1 =========================== TOPICS UNDER THE SYLLABUS VIII. Banking Laws A. The New New Centra Centra Banking Banking A!t A!t "R.A. "R.A. #$%&' #$%&' =========================== A. The New New Centra Centra Banking Banking A!t A!t "R.A. "R.A. #$%&' #$%&' (. Stat State e P)i P)i!i !ies es an* Crea Creati ti)n )n )+ the Bangk) Sentra ng Pii,inas "BSP' Bangk ko Sent Sentra rall ng Pili Pilipi pina nas s The Bang (BSP) is the State State’s ’s Centra Centrall Moneta Monetary ry Authority mandated in the 1987 Phil Philip ippi pine ne Cons Consti titu tuti tion on,, whic which h shal shalll function and operate as an independent and accountale accountale ody corporate corporate in the dischar!e dischar!e of its mandated responsiilities responsiilities concernin! money, an"in! and credit -. Res,)n Res,)nsi siii iit/ t/ an* Pri0a Pri0ar/ r/ O1e!t O1e!ti2e i2e Pri0ar/ O1e!ti2es3 a# To main mainta tain in pric price e sta stail ilit ity y cond conduc uci$ i$e e to a ala alanc nced ed and and sustainale !rowth of the economy% # To promo promote te and mainta maintain in the monetary staility and con$ertiility of the peso% c#To c#To pro$ pro$ide ide polic policy y dire directi ction ons s in area areas s of mone money, y, an" an"in in! ! and and cred credit it,, with with supe super$ r$is isio ion n o$er o$er oper operat atio ions ns of an" an"s s and and with with re!ulatory powers o$er operations of &nance companies, and non'an" &nancial insti institut tution ions s perfor performin min! ! (uasi (uasi'' an"in! functions# R)es )+ BSP3 a. Bank Banker er )+ 4)2er 4)2ern0 n0en entt The Act as a an"er an"er of the )o$ernment, its political sudi$isions and instrumentalities, and their cash alances should e deposited to the *SP, *SP, with with only only mini minimu mum m wor" wor"in in! ! alances to e held y !o$ernment' owned an"s, an"s, and and such other an"s an"s incorporated in the Philippines as the Monetary *oard may prescrie# . Re,resentati)n with the Internati)na 5)netar/ B)ar* To To represent represent )o$ernment )o$ernment in all dealin!s, ne!otiations and transact transactions ions with the +M, and shall carry carry such such accoun accounts ts as may resu result lt from the Philippin Philippine e memership memership in or operations with the said und# !. Re,resentati)n with Other 6inan!ia Instit7ti)ns May repr represe esent nt the )o$er )o$ernme nment nt in dealin!s, ne!otiations or transactions with the -orld *an" and with other fore forei! i!n n or inte intern rnat atio iona nall &nan &nanci cial al institutions institutions or a!encies#
*. 6is! 6is!a a O, O,er erat ati) i)ns ns Shall Shall open a !eneral !eneral cash account account for the Treasurer of the Philippines, in which the li(uid funds of the )o$ernment shall e deposited, and with with transf transfer er of fund funds s to e made made only upon the order of the Philippine Treasur Treasurer er ./illanue$a, ./illanue$a, 092# 092# Other Basi! 67n!ti)ns )+ BSP3 1# +t shall ha$e the sole power and authority to issue currency within the ter territo ritory ry of the the 3epu epulic lic of the the Philippines% 0# The The power wer to issu issue e re!ulati ations ons to pre$e pre$ent nt the circ circula ulatio tion n of forei! forei!n n currencies, or currency sustitutes as well as the reproduction of facsimiles of *SP notes% 4# +t has has the powe powerr to in$e in$esti sti!at !ate, e, ma"e ma"e arrests, conduct searches and sei5ure for the purp purpose ose of maint maintain ainin! in! the inte!rity of the currency% 6# To en!a!e in forei!n en!a!e tran transa sact ctio ions ns in orde orderr to main mainta tain in price staility% # To ma"e ma"e redisc rediscount ounts, s, discou discounts, nts, loans loans and ad$ances ad$ances to an"in! an"in! and other other &nancial institutions to inuence the $olume of credit consistent with the oecti$es of price staility% :# To en!a!e in open mar"et operat operation ions'' s'''pu 'purc rchas hase e and sale sale of securities '''e;clusi$ely in accordance accordance with its oecti$es of achie$in! price staility% 7# To en!a!e in mar"etin! and sta stail ili5 i5at atio ion n of secu securi riti ties es for for the the account of the !o$ernment% 8# To act as the the &nanc &nancial ial ad$i ad$isor sor of of the !o$ernment% .Sundian!, 0:2 &. 5)netar/ 67n!ti)ns
B)ar*888P)wers
an *
C)r,)rate P)wers The *SP is a !o$ernment !o$ernment owned and controlled corporation that is in$ested y law with corporate powers# The corporate powers speci&ed in Section of the
0 !#
To compromise, condone or release, in whole or in part, any claim of or settled liaility .Sundian!, 0:2#
The *SP powers and functions e;ercised y the 5)netar/ B)ar*#
are
C)0,)siti)n )+ the 5)netar/ B)ar*3 There are 7 memers who are appointed y the President of the 3epulic of the Philippines# They are only appointed once# a# )o$ernor, as Chairman% # A memer of the Cainet desi!nated y the President of the Philippines% c# i$e .2 memers who shall come from the sector, all of whom shall ser$e full'time# Ter03 : years 97ai:!ati)ns )+ the 5e0ers )+ the B)ar*3 a# Must e a natural'orn citi5ens of the Philippines% # At least 4 years of a!e with the e;ception of the )o$ernor, who should at least e 6 years of a!e% c# >f !ood moral character, of un(uestionale inte!rity, of "nown proity and patriotism# d# -ith reco!ni5ed competence in social and economic disciplines# 4r)7n*s +)r Re0)2a )+ a 5e0er )+ the B)ar*3 The President may remo$e any memer of the *oard for any of the followin! reasons= a# Suse(uent dis(uali&cation # Physical or mental incapacity that he cannot properly dischar!e his duties and responsiilities and such incapacity has lasted for more than : months# c# )uilty of acts or operations which are of fraudulent or ille!al character or which are manifestly opposed to the aims and interests of the *SP% d#
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accordance with applicale laws and re!ulations% and +ndemnify its memers and other oBcials of *an!"o Sentral, includin! personnel of the departments performin! super$ision and e;amination functions, a!ainst all costs and e;penses reasonaly incurred y such persons in connection with any ci$il or criminal action, suit or proceedin!, to which any of them may e made a party y reason of the performance of his functions or duties, unless such memers or other oBcials is found to e liale for ne!li!ence or misconduct##
The 4)2ern)r;s P)wers an* D7ties as a Chie+ E
7ai:!ati)ns3 1# +n addition to the dis(uali&cations imposed y 3epulic Act
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such memer shall resi!n from, and di$est himself of any and all interests in such institution efore assumption of oBce as memer of the Monetary *oard# The memer of the Monetary *oard comin! from the pri$ate sector shall not hold any other pulic oBce or pulic employment durin! their tenure#
Res,)nsiiit/ an* iaiit/ )+ the 0e0ers )+ the 5)netar/ B)ar* a# Memers of the Monetary *oard, oBcials, e;aminers, and employees of the *an!"o Sentral who willfully $iolate 3A 7:4 or who are !uilty of ne!li!ence, auses or acts of malfeasance or misfeasance or fail to e;ercise e;traordinary dili!ence in the performance of his duties shall e held liale for any loss or inury su?ered y the *an!"o Sentral or other an"in! institutions as a result of such $iolation, ne!li!ence, ause, malfeasance, misfeasance or failure to e;ercise e;traordinary dili!ence# # Similar responsiility shall apply to memers, oBcers and employees of the *an!"o Sentral for% 1# The disclosure of any information of a con&dential nature, or any information on the discussions or resolutions of the Monetary *oard, or aout the con&dential operations of the *an!"o Sentral, unless the disclosure is in connection with the performance of oBcial functions with the *an!"o Sentral, or is with prior authori5aytion of the Monetary *oard or the )o$ernor% or 0# The use of such information for personal !ain or to the detriment of the )o$ernment, the *an!"o Sentral or third parties# c#
owe$er, any data or information re(uired to e sumitted to the President andDor Con!ress, or to e pulished under the pro$isions of 3A 7:4 shall not e considered con&dential#
O7tsi*e interests )+ the 4)2ern)r an* the +78 ti0e 0e0ers )+ the B)ar* a# The )o$ernor of the *an!"o Sentral and the full' time memers of the *oard shall limit their professional acti$ities to those pertainin! directly to their positions with the *an!"o Sentral# # They may not accept any other employment, whether pulic or pri$ate, remunerated or ad honorem# c# ;ceptions= 1# Positions in eleemosynary, ci$ic, cultural or reli!ious or!ani5ations
0#
-hene$er, y desi!nation of the President, the )o$ernor or the full' time memer is tas"ed to represent the interest of the )o$ernment or other !o$ernment a!encies in matters connected with or a?ectin! the economy or the &nancial system of the country
Pr)hiiti)ns )n ,ers)nne )+ the Bangk) Sentra +n addition to the prohiitions found in 3A 419 and :714, personnel of the *an!"o Sentral are herey prohiited from= 1# *ein! an o Bcer, director, lawyer or a!ent, employee, consultant or stoc"holder, directly or indirectly, of any institution suect to super$ision or e;amination y the *an!"o Sentral, e;cept non'stoc" sa$in!s and loan associations and pro$ident funds or!ani5ed e;clusi$ely for employees of the *an!"o Sentral, and e;cept as otherwise pro$ided in 3A 7:4% 0# @irectly or indirectly re(uestin! or recei$in! any !ift, present or pecuniary or material ene&t for himself or another, from any institution suect to super$ision or e;amination y the *an!"o Sentral% 4# 3e$ealin! in any manner, e;cept upon orders of the court, the Con!ress or any !o$ernment oBce or a!ency authori5ed y law, or under such conditions as may e prescried y the Monetary *oard, information relatin! to the condition or usiness of any such institution# This prohiition shall not apply to the !i$in! of information to the Monetary *oar or the )o$ernor of the *an!"o Sentral, or to any person authori5ed y either of them, in writin!, to recei$e such information% and 6# *orrowin! from any institution suect to super$ision or e;amination y the *an!"o Sentral unless said orrowin!s are ade(uately secured, fully disclosed to the Monetary *oar, and shall e suect to such further rules and re!ulations as the Monetary *oard may prescrie# HO? BSP HANDLE BAN@S IN DISTRESS A. CONSERVATORSHIP 'a an" or (uasi'an" is 1# in a state of continuin! inaility or 0# unwillin!ness to maintain a condition of li(uidity deemed ade(uate to protect the interest of depositors and creditors A!ti)n )+ the 5)netar/ B)ar* The Monetary *oard may appoint a conser$ator .who shall e competent and "nowled!eale in an" operations and mana!ement2 for a period not e;ceedin! 1 year i# ta"e char!e of the assets, liailities and mana!ement of the an" or (uasi'an" in (uestion ii# reor!ani5e the mana!ement thereof
6 iii# collect all monies and dets due and i$# e;ercise all powers necessary to restore its $iaility in!7*ing the ,)wer t) )2err7e )r re2)ke the a!ti)ns )+ the ,re2i)7s 0anage0ent an* )ar* )+ *ire!t)rs -hile admittedly, the Central *an" !i$es $ast and far'reachin! powers to the conser$ator, such powers must e related to Epreser$ation of the assets of the an", the reor!ani5ation of the mana!ement thereof, and the restoration of its $iaility# Such powers, enormous and e;tensi$e as they are, cannot e;tend to post'facto repudiation of perfected transactions, otherwise they would infrin!e a!ainst the non'impairment clause of the Constitution# +t merely !i$es the conser$ator the power to re$o"e contracts that are under e;istin! law, deemed to e defecti$e F i#e# $oid, $oidale, unenforceale or rescissile# ence, the conser$ator merely ta"es the place of a *an"’s *>@# -hat the said *oard cannot do F such as repudiatin! a contract $alidly entered into under the doctrine of implied authority, the conser$ator cannot do either# +neluctaly, his power is not unilateral, and he cannot simply repudiate $alid oli!ations of the *an"# is authority would e only to rin! court actions to assail such contract F as he has already done so in the instant case# (First Phil. Int’l Bank v. CA, 252 SCRA 259) Ter0inati)n )+ C)nser2at)rshi, .a2 -hen M* is satis&ed that the institution can continue to operate on its own and the conser$atorship is no lon!er necessary% or .2 -hen M* determines that the continuance in usiness of the institution would in$ol$e proale loss to its depositors or creditors, in which case proceedin!s for recei$ership and li(uidation shall e pursued# B. CLOSURE 'prohiit a an" or (uasi'an" from doin! usiness in the Philippines 4r)7n*s +)r C)s7re .a2 Gnale to pay its liailities as they ecome due in the ordinary course of usiness .cash ow test2 *GT= shall not include inaility to pay caused y e;traordinary demands induced y &nancial panic in the an"in! community# .2 +nsuBcient reali5ale assets to meet its liailities .alance sheet test2 .c2 Cannot continue in usiness without in$ol$in! proale losses to its depositors and creditors .d2 -illfully $iolated a cease and desist order under Sec# 47 .administrati$e sanctions2 that has ecome &nal and in$ol$es acts or transactions which amount to fraud or dissipation of assets .e2
.f2 Suspends the payment of its deposit liailities continuously for more than 4 days .!2 Persists in conductin! its usiness in an unsafe or unsound manner
This may e done summarily and without need of prior hearin!#
C# RECEIVERSHIP ?h) are Re!ei2ers .a2 or *an"s FP@+C .2 or Huasi'*an"s F Any person of reco!ni5ed competence in an"in! or &nance 67n!ti)ns )+ Re!ei2er .a2 +mmediately !ather and ta"e char!e of all the assets and liailities of the institution, administer the same for the ene&t of its creditors e#!# Collect pre'e;istin! dets oreclose mort!a!es security .2 ;ercise the !eneral powers of a recei$er .c2 @etermine as soon as possile, ut not late than 9 days from ta"eo$er, whether the institution can e rehailitated or otherwise placed in such a condition so that it may e permitted to resume usiness with safety to its depositors and creditors, and the !eneral pulic# BUT3 any determination for resumption of usiness shall e suect to the prior appro$al of the Monetary *oard# • •
+f the recei$er determines that the institution cannot e rehailitated or permitted to resume usiness, then the M* shall notify in writin! the oard of directors of the institution of its &ndin!s and direct the recei$er to proceed with the li(uidation of the institution#
Appointment of a recei$er operates to suspend the authority of a an" and its directors and oBcers o$er its properties and e?ects, such authority ein! reposed in the recei$er, and in this respect, the recei$ership is e>7i2aent t) an in17n!ti)n t) restrain the an" oBcers from intermeddlin! with the property of the an" in any way# The recei$er only has the authority to administer the properties of the an" for the ene&t of the creditors# Conse(uently, the recei$er has no authority to appro$e the acts
of ownership, such as the !rant of Ee;clusi$e option to purchaseI a particular property of the an"# (A#a$%s Real &state 'ev. Center vs. anila Banking Corp., 52 SCRA 9*)
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D. LI9UIDATION 'from the determination of recei$er if institution cannot e rehailitated or permitted to resume usiness D7ties )+ the Re!ei2erLi>7i*at)r ile e; parted with the 3TC a petition for assistance in the li(uidation of the institution pursuant to a li(uidation plan adopted y the P@+C for an"s, and y M* for (uasi'an"s Gpon motion y recei$er, upon 3TC’s ac(uisition of urisdiction, 3TC shall assist enforcement of the indi$idual liailities of the stoc"holders, directors, and oBcers and decide on other issues as may e material to the li(uidation plan adopted 3ecei$er shall con$ert the assets to money and proceeds shall e applied in payin! the dets of the institution in accordance with rules on concurrence and preference of credit 3ecei$er shall institute such actions as may e necessary
The assets under recei$ership or li(uidation deemed in custodia le!is, in the hands of the recei$er and shall e e;empt from any order of !arnishment, le$y, attachment or e;ecution Phases )+ Li>7i*ati)n Pr)!ee*ing .Paci&c *an"in! $s# CA, )3 19474, March 0, 1992 irst= Appro$al and disappro$al of claims .a2 all money claims a!ainst the an" are re(uired to e &led with the li(uidation court
those entitled to recei$e them# +t is the process of reducin! assets to cash, dischar!in! liailities and di$idin! surplus or loss#
EFe!ts )+ Li>7i*ati)n )+ a Bank )r a 97asi8Bank .a2 After payment of the cost of the proceedin!s, includin! reasonale e;penses and fees of the recei$er to e allowed y the court, the recei$er shall pay the dets of such institution, under order of the court, in accordance with the rules on concurrence and preference of credit as pro$ided in the Ci$il Code# .Sec# 412 .2 All re$enues and earnin!s reali5ed y the recei$er in windin! up the a?airs and administerin! the assets of any an" or (uasi'an" within the pur$iew of this Act shall e used to pay the costs, fees and e;penses mentioned in the precedin! section, salaries of such personnel whose employment is rendered necessary in the dischar!e of the li(uidation to!ether with the other additional e;penses caused therey# .Sec#402 The alance of re$enues and earnin!s, after the payment of all said e;penses, shall form part of the assets a$ailale for payment of creditors# A li(uidation proceedin! is a sin!le proceedin! Althou!h the claims are liti!ated in the same proceedin!, the treatment is indi$idual# And the >rder issued relati$e to a particular claim applies only to said claim, lea$in! the other claims una?ected, as each claim is considered separate and distinct from the others# The e;clusi$e urisdiction of the li(uidation courts pertains only to the adudication of claims a!ainst the an", and does not co$er the re$erse situation where it is the an" which &les a claim a!ainst another person# (analo vs. CA, !"" SCRA *52) The actions of the M* under Sec# 09 .appointin! a conser$ator2 and Sec# 4 .closin! a an"2 are &nal and e;ecutory and may not e restrained or set aside y a court EGCEPT3on petition for certiorari on the !round of e;cess of urisdiction or with !ra$e ause of discretion &led y stoc"holders of record representin! the maority of the capital stoc" within 1 days from receipt y the *>@ of the institution of the order directin! conser$atorship, recei$ership or li(uidation
.2 phase may end with the declaration y the court whether claim is with asis or not% if with asis, classi&ed whether ordinary or preferred .c2 order y court is &nal and may e appealed y the party a!!rie$ed Second= Appro$al y the court of the distriution plan prepared y the duly appointed li(uidator .a2 order disposes of the issue of how much property is a$ailale for disposal .2 payment of all allowed claims DISTIN4UISH BET?EEN LI9UIDATION AND REHABILITATION LI9UIDATION REHABILITATIO N +s a windin! up of Connotes a settlin! with reopenin! or creditors and reor!ani5ation# +t detors# +t is the contemplates a windin! up of a continuance of corporation so corporate life and that assets are acti$ities in an distriuted to e?ort to restore
and reinstate the corporation to its former position of successful operation and sol$ency#
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nature of the transaction to e &nanced#
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E. SECTION ($. +n order to promote the li(uidity and sol$ency of the an"in! system, the Monetary *oard may issue such re!ulations as it may deem necessary with respect to the ma;imum permissile maturities of the loans and in$estments which the an"s may ma"e, and the "ind and amount of security to e re(uired a!ainst $arious types of credit operations of the an"s# DE5AND DEPOSITS F this term refers to all those liailities of the *SP and of other an"s, which are denominated in Philippine currency, and are suect to payment in le!al tender upon demand y the presentation of chec"s .Sec# 82# >nly an"s duly authori5ed may accept funds, or create liailities payale in pesos upon demand y presentation of chec"s, and such operations shall e suect to the control of the Monetary *oard# LE4AL CHARACTER O6 CHEC@S F the chec"s representin! demand deposits do not ha$e le!al tender power, and their acceptance in the payment of dets% oth pulic and pri$ate, is at the option of the creditor# owe$er, a chec" which has een cleared and credited to the account of the creditor, shall e e(ui$alent to a deli$ery to the creditor of cash in an amount e(ual to the amount credited to his account# .Sec#:2
7 C. 4ENERAL BAN@IN4 LA? O6 - "R.A. NO. #J('
recourse or acceptance of deposit sustitutes as de&ned in Section 9 of 3#A# 7:4 for purposes of relendin! or purchasin! of recei$ales and other oli!ations .Sec# 6 par# 4 )*J2#
(. DE6INITION AND CLASSI6ICATION O6 BAN@S a. UNIVERSAL BAN@S K these used to e called e;panded commercial an"s and their operations are primarily !o$erned y the )eneral *an"in! laws# They can e;ercise the powers of an in$estment house and in$est in non'allied enterprises# They ha$e the hi!hest capitali5ation re(uirement#
. TRUST ENTITIES i.
. CO55ERCIAL BAN@S F these are ordinary or re!ular commercial an"s, as distin!uished from a uni$ersal an"# They ha$e a lower capitali5ation re(uirement than a uni$ersal an" and cannot e;ercise the powers of an in$estment house and in$est in non'allied enterprises#
A trust usiness is any acti$ity resultin! from trusteeship in$ol$in! the appointment of a trustee y a trustor for the administration, holdin!, mana!ement of funds andDor properties of the trustor y the trustee for the use, ene&t or ad$anta!e of the trustor or of ene&ciaries#
!. THRI6T BAN@S K shall include sa$in!s and mort!a!e an"s, pri$ate de$elopment an"s, and stoc" sa$in!s and loans association or!ani5ed under e;istin! laws# *. RURAL BAN@S 8 an"s which are desi!ned to ma"e needed credit a$ailale and readily accessile in the rural areas on reasonale terms# e. COOPERATIVE BAN@S F one or!ani5ed, the maority share of which is owned and controlled y cooperati$es, primarily to pro$ide &nancial and credit ser$ices to cooperati$es# +. ISLA5IC BAN@S K these are an"s the usiness dealin!s and acti$ities of which are suect to the asic principles and rulin!s of +slamic Shari’a# The Al Amanah +slamic +n$estment *an" of the Philippines, which was created y 3A :868, is the only +slamic an" in the country at this time# Created y Con!ress to promote and accelerate socio'economic de$elopment of the Autonomous 3e!ion y performin! an"in!, &nancin! and in$estment operations and to estalish and participate in a!ricultural, commercial and industrial $entures ased on the +slamic concept of an"in!# .Sec# 4 3A# :8682# g. Other Cassi:!ati)n )+ anks as *eter0ine* / the 5)netar/ B)ar*.
&. BAN@ PO?ERS AND LIABILITIES a. CORPORATE PO?ERS F these are the powers enumerated under the Corporation Code# Section 4: of the Corporation Code pro$ides that e$ery corporation incorporated under this Code has the power and capacity= i# ii#
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-. DISTINCTION O6 BAN@S 6RO5 9UASI8BAN@S AND TRUST ENTITIES a. 9UASI8BAN@S i. EHuasi'*an"sI shall refer to entities en!a!ed in the orrowin! of funds throu!h the issuance, endorsement or assi!nment with
Any an", in$estment house or a stoc" corporation duly authori5ed y the Monetary *oard to en!a!e in trust, in$estment mana!ement and &duciary usiness methodolo!y#
$iii#
To sue and e sued in its corporate name% >f succession y its corporate name for the period of time stated in the articles of incorporation and the certi&cate of incorporation% To adopt and use a corporate seal% To amend its articles of incorporation in accordance with the pro$isions of this Code% To adopt y'laws, not contrary to law, morals, or pulic policy, and to amend or repeal the same in accordance with this Code% +n case of stoc" corporations, to issue or sell stoc"s to suscriers and to sell treasury stoc"s in accordance with the pro$isions of this Code% and to admit memers to the corporation if it e a non'stoc" corporation% To purchase, recei$e, ta"e or !rant, hold, con$ey, sell, lease, pled!e, mort!a!e and otherwise deal with such real and personal property, includin! securities and onds of other corporations, as the transaction of the lawful usiness of the corporation may reasonaly and necessarily re(uire, suect to the limitations prescried y law and the Constitution% To enter into mer!er or consolidation as pro$ided in this Code%
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To ma"e reasonale donations, includin! those for the pulic welfare or for hospital, charitale, cultural, scienti&c, ci$ic, or similar purposes= Pro$ided, that no corporation, domestic or forei!n, shall !i$e donations in aid of any political party or candidate or for purposes of partisan political acti$ity% To estalish pension, retirement, and other plans for the ene&t of its directors, trustees, oBcers and employees% and To e;ercise such other powers as may e essential or necessary to carry out its purpose or purposes as stated in the articles of incorporation#
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. BAN@IN4 AND INCIDENTAL PO?ERS All such powers as may e necessary to carry on the usiness of commercial an"in! .Sec# 092# i# ii# iii#
Acceptin! drafts +ssuin! letters of credit @iscountin! and ne!otiatin! promissory notes, drafts, ills of e;chan!e and other e$idence of det Acceptin! or creatin! demand deposits 3ecei$in! other types of deposits and deposit sustitutes *uyin! and sellin! forei!n e;chan!e and !old or sil$er ullion Ac(uirin! mar"etale onds and other det securities ;tendin! credit
i$# $# $i# $ii# $iii#
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Gnder Sec# 0, the de!ree of dili!ence is “high standards of integrity and performance”.
6i*7!iar/ Oigati)n )+ Banks BPI v. +ieti-e arketing Corp. 555 SCRA !*!, 2 The de!ree of dili!ence re(uired of an"s is more than that of a reasonale man or a !ood father of a family# +n $iew of the &duciary nature of their relationship with their depositors, an"s are duty'ound to treat the accounts of their clients with the hi!hest de!ree of care# 6i*7!iar/ Oigati)n )+ Bank E0,)/ees P/B v. Pike * SCRA !2 +t ears emphasi5in! that the ne!li!ence of an"in! institutions should ne$er e countenance# Althou!h its employees may e the ones ne!li!ent, a bank’s liability as obligor is not merely vicarious, but primary, as banks are expected to exercise the highest degree of diligence in the selection and supervision of their employees. D7t/ )n Bank A!!)7nts )+ Cients BPI Fa-il0 Bank v. Fran$o 5! SCRA 1, 2*
. DILI4ENCE RE9UIRED O6 BAN@S K RELEVANT MURISPRUDENCE .Sec# 02 The State reco!ni5es the $ital role of an"s in pro$idin! an en$ironment conduci$e to the sustained de$elopment of the national economy and the &duciary nature of an"in! that re(uires hi!h standards of inte!rity and performance# +n furtherance thereof, the State shall promote and maintain a stale and eBcient an"in! and &nancial system that is !loally competiti$e, dynamic and responsi$e to the demands of a de$elopin! economy# *an"s are re(uired to e;ercise the highest degree of diligence. 6i*7!iar/ Nat7re )+ Banks •
ailure on the part of the an" to satisfy the de!ree of dili!ence re(uired of an"s may warrant the award of dama!es#
+n e$ery case, the depositor e;pects the an" to treat his account with utmost &delity, whether such account consists only of a few hundreds of pesos or of millions# The an" must record e$ery sin!le transaction accurately, down to the last centa$o, and as promptly as possile# This has to e done if the account is to reect at any !i$en time the amount of money the depositor can dispose of as he sees &t, con&dent that the an" will deli$er it as and to whome$er directed# A lunder on the part of the an", such as the dishonor of the chec" without !ood reason, can cause the depositor not a little emarrassment if not also &nancial loss and perhaps e$en ci$il and criminal liti!ation# The point is that as usiness a?ected with pulic interest and ecause of the nature of its functions, the an" is under oli!ation to treat the accounts of its depositors with
9 meticulous care, always ha$in! in mind the &duciary nature of their relationship# Deaings with Registere* Lan* rsal v. CA *! SCRA 52, 25 *an"s cannot merely rely on certi&cates of title in ascertainin! the status of mort!a!ed properties# As their usiness is impressed with pulic interest, they are e;pected to e;ercise more care and prudence in their dealin!s than pri$ate indi$iduals# +ndeed, the rule that persons dealin! with re!istered land can rely solely on the certi&cate of tile does not apply to an"s#
interest# >f paramount importance is the trust and con&dence of the pulic in !eneral in the an"in! industry# Conse(uently, the dili!ence re(uired of an"s is more than that of the 3oman pater familias or a !ood father of a family# The highest degree of diligence is e;pected# Bank o A-eri$a /78SA v. Philippine Ra$ing Cl%#, 29 The an"in! usiness is so impressed with pulic interest where the trust and con&dence of the pulic in !eneral is of paramount importance such that the appropriate standard of dili!ence must e high degree of diligence, if not the utmost diligence.
Degree )+ Diigen!e Re>7ire* )+ Banks as Len*ers85)rtgagees Consoli3ate3 R%ral Bank (Caga0an 4alle0) v. CA SCRA !*, 25
%. NATURE O6 BAN@ 6UNDS AND BAN@ DEPOSITS
*an"s, their usiness ein! impressed with pulic interest Kin this case ta"in!'up real estate mort!a!es to secure the loans !i$enL, are e;pected to e;ercise more care and prudence than pri$ate indi$idual in their dealin!s, e$en those in$ol$in! re!istered lands# ence, for merely relyin! on the certi&cates of title and for its failure to ascertain the status of the mort!a!ed properties as is the standard procedure in its operations, the an" is a mort!a!ee in ad faith#
The an" can ma"e use as its own the money deposited (7an 7iong 7i$k v. A-eri$an Apothe$aries "5 Phil 1, 19!). Said amount is not ein! held in trust for the depositor nor is it ein! "ept for safe"eepin!# Art# 199 .Ci$il Code2# i;ed, sa$in!s, and current deposits of money in an"s and similar institutions shall e !o$erned y the pro$isions concernin! simple loan#
Ree2ant M7ris,r7*en!e Si-e International v. CA, 199 As a usiness a?ected with pulic interest and ecause of the nature of its functions, the an" is under oli!ation to treat the accounts of its depositors with meticulous care, always ha$in! in mind the &duciary nature of their relationship# PCI Bank v. CA, 21 *an"s are e;pected to e;ercise the hi!hest de!ree of dili!ence in the selection and super$ision of their employees# PS Bank v. Cho6king Foo3 Corp., 2 +t cannot e o$eremphasi5ed that the an"in! usiness is impressed with pulic
C)n:*entiait/ )+ Bank De,)sits The pre$ailin! policy of the matter is to preser$e the asolute con&dentiality enoyed y an" deposits# Rep%#li$ v. &%genio, 2 +ndeed, y force of statute, all an" deposits are asolutely con&dential, and that nature is unaltered e$en y the le!islated e;ceptions referred to ao$e# There is disfa$or towards construin! these e;ceptions in such a manner that would authori5e unlimited discretion on the part of the !o$ernment or of any party see"in! to enforce those e;ceptions and in(uire into an" deposits# +f there are douts in upholdin! the asolutely con&dential nature of an" deposits a!ainst the aBrmin! authority to in(uire into such accounts, then such douts must e resol$ed in fa$or of the former# Such a stance would persist unless Con!ress passes a law re$ersin! the !eneral state policy of preser$in! the asolutely con&dential nature of Philippine an" deposits# BSP ro%p, In$. v. o, 21
1 +t is conceded that while the fundamental law has not othered with the tri$iality of speci&cally addressin! pri$acy ri!hts relati$e to an"in! accounts, there, ne$ertheless, e;ists in our urisdiction a le!itimate e;pectation of pri$acy !o$ernin! such accounts# The source of this ri!ht of e;pectation is statutory, and is found in 3#A#
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Bank as a Det)r @eposit is a $oluntary a!reement, Enow Nour CustomerI standards *an" ac(uires ownership of money deposited% oli!ation to pay amount, ut not oli!ation to return the same money (%ingona, :r. v. Cit0 Fis$al o anila 12 SCRA 5**, 19) Payment to proper party'depositor (F%lton Iron ;orks Co. 4. China Banking Corp. 5 Phil. 2", 19!) @eposits are not preferred credits (Central Bank v. ore "! SCRA 11, 19*5 *an" has ri!ht to compensation (%llas v. P/B "2 Phil. 519, 19!5) 3*2# +nterest or yield on time depositDdeposit sustitute may e paid at maturity or upon withdrawal or in ad$ance# owe$er, interest or yield paid in ad$ance shall not e;ceed the interest for one year .Section 060#1, M>3*2 Interest )n L)ans -hile the Gsury Jaw ceilin! on interest rates was lifted y Central *an" Circular 9,
nothin! in the said circular !rants lenders carte lanche authority to raise interest rate to le$els which will either ensla$e their orrowers or lead to a hemorrha!in! of their assets (Solangon v. Sala
#. 4RANT O6 RE9UIRE5ENTS
LOAN
AND
SECURITY
a. RATIO O6 NET?ORTH TO TOTAL RIS@ ASSETS The Monetary *oard shall prescrie the minimum ratio which the net worth of a an" must ear to its total ris" assets wh#ich may include contin!ent accounts, and may= ' 3e(uire that such ratio e determined on the asis of the
11 Provided: (i The Monetary *oard may re(uire or suspend compliance with such ratio whene$er necessary for a ma;imum period of one year% (ii The ratio applied uniformly to an"s of same cate!ory#
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a. SIN4LE BORRO?ER;S LI5IT "SBL' ;cept as the Monetary *oard ay otherwise prescrie for reason of national interest, total amount of loans, credit, accommodations and !uarantees that may e e;tended y a an" to any person, partnership, association or other entity shall at no time e;ceed 0O of the net worth of such an"# owe$er, in 01, the S*J was increased to 0O for a period of 4 Nears# urther, in 014, the *an"on! Sentral n! Pilipinas issued Circular
Gnder letters of credit, to the e;tent co$ered y mar!in deposits% Those which the Monetary *oard may, from time to time, specify as non'ris" items Joans and other credit accommodations, deposits maintained with, and usual !uarantees y a an" to any other an"s or non'an" entity, whether locally or aroad#
In!7si)n )+ Parent C)r,)rati)n $en if a parent corporation, partnership, association, entity or an indi$idual who owns or controls a maority interest in such entities has no liaility to the an", the Monetary *oard may prescrie the comination of the liailities of susidiary corporations or memers of the partnership, association, entity or such indi$idual under certain circumstances, includin! ut not limited to any of the followin! situations= Parent corporation, partnership, association, entity or indi$idual !uarantees the repayment of the liailities% Jiailities were incurred for the accommodation of the parent corporation or another susidiary or the partnership or association or entity or such indi$idual% or Susidiaries throu!h separate entities operate merely as departments or di$isions of a sin!le entity# ./illanue$a, 092 •
Also, unless the Monetary *oard prescries otherwise, the S*J may e increased y an additional 1O of
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. RESTRICTIONS ON BAN@ EGPOSURE TO DOSRI "Dire!t)rs O!ers St)!kh)*ers an* their Reate* Interest'
10 oBcer who $iolates the pro$isions of the @>S3+ restriction may e declared $acant and the director or oBcer shall e suect to the penal pro$isions of the S3+ accounts shall e limited to an amount e(ui$alent to their respecti$e encumered deposits and oo" $alue of their paid'in capital contriution in the an"# Pro$ided= .i2 Joans, credit accommodations and !uarantees secured y assets considered as non#risk y the Monetary *oard shall e e;cluded from such limits%
.ii2
Joans, credit accommodations and ad$ances to oBcers in the form of fringe bene$ts !ranted shall not apply to loans, credit accommodations, and !uarantees e;tended y a cooperati$e an" to its cooperati$e shareholders#
