserve the integrity and confidentiality of bank accounts
ii. Ensure that the Philippines shall not be used as a money laundering site for
the proceeds of any unlawful activity.
iii. Cooperation in transnational investigation and prosecution of persons
involved in money laundering
H. Covered Institutions
i. Banks, non-banks, quasi-banks, trust entities ad all other institutions
regulated by the BSP
ii. nsurance companies and all other 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, common trust fund and pre-
need companies
v. Foreign exchange corporations, money changers, money payments,
remittance, and transfer companies
vi. Those administering or dealing in currency, commodities, financial
derivatives or other monetary instruments or property supervised by the
SEC
I. Covered and Suspicious transaction
i. Transaction 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. Amount is not commensurate with the client's financial capacity
d. Structured 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. Related 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 of the Phil. Or any country
ii. Drafts, checks and notes
iii. Securities or negotiable instruments, bonds, commercial papers, deposit
certificates, trust certificates, custodial receipts, trading orders, transaction
tickets, confirmation of sale money market instruments
iv. Other similar instruments when title passes to another by endorsement,
assignment or delivery
K. UnIawfuI 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. Sec.3 par b, c, e, g, h, 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 532
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 other
countries
L. Money Laundering Offense- is a crime whereby the proceeds of an unIawfuI
activity are transacted, thereby making them appear to have originated from
Iegitimate sources. It can be committed by the ff:
i. Any person knowing that any monetary instrument or property represents,
involves, or relates to, the proceeds of any unlawful activity, transacts or
attempts to transact said monetary instrument or property
ii. Any person knowing any monetary instrument or property 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 offense of
money laundering referred to above
iii. 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
II. Jurisdiction and Prosecution
C. Jurisdiction
i. Private persons- RTC
ii. Public persons and private persons in conspiracy with the former-
Sandiganbayan
D. Prosecution
i. Any person may be charged of both money 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 other remedies
III. Anti-Money Laundering Council
C. Composition
iv. Governor of he BSP as chairman
v. Commissioner of the nsurance Commission
vi. Chairman of the SEC
D. Functions
xiii. Require and receive covered or suspicious transaction reports from covered
institutions
xiv. ssue orders addressed to the supervising authority of the institution to
determine the true owner of a covered or suspicious transaction report or
request assistance on the basis of substantial evidence
xv. nstitute civil forfeiture proceedings through the OSG
xvi. Cause the filing of complaints with the DOJ or Ombudsman
xvii. nvestigate suspicious and covered transactions
xviii. Apply before the CA ex parte, for the freezing of any monetary instrument or
property
xix. mplement measures as may be necessary to counteract money laundering
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 assistance from government instrumentality for any anti-money
laundering operation
xxiii. mpose administrative sanctions for violation of laws, rules, regulations and
orders issued pursuant thereto
xxiv. Establish a secretariat
a. Member of the Bar
b. 35 years of age
c. GMC
d. Unquestionable integrity and known probity
V. Prevention of Money Laundering
F. Customer Identification
v. nstitutions shall establish and record the true identity of its clients based on
office documents
vi. Maintain a system of verifying the identity and legal existence of their
clients
vii. Anonymous, fictitious an similar accounts are prohibited
viii. Peso 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
the 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 records 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 working 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
viii. 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. n case of violation 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 application 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 upon 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 following activities
a. Kidnapping for ransom
b. Violations of Dangerous Drug Act of 2002
c. Hijacking and other violations of RA 6235
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d. Destructive arson and murder including those perpetrated by
terrorists
V. Forfeiture
D. CiviI 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 forfeiture applies
E. CIaim 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. t shall be filed with the court which rendered the judgment of forfeiture
within 15 days from the order of forfeiture
F. Payment in Iieu of forfeiture
a. s allowed because forfeiture cannot be enforced due to the ff:
i. With due diligence, it cannot be located
ii. Substantially altered, destroyed, diminished in value or rendered
worthless by any act or omission attributable to the offender
iii. Concealed, removed, converted or transferred to prevent from
being found or avoid forfeiture
iv. Located outside the Philippine or outside the jurisdiction of the
court
v. Commingled with other instrument or property rendering it difficult
to be identified or segregated
VI. Mutual assistance among states
H. 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 executing such request
I. 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 the order of a court in the requesting state
ordering the forfeiture
ii. Certification or affidavit of a competent officer of the requesting
stat that the conviction and order of forfeiture are final
J. Obtaining assistance from foreign state
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 order of forfeiture and must be accompanied by the order of the
RTC and an affidavit of the Clerk of Court that the conviction and forfeiture
are final
K. Limitations on request
a. When it contravenes the constitution
b. Prejudicial to the interest 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 laundering
offense
L. Requirement for request from a foreign state
a. Confirm that an investigation 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 institution believed to have any info
e. Ask from the institution for any info which may be of assistance to the
investigation 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 other info as may assist in the execution of the request
M. Authentication of documents
a. Signed or certified by a judge or 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
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. Extradition
a. Negotiate for the inclusion of money laundering offenses among
extraditable offenses
VII. Penalties
E. Crime of money Iaundering
a. Any person knowing that any monetary instrument or property represents,
involves, or relates to, the proceeds of any unlawful activity, transacts or
attempts to transact said monetary instrument or property
i. mprisonment of 7 to 14 years and a fine not less than P3M
b. Any person knowing any monetary instrument or property 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 offense of
money laundering 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. 6m-4years or fine not less than P100,000 not more than
P500,000, or both
F. FaiIure to keep records
a. 6m-1year or fine not less than P100,000 not more than P500,000, or both
G. MaIicious 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. f corporation- upon the responsible officers
iii. Juridical person- suspend or revoke its license
iv. Alien- deportation
v. Public official- perpetual or temporary absolute disqualification
from office
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vi. Public official who refuses to testify- same penalties above
H. Breach of ConfidentiaIity
a. 3-8years and fine P500,000- P1M
b. f disclosed to media- reporter, writer, publisher, manager, editor
VIII. Prohibitions against political harassment
C. shall not be used for political persecution or harassment or as an instrument to
hamper competition in trade and commerce
D. no case may be filed against and no assets shall be frozen or forfeited to the prejudice
of a candidate for electoral office during election period
X. Implementing rules and Regulations
A. The BSP, C, and SEC shall promulgate rules to effectively implement this Act. These
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 Senate President and the Speaker, respectively,
based on proportional representation of parties
D. Powers
a. Power to promulgate rules to overse the implementation of the law and to
review and revise the rules issued by the AMLC within 30 days from
promulgation
XI. Rules and Regulation for banks and non-financial institutions to combat money
laundering
1. Take reasonable measures to establish and record 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. special 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. Banks should avoid business with criminals
9. Programs against money laundering- employee training, audit function, development
of internal policies.

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