True or False: 1.

The fiduciary nature of the relationship of a depositor with the depositary bank imposes on the latter the obligation to discharge the highest standard of trust and integrity and a violation thereof is considered a breach of trust. False 2. The humble wage-earner has not hesitated to entrust his lifes savings to the bank knowing that they will be safe in the custody of the banks. True 3. Banks are gratuitous bailees of the funds deposited with them by their clients. False 4. The public relies on the banks fiduciary duty to observe the highest degree of diligence but any violation of this duty by the bank is not a valid ground for the grant of exemplary damages to the depositor. False 5. Thrift banks may not act as correspondent for other financial institutions. False 6. A non-stock corporation may act as a trustee or administer any trust or hold property in trust or on deposit for the benefit of others. False 7. A bank cannot use any of its branches as outlets for the sale of the financial products of its allied undertaking or its investment house units. True 8. A bank may declare dividends greater than its accumulated net profits then on hand, deducting there from its losses and bad debts. False 9. The appointment of a receiver is vested exclusively with the Monetary Board. True 10. The MB cannot appoint a conservator connected with BSP. False 11. In a judicial foreclosure of mortgage, there is an equivalent right of redemption. False 12. No late payment of penalty fee shall be collected from cardholders unless the collection thereof is fully disclosed in the contract between the issuer and the cardholder. True 13. A bank which had been ordered closed by the monetary board does not retain its juridical personality which can sue and be sued through its liquidator. False

Fill in the blanks 1. The law governing the creation, organization and operation of rural banks is Rural Banks Act. 2. The total investment in equities of allied enterprise shall not exceed 35 % of the net worth of the bank. 3. Subsidiary shall refer to a corporation or firm more than 50% of the outstanding voting stock of which is directly or indirectly owned. 4. The rule that the total amount of loans that may be extended by a bank to any person or entity shall at no time exceed 20% of the net worth of such bank is called Single Borrowers Limit. 5. Credit Risk Transfer shall refer to any agreement that allows the bank to transfer the credit risk associated with its loan or other credit accommodation to a third party. 6. The term Legal Compensation refers to that situation when two persons, in their own right, are creditors and debtors of each other. 7. The contracts between cardholders and credit card companies are called contracts of adhesion because their terms are prepared by only one party while the other merely affixes his signature signifying his conformity thereto. 8. Net worth means the total unimpaired paid-in capital including paid-in surplus, retained earnings and undivided profit, net of valuation reserves and other adjustments as maybe required by BSP. 9. Letter of Credit refers to a financial device availed of by businessmen as a convenient mode of dealing with sales of goods to satisfy the seemingly irreconcilable interests of a seller who refuses to part with his goods before he is paid. 10. Survivorship agreement is the agreement that allows joint depositors to withdraw the whole deposit during their lifetime and transferring the balance to the survivor upon the death of one of them. 11. In the case of Consolidated Bank and Trust Co., the SC ruled that the contract between the bank and its depositor is governed by the provisions of the Civil Code on simple loan/mutuum. 12. In the case of Serrano vs. Central Bank of the Phil., the SC held that bank deposits are in the nature of irregular deposits.

13. In Simex International Case, the SC said that the banking system is an indispensable institution that plays a vital role in the economic life of the nation. 14. It is basic that after consolidation of title in the buyers name for failure of the mortgagor to redeem, the writ of possession becomes a matter of right and its issuance to a purchaser is merely a ministerial function. 15. Acceleration Clause means any provision in the contract between the bank and the cardholder that gives the bank the right to demand the obligation in full in case of default or non-payment for whatever reason. 16. The law that protects its citizens from a lack of awareness of the true cost of credit to the user by assuring full disclosure of such cost is Truth in Lending Act. 17. The agreement between the parties in a loan transaction which stipulate that the rate of interest agreed upon may be increased in the event that the applicable maximum rate of interest is increased by the MB is called escalation clause. 18. Joint and Solidary Agreement is an agreement where the contracting parties consent to be jointly and severally liable in a loan obligation. 19. A bank guarantee is an irrevocable commitment of a bank binding itself to pay sum of money in the event of non-performance of a contract by a third party. 20. Assignment of credit is an agreement by virtue of which the owner of credit, known as the assignor, by a legal cause, such as sale or dation in payment transfers his credit to another known as the assignee who acquires the power to enforce it. 21. All foreign currency deposit are of absolute confidential nature as a general rule and said deposit shall be exempt from attachment pursuant to RA No. 6426 otherwise known as Foreign Currency Deposit Act of the Philippines. 22. Negotiable Order of Withdrawal Accounts are interest bearing deposit accounts that combine the payable on demand feature of checks and investment feature of savings account. 23. Independent Auditor means a person other than an officer or employee of the bank, its subsidiaries or affiliates or related companies, or its majority shareholders.

24. Interest Rate Differential refers to the difference or margin between interest rates such as the difference between domestic and foreign interest rates. 25. Secrecy of Bank Deposit Act is the law that was passed to give encouragement to people to deposit their money in banking institutions. 26. The Securities and Exchange Commission shall not register the articles of incorporation of any bank unless accompanied by certificate of authority issued by the monetary board. 27. The equity investment of a universal bank or its wholly or majority owned subsidiaries, in a single non-allied enterprise shall not exceed 20% of the total equity. 28. Demand deposit are all those liabilities of the Banko Sentral and of the other banks which are denominated in the Philippine currency and are subject to payment in legal tender upon demand by presentation of depositors check. 29. The rule intended to maintain the quality of bank management and afford better protection to depositors and the public in general is called fit and proper rule. 30. Off shore banking units refer to a branch, subsidiary or affiliate of a foreign banking corporation which is duly authorized by the Banko Sentral to transact offshore banking business in the Philippines.

31. A bank is bound by the negligence of its employees under the principle of Respondeat Superior. 32. Quasi banks refer to entities engaged in the barrowing of funds through the issuance, endorsement or assignment with recourse or acceptance of deposit substitutes for the purpose of relending or purchasing receivables and other obligation. 33. The business of banking is imbued with public interest in order to assure the stability of banks which largely depends on the confidence of the people in the honesty and efficiency of bank.