Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
TABLE OF CONTENTS
A.
B.
C.
D.
E.
F.
G.
H.
equity
debt-financing
A cross-breed of the two may also occur.
Intermediaries
1.
2.
3.
4.
Banks
Non-bank financial intermediaries
Exchanges
Others i.e. secondary markets
Function of intermediaries
1.
2.
3.
IN GENERAL
Mandate
The Bangko Sentral ng Pilipinas is the States central monetary authority, mandated in
the 1987 Constitution, which shall function and operate as an independent and
accountable body corporate in the discharge of its mandated responsibilities
concerning money, banking and credit. [Section 1, RA 7653]
The Bangko Sentral shall enjoy fiscal and administrative autonomy. [Section 1, RA
7653]
Objectives
1.
2.
3.
4.
The primary objective of the Bangko Sentral is to maintain price stability conducive
to a balanced and sustainable growth of the economy.
It shall also promote and maintain monetary stability and the convertibility of the
peso.
It shall also provide policy directions in the areas of money, banking and credit.
It has supervision over banks and has regulatory powers over the operations of
finance companies and non-bank financial intermediaries performing quasi-banking
functions. [Section 3, RA 7653]
2
3.
4.
5.
6.
7.
8.
Fiscal policy is concerned with revenue generation and expenditure while monetary
policy involves regulating money supply and price stability.
The Bangko Sentral will now concentrate on monetary policy and shed off fiscal
responsibilities which in the past had distracted it from its primary function. [Section
129, RA 7653]
The powers and functions of the Bangko Sentral are exercised by the Monetary Board.
The Board is composed of seven (7) members appointed by the President for a term
of six (6) years. No member may be reappointed more than once.
Disqualifications
The member of the Monetary Board coming from the private sector shall not hold any
other public office or public employment during their tenure.
No person shall be a member of the Monetary Board if he has been connected with
any multilateral banking or financial institution or has a substantial interest in any
private bank in the Philippines, within one (1) year prior to his appointment; likewise,
no member of the Monetary Board shall be employed in any such institution within
two (2) years after the expiration of his term except when he serves as an official
representative of the Philippine Government to such institution.
The presence of four (4) members shall constitute a quorum. However, in all cases, the
Governor or his duly designated alternate shall be among the four.
In addition to the requirements of Republic Act No. 6713, any member of the
Monetary Board 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.
Members of the Monetary Board, officials, examiners, and employees of the Bangko
Sentral who willfully violate RA 7653 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;
1.
2.
The use of such information for personal gain or to the detriment of the
Government, the Bangko Sentral or third parties.
The Governor of the Bangko Sentral shall have the power to 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. [Section 17(e), RA 7653]
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
limit their professional activities to those pertaining directly to their positions with the
Bangko Sentral.
They may not accept any other employment, whether public or private, remunerated
or ad honorem.
Exceptions:
1.
2.
The Bangko Sentral shall have supervision over, and conduct periodic or special
examination of, banking institutions and quasi-banks, including their subsidiaries and
affiliates engaged in allied activities.
A subsidiary means a corporation more than fifty percent (50%) of the voting stock of
which is owned by a bank or quasi-bank and an affiliate means a corporation the
voting stock of which, to the extent of fifty percent (50%) or less, is owned by a bank
or quasi-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 Monetary
Board.
No restraining order or injunction shall be issued by the court enjoining the Bangko
Sentral from examining any institution subject to supervision or examination by the
Bangko Sentral, unless there is convincing proof that the action of the Bangko Sentral
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 executed in favor of
6
the Bangko Sentral, in an amount to be fixed by the court. [Section 25, RA 7653]
In addition to the prohibitions found in RA 3019 and 6713, personnel of the Bangko
Sentral are hereby prohibited from:
1.
2.
3.
Revealing in any manner, except upon orders of the court, the Congress or
any government office or agency authorized by law, or under such conditions
as may be prescribed by the Monetary Board, information relating to the
condition or business of any such institution. This prohibition shall not apply
to the giving of information to the Monetary Boar or the Governor of the
Bangko Sentral, or to any person authorized by either of them, in writing, to
receive such information; and
4.
CONSERVATORSHIP V. RECEIVERSHIP
CONSERVATOR
Grounds for appointment of conservator
The Monetary Board may appoint a conservator whenever it finds that a bank or a
quasi-bank is in a state of continuing inability or unwillingness to maintain a
condition of liquidity deemed adequate to protect the interest of depositors and
creditors. [Section 29, RA 7653]
Powers of conservator
1.
2.
3.
4.
Take charge of the assets, liabilities and management of the bank or quasi-bank
Reorganize the management
Collect all monies and debts due said institution
Exercise all powers necessary to restore its viability
The conservator has the power to overrule or revoke the actions of the previous
management and board of directors of the bank or quasi-bank.
Section 28-A of RA No. 265 merely gives the conservator the power to revoke
contracts that are deemed to be defective under existing law (i.e., void, voidable,
unenforceable, or rescissible); hence, the conservator merely takes the place of a
banks board of directors. What the board of directors cannot do, such as repudiating
a contract validly entered into under the doctrine of implied authority, the
conservator cannot do either. [First Philippine International Bank v. CA, 252 SCRA
255 (1986)]
Termination of conservatorship
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.
The conservatorship shall likewise be terminated should the Monetary Board
determine that the continuance in business of the institution would involve probable loss to
its depositors or creditors, in which case proceedings for receivership and liquidation shall be
pursued. [Section 29, RA 7653]
The Monetary Board shall institute proceedings for receivership whenever it finds that
a bank or quasi-bank:
1.
Is unable to pay its liabilities as they become due in the ordinary course of
business; provided that this shall not include inability to pay caused by
8
2.
3.
4.
In such cases, the Monetary Board may summarily and without need for prior hearing,
forbid the institution from doing business in the Philippines and designate the
Philippine Deposit Insurance Corporation as receiver of the banking institution.
[Section 30, RA 7653]
For a bank, the Philippine Deposit Insurance Corporation shall serve as receiver; for a
quasi-bank, any person of recognized competence in banking or finance may be
designated as receiver.
Resumption
Any determination for the resumption of business of the institution shall be subject to prior
approval of the Monetary Board.
Liguidation
If the receiver determines that the institution cannot be rehabilitated or permitted to resume
business, the Monetary Board shall notify in writing the board of directors of its findings and
direct the receiver to proceed with the liquidation of the institution.
2.
3.
File ex parte with the proper regional trial court, and without the requirement
of prior notice or any other action, a petition for assistance in the liquidation
of the institution pursuant to a liquidation plan adopted by the Philippine
Deposit Insurance Corporation in the case of a bank or by the Monetary Board
in the case of a quasi-bank;
Upon acquiring jurisdiction, the court shall, upon motion by the institution,
assist the enforcement of individual liabilities of the stockholders, directors
and officers, and decide on other issues as may be material to implement the
liquidation plan adopted; and
Convert the assets of the institution to money, dispose of the same to
creditors and other parties, for the purpose of paying the debts of such
institution in accordance with the rules on concurrence and preference of
credit under the Civil Code of the Philippines and he may, in the name of the
institution, institute such actions as may be necessary to collect and recover
accounts and assets of, or defend any action against, the institution.
Actions of Monetary Board final and may be questioned only through certiorari
The actions of the Monetary Board taken regarding the designation of a conservator
and appointment of a receiver shall be final and executory and may not be restrained
or set aside by the court except on petition for certiorari on the ground that the
action taken was in excess of jurisdiction or with such grave abuse of discretion as to
amount to lack or excess of jurisdiction.
The petition for certiorari may only be filed by the stockholders of record
representing the majority of the capital stock within ten (10) days from receipt by the
board of directors of the institution of the order directing receivership, liquidation or
conservatorship.
Currency
The word "currency" is hereby defined as meaning all Philippine notes and coins issued or
circulating in accordance with the provisions of RA 7653.
Bank of issue
Sentral has the sole power and authority to issue currency within the territory
of the Philippines [Section 50, RA 7653]
against and in amounts not exceeding, the assets of the BSP. Said notes and coins shall be a
first and paramount lien on all assets of the BSP [Section 51, RA 7653]
All notes and coins issued by the BSP are fully guaranteed by the RP and shall be legal
tender in the Philippines for all debts, both public and private. [Section 52, RA 7653]
Demand deposits
"Demand deposits" means all those liabilities of the Bangko Sentral and of other
banks which are denominated in Philippine currency and are subject to payment in
legal tender upon demand by the presentation of checks.
Only banks duly authorized to do so may accept funds or create liabilities payable in
pesos upon demand by the presentation of checks, and such operations shall be
subject to the control of the Monetary Board in accordance with the powers granted
it with respect thereto under RA 7653.
Checks representing demand deposits do not have legal tender power and their
11
acceptance in the payment of debts, both public and private, is at the option of the
creditor. [Section 60, RA 7653]
However, a check which has been cleared and credited to the account of the creditor
shall be equivalent to a delivery to the creditor of cash in an amount equal to the
amount credited to his account. [Section 60, RA 7653]
Guiding principle
Action when abnormal movements occur in the monetary aggregates, credit, or price
level
Whenever abnormal movements in the monetary aggregates, in credit, or in prices
endanger the stability of the Philippine economy or important sectors thereof, the Monetary
Board shall:
1.
Take such remedial measures as are appropriate and within the powers
granted to the Monetary Board and the Bangko Sentral;
2.
Submit to the President of the Philippines and the Congress, and make public,
a detailed report which shall includes, as a minimum, a description and
analysis of:
a.
b.
c.
The measures which the Monetary Board has taken and the other
monetary, fiscal or administrative measures which it recommends to be
adopted.
The Bangko Sentral shall exercise its powers to preserve the international value of the
pesos and to maintain its convertibility into other freely convertible currencies
primarily for, although not necessarily limited to, current payments for foreign trade
and invisibles. [Section 64, RA 7653]
12
International reserves
Gold
Assets in foreign currencies
Whenever the international reserve of the Bangko Sentral falls to a level which the
Monetary Board considers inadequate to meet the prospective net demands on the
Bangko for foreign currencies, or whenever the international reserve appears to be in
imminent danger of falling to such a level, or whenever the international reserve is
falling as a result of payments or remittances abroad which, in the opinion of the
Monetary Board, are contrary to the national welfare, the Monetary Board shall:
1.
2.
Take such remedial measures as are appropriate and within the powers
granted to the Monetary Board and the Bangko Sentral;
Submit to the President of the Philippines and the Congress, and make public,
a detailed report which shall includes, as a minimum, a description and
analysis of:
a. The nature and causes of the existing or imminent decline;
b. The remedial measures already taken or to be taken by the Monetary
Board;
c. The monetary, fiscal or administrative measures further proposed; and
d. The character and extent of the cooperation required from other
government agencies for the successful execution of the policies of the
Monetary Board.
In order to achieve the primary objective of price stability, the Monetary Board shall
rely on its moral influence and the powers granted to it under RA 7653 for the
management of monetary aggregates.
13
The Bangko Sentral may buy and sell gold in any form.
The Bangko sentral may buy and sell foreign notes and coins, and documents and
instruments of types customarily employed for the international transfe rof funds.
The Bangko Sentral may engage in future exchange operations.
The Bangko Sentral may engage in foreign transactions with the following entities or
persons only:
1.
Banking institutions operating in the Philippines;
2.
The Government, its political subdivisions and instrumentalities;
3.
Foreign or international financial institutions;
4.
Foreign governments and their instrumentalities; and
5.
Other entities or persons which the Monetary Board is hereby empowered to
authorize as foreign exchange dealers.
The Bangko Sentral shall endeavor to maintain at all times a net positive foreign asset
position so that its gross foreign exchange assets will always exceed its gross foreign
liabilities.
2.
3.
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. [Section 72, RA 7653]
Such measures may be adopted with the concurrence of at least five (5) members of
the Monetary Board and with the approval of the President of the Philippines.
[Section 72, RA 7653]
Exchange rates
The Bangko Sentral shall determine the exchange rate policy of the country.
In order that the Bangko Sentral may at all times have foreign exchange resources
sufficient to enable it to maintain the international stability and convertibility of the
peso, or in order to promote the domestic investment of bank resources, the
Monetary Board may require the banks to sell to the Bangko Sentral or to other banks
all or part of their surplus holdings of foreign exchange. [Section 76, RA 7653]
The rediscounts, discounts, loans and advances, which the Bangko Sentral is
authorized to extend to banking institutions, shall be used to influence the volume of
credit consistent with the objective of price stability.
Commercial credits
Production credits
Other credits
Commercial credits
The Bangko Sentral may rediscount, discount, buy and sell bills, acceptances,
promissory notes and other credit instruments with maturities of not more than one
15
hundred eighty (180) days from the date of their rediscount, discount or acquisition
by the Bangko Sentral and resulting from transactions related to:
1.
2.
The storing of non-perishable goods and products which are duly insured and
deposited, under conditions assuring their preservation in authorized bonded
warehouses or in other places approved by the Monetary Board.
Production credits
The Bangko Sentral may rediscount, discount, buy and sell bills, acceptances,
promissory notes and other credit instruments having maturities of not more than
three hundred sixty (360) days from the date of their rediscount, discount or
acquisition by the Bangko Sentral and resulting from transactions related to the
production or processing of agricultural, animal, mineral, or industrial products.
Other credits
The Bangko Sentral may extend loans and advances to banking institutions for a
period of not more than seven (7) days without any collateral for the purpose of
providing liquidity to the banking system in times of need. [Section 83, RA 7653]
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,
16
though foreseeable, could not be prevented by the bank concerned. This requires
that the Monetary Board has ascertained that the bank is not insolvent and has the
assets to secure the advances and that the concurrent vote of at least five (5)
members of the Monetary Board is obtained. [Section 84, RA 7653]
The open market purchases and sales of securities by the Bangko Sentral shall be
made exclusively in accordance with its primary objective of achieving price stability.
In pursuit of this principle, the Bangko Sentral may engage in the purchase and sale
of government securities as well as issue and negotiate obligations of the Bangko
Sentral.
BANK RESERVES
Reserve requirements
In order to control the volume of money created by the credit operations of the
banking system, all banks operating in the Philippines shall be required to maintain
reserves against their deposit liabilities.
The required reserves of each bank shall be proportional to the volume of its deposit
liabilities and shall ordinarily take the form of a deposit in the Bangko Sentral.
[Section 94, RA 7653]
Since the requirement to maintain bank reserves is imposed primarily to control the
volume of money, the Bangko Sentral shall not pay interest on the reserves
maintained with it unless the Monetary Board decides otherwise as warranted by
circumstances. [Section 94, RA 7653]
Deposit substitutes
The Monetary Board is similarly authorized to prescribe and modify the minimum
17
Banks and other affected financial institutions shall be notified reasonably in advance
of the date on which such increase is to become effective.
Deposits maintained by banks with the Bangko Sentral as part of their reserve
requirements shall be exempt from attachment, garnishment, or any other order or
process of any court, government agency or any other administrative body issued to
satisfy the claim of a party other than the Government, or its political subdivision or
instrumentalities.
Guiding principle
The Monetary Board shall use the powers granted to it under RA 7653 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.
The Monetary Board may at any time prescribe minimum cash margins for the
opening of letters of credit, and may related the size of the required margin to the
nature of the transaction to be financed.
The Bangko Sentral shall act as a banker of the Government, its political subdivisions
and instrumentalities.
The Bangko Sentral shall represent the government with the International Monetary
18
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.
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. [Section 118, RA 7653]
The servicing and redemption of the public debt shall also be effected through the
Bangko Sentral.
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 opinion must similarly be
requested by all political subdivisions and instrumentalities of the Government before
any credit operation abroad is undertaken by them.
In 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.
19
PROHIBITIONS
Prohibitions
The Bangko Sentral shall not acquire shares of any kind or accept them as coolateral,
and shall not participate in the ownership or management of any enterprise, either
directly or indirectly.
TRANSITORY PROVISIONS
Phaseout of fiscal agency functions
Phaseout of regulatory powers over the operations of finance corporations and other
institutions performing similar functions
The Bangko Sentral shall within a period of five (5) years from the effectivity of RA
7653 phase out its regulatory powers over finance companies without quasi-banking
functions and other institutions performing similar functions, the same to be assumed
by the Securities and Exchange Commission. [Section 130, RA 7653]
23
IN GENERAL
Rule on bank operations
Monetary Board of the Bangko Sentral may engage
in the lending of funds obtained from the public through the receipt of deposits of any
kind and all entities regularly conducting such operations shall be considered as banking
institutions.
Entities engaged in the lending of funds obtained from the public through the
20
receipt of deposits of any kind, and all entities regularly conducting such operation.
Banks or banking institutions must be duly authorized by the Monetary Board of the
Central Bank.
Quasi-banking functions
Quasi-banking functions shall mean borrowing funds, for the borrowers own
account, through the issuance, endorsement or acceptance of debt instruments
of any kind other than deposits, or through the issuance of participations,
certificates of assignment, or similar instruments with recourse, trust certificates,
or of repurchase agreements, from twenty or more lenders at any one time, for
purposes of re-lending or purchasing of receivables and other obligations.
Financial intermediaries
The following entities shall not be considered as banking institutions but shall be
subject to regulation by the Monetary Board:
1.
2.
3.
Trust companies, building and loan associations, and non-stock savings and
21
loan associations.
These entities will be subject to regulation by the Monetary Board which may
include, but need not be limited to:
1.
2.
3.
4.
5.
6.
7.
Determination of functions
Regulation
22
Supervision
Supervision shall include not only the issuance of rules but also the overseeing to
ascertain that regulations are complied with, investigating or examining to determine
whether an institution is conducting its business on a sound financial basis, and
inquiring into the solvency and liquidity of the institution.
Types of deposits
1.
2.
Savings deposit-Interest fixed under the fine prints, if one deposits today, he cannot
withdraw the amount not until 60 days later. The bank can lend out such funds; that
is why it pays interests on such deposits.
3.
Demand deposit or current accounts- No interest is fixed by the bank because the
depositor can take out his funds any time. It is called demand deposit because the
depositor can withdraw the money deposited on the very same day when he
deposited it. Note: As a general rule, only commercial banks can accept demand
deposits on checking accounts. By way of exception, savings banks and even rural
banks, are allowed by the CB to accept checking accounts because their
capitalizaition may be large.
Period- Under the Civil Code, a period is presumed to be for the benefit of both
parties. Insofar as banks are concerned, the period is always for the benefit of the
debtor if the bank is the creditor. The debtor can compel the creditor bank to
accept payment of a debt before it is due, and recover interest deducted in
advance.
2.
Foreclosure of mortgageThe general rule is that there is no right of redemption in judicial foreclosure of
mortgage. There is only 90 day equity redemption period.
-day equity redemption
period, banks are required to give a one-year redemption period.
mortgage to it in the course of an ordinary banking transaction. If the mortgage was not
within the normal banking transaction, it must be prohibited from bidding.
Mortgage loans
Loans against real estate security shall not exceed 70% of the appraised value of the real
estate security, plus 70 %of the appraised value of the improvements with title to the
property being with the mortgagor.
Loans on the security of chattels shall not exceed 50% of the appraised value of the
security.
24
3.
Commercial banks
Thrift banks
a. Savings and mortgage banks
b. Stock savings and loan associations
c. Private development banks
Rural banks
The Securities and Exchange Commission shall not register the articles of
incorporation of any bank, or any amendment thereto, unless accompanied by a
certificate of authority issued by the Monetary Board, under its official seal.
At least two thirds of the members of the board of directors of any bank or
banking institution which may be established after the approval of this Act shall
be Filipino citizens.
Such certificate shall not issue unless the Monetary Board is satisfied from the
evidence submitted to it:
1.
that all the requirements of existing laws and regulations to engage in the
business for which the applicant is proposed to be incorporated have been
complied with;
2.
that the public interest and economic conditions, both general and local,
25
This prohibition, however, shall not apply to branches and agencies of foreign banks
which, at the time of approval of the General Banking Act, are actually receiving
deposits.
After approval of the Act, all deposits so received by such branches and
agencies of foreign bank shall not be invested in any manner outside the
territorial limits of the Republic of the Philippines.
The Monetary Board may, with the approval of the President, increase the
percentage of foreign-owned voting stocks in any domestic bank from thirty
percent (30%) to forty percent (40%).
The total voting stocks which any corporation, including its wholly or majority owned
subsidiaries, may own in any bank shall not exceed thirty percent (30%) of the voting
stock of that bank.
26
In the case of a corporation which is wholly owned, or the majority of the voting
stock of which is owned, by any one person or by persons related to each other
within the third degree of consanguinity or affinity, that corporation may own not
more than twenty percent (20%) of the voting stock of any bank.
No foreign building and loan association or building and loan association not
formed, organized, or existing under the laws of the Philippines shall be permitted
to transact business in the Philippines.
Public and economic conditions, both general and local, justify the issuance of such
order.
The foreign bank or banking corporation is solvent and in sound financial
condition.
A duly appointed agent in the Philippines has been authorized to accept
summons and legal processes.
Investment rights
1.
2.
With prior approval of the Central Bank, these foreign entities may also
purchase equities in domestic banks, subject to restrictions.
27
Revocation of license
1.
2.
2.
3.
4.
by receiving deposits;
by buying and selling foreign exchange and gold or silver bullion; and
by lending money against personal security or against securities consisting of
personal property of mortgages on improved real estate and the insured
improvements thereon.
A commercial bank may offer NOW accounts (special types of savings deposit which
can be withdrawn by means of a Negotiable Order of Withdrawal and is offered only
to natural persons).
A commercial bank may likewise acquire readily marketable bonds and other debt
securities subject to such rules as the Monetary Board may promulgate.
A commercial bank, finally, may invest to the extent allowed under applicable law and
regulations in equities of allied undertaking, whether financial or non-financial.
The total investment in equities shall not exceed twenty five percent (25%)
of the net worth of the bank.
2.
The equity investment in any one enterprise shall not exceed fifteen
percent (15%) of the net worth of the bank;
3.
The total equity investment of the bank in any single enterprise shall remain
a minority holding in that enterprise; and
4.
The equity investment in other banks shall be deducted from the investing
banks net worth for purposes of computing the prescribed ratio of net
worth to risk assets.
Leasing companies
Banks
Investment houses
Financing companies
Credit card operations
Financial institutions catering to small and medium scale enterprises
Warehousing companies
Storage companies
Safe deposit box companies
Companies engaged in the management of mutual funds but not in the
mutual funds themselves
Management corporations engaged or to be engaged in activity similar to the
engagement of mutual funds
Companies engaged in the provision of computer services
Insurance agencies
Companies engaged in home building and home development
Companies providing drying and/or milling facilities for agricultural
crops
By virtue of such expanded power, the universal bank may, in addition to powers
authorized for commercial banks:
1. exercise the power of an Investment House as provided in PD 129;
2. invest in the equity of a non-allied undertaking; or
3. own a majority or all of the equity in a financial intermediary other than a
commercial bank or a bank authorized to provide commercial banking services.
If performed indirectly through an investment house, universal bank may not directly
exercise such powers as are exclusively reserved to investment houses.
The total investment in equities shall not exceed fifty percent (50%) of the net
worth of the bank.
2.
The equity investment in any one enterprise whether allied or non-allied shall not
exceed fifteen percent (15%) of the net worth of the bank.
3.
4.
The equity investment in other banks shall be deducted from the investing banks
net worth for purposes of computing the prescribed ratio of net worth to risk assets.
Capitalization
Commercial bank
P 2 billion
Universal bank
P 4.5 billion
30
The combined capital accounts of each commercial bank shall not be less than
an amount equal to ten percent (10%) of its risk assets
Risk assets is defined as its total assets minus the following assets:
1.
Cash on hand;
2.
Amounts due from the Central Bank;
3.
Evidence of indebtedness of the Philippine Government or Central Bank or
any other evidence of indebtedness fully guaranteed by the Philippine
Government;
4.
Loans to the extend covered by hold-out on, or assignment of, deposits
maintained in the lending bank and held in the Philippines;
5.
Loans or acceptances under letters of credit to the extend covered by
marginal deposits; and
6.
Other non-risk items which the Monetary Board may, from time to time,
authorize to be deducted from total assets.
Any commercial bank may purchase, hold, and convey real estate for the
following purposes:
1.
2.
3.
4.
However, no such bank shall hold the possession of any real estate under
mortgage or trust deed, or the title and possession of any real estate purchased
to secure any debt due to it, for a longer period than five years.
31
Establishment of branches
Any commercial bank organized under Philippine laws may, with the prior approval
of the Monetary Board, establish branches in the Philippines or branches and
agencies outside the Philippines, and the bank shall be responsible for all business
conducted in such branches to the same extent and in the same manner as though
such business had all been conducted in the head office.
THRIFT BANKS
Thrift banks
Thrift banks shall include savings and mortgage banks, private development banks,
and stock savings and loan associations organized under existing laws and any
banking corporation that may be organized for the following purposes:
1.
2.
3.
Providing diversified financial and allied services for its chosen market and
constituencies especially for small and medium enterprises and individuals.
Scope of authority
7.
8.
9.
10.
11.
12.
13.
Thrift banks may perform services similar to those offered by commercial banks
under an expanded authority when permitted by the Bangko Sentral ng Pilipinas.
Capitalization
P250 million
P 40 million
Equity ownership
At least 40% of the voting stock of a thrift bank shall be owned by Filipino citizens.
Exception: In case of merger or consolidation of existing Thrift Banks with foreign holdings,
the resulting holding shall not be increased but may be reduced and, once reduced, shall not
be increased thereafter beyond 60% of the voting stock of the Thrift Bank.
33
Minors as depositors
Minors in their own rights and in their own names may make deposits and
withdraw the same, and may receive dividends and interests.
If the guardian shall give notice in writing to any thrift bank not to make payments of
deposits, dividends or interest to the minor of whom he is the guardian, then such payment
shall be made only to the guardian.
Building and loan associations are corporations whose capital stock is required or
is permitted to be paid in by the stockholders in regular, equal periodical
payments and whose purpose is:
1.
2.
3.
4.
Prohibition
It shall be unlawful for any building and loan association to make any loan upon
property that is suitable for us only as theatre, public hall, church, convent, school,
club, hotel, garage, or other public building. Monetary Board may grant exemptions
in cases of public hall, school, hotel and other public buildings to facilitate the
investment of idle funds.
Investment in bonds
With the approval of the Monetary Board, a building and loan association may also
invest such of its funds as may otherwise remain idle in bonds and obligations of the
Republic of the Philippines or any of its subdivisions, or GOCCs.
Capital stock
The capital stock of such associations shall be paid in by the stockholders in regular,
equal, periodical payments known as dues, at such times and in such amounts as shall
34
The dues on each share of stock subscribed for by a stockholder shall continue to be
paid by the stockholder to the association until the share has been duly withdrawn,
cancelled, or forfeited or until the share has reached its matured value.
Matured value is when the due paid on each share and the net earnings thereof, in
accordance with the by laws, shall amount to the matured of the share.
Certificates of stock
Certificates of stock shall be issued to each stockholder upon the payment of the
membership fees and first installment of the dues.
Shares which have not been pledged as security for the payment of a loan shall be
called free shares, and shares which have been so pledged shall be called
pledged shares.
Surrender of shares
Stockholders may surrender their shares and withdraw from the association after
paying twelve (12) monthly installment of dues upon giving sixty (60) days notice in
writing to the board of directors and the withdrawal value shall be the total sum of
the dues paid thereon plus not less than ninety percent (90%) of all dividends earned
by such shares up to the end of the last preceding fiscal period plus such interest for
the time elapsed since the end of the period as shall be allowed by the board of
directors.
Stockholders who have not paid twelve (12) monthly installments of dues may, after
giving sixty (60) days notice to the board, surrender their shares and withdraw from
the association, and the withdrawal value shall be the total sum of the due paid
thereon plus such dividend or interest as may be allowed by the board of directors.
35
Scope of authority
RURAL BANKS
2.
3.
4.
5.
6.
7.
8.
Extend loans and advances primarily for the purpose of meeting the normal
and credit needs of farmers, fishermen, or farm families as well as
cooperatives, merchants, private and public employees;
Accept savings and time deposits;
Ac as correspondent bank of other financial institutions;
Rediscount paper with the LBP, DBP, or any other bank, including its
branches and agencies.
Act as a collection agent;
Offer other banking services as provided in Section 772 of RA 337, as
amended;
Extend financial assistance to private and public employees in
accordance with RA 3779, as amended; and
With prior approval of the Monetary Board:
a.
Accept current or checking accounts;
b.
Accept NOW accounts;
c.
Act as trustee over estates or properties of farmers and
merchants;
d.
Act as official government depository;
e.
Sell domestic drafts; and
f.
Invest in allied undertakings.
Rationale
The rationale behind rural banking system is the need to promote comprehensive rural
development with the end in view of the following:
1.
2.
3.
This can be achieved by making credit available and readily accessible in the rural areas.
Capital stock
With the exception of shareholdings of corporations organized primarily to hold equities in
rural banks, and of Filipino-controlled domestic banks, the capital stock of any rural bank
shall be fully-owned and held by Philippine citizens or entities qualified under Phil. law to
own and hold such capital stock.
36
Board
All members of the BOD shall be Filipino citizens.
However, there is no prohibition against any appointive or elective public official from
serving as director, officer, consultant or in any capacity in the bank.
Incentives
ewspaper publication requirements if the loan,
excluding interest due and unpaid, does not exceed P100,000.
except corporate income taxes and local taxes, fees and charges for aperiod of five years
from the date of commencement of operations.
Declaration of policy
Pursuant to this policy, the Philippine banking and financial system is hereby
liberalized to create a more competitive environment and encourage greater foreign
participation through increase in ownership in domestic banks by foreign banks and
the entry of new foreign bank branches.
In allowing increased foreign participation in the financial system, it shall be the policy
of the State that the financial system shall remain effectively controlled by Filipinos.
37
The Monetary Board may authorize foreign banks to operate in the Philippine
banking system through any of the following modes of entry:
1.
2.
3.
2. consider strategic trade and investment relationships between the Philippines and
the country of incorporation of the foreign bank;
3. study the demonstrated capacity, global reputation for financial innovations and
stability in a competitive environment of the applicant;
4. see to it that reciprocity rights are enjoyed by Philippine banks in the applicants
country; and
5. consider willingness to fully share their technology.
Only those among the top one hundred fifty (150) foreign banks in the world or the
top five (5) banks in their country of origin as of the date of application shall be
allowed entry in (b) and (c) of modes of entry.
In approving entry, Monetary Board shall adopt such measures as may be necessary:
1.
2.
3.
to ensure that, at all times, the control of seventy (70%) of the resources or
assets of the entire banking system is held by domestic banks which are at
least majority-owned by Filipinos;
prevent a dominant market position by one bank or the concentration of
economic power in one or more financial institutions, or in corporations,
partnerships, groups or individuals with related interests; and
secure the listing in the Philippine Stock Exchange of the shares of stocks of
banking corporations established under (a) and (b) modes of entry.
38
Capital requirements
Locally incorporated subsidiaries shall have the same minimum capital requirements
as domestic banks of the same category.
For foreign bank branches, they shall permanently assign capital of not less than the
U.S. dollar equivalent of P210,000,000.00 at the exchange rate on the date of
effectivity of this law.
The permanently assigned capital shall be inwardly remitted and converted into
Philippine currency.
Branches
A foreign bank shall be entitled to three (3) branches upon remittance of minimum
capital requirement.
A foreign bank may open three (3) additional branches in locations designated by the
Monetary Board by inwardly remitting and converting into Philippine currency as
permanently assigned capital the U.S. dollar equivalent of P35,000,000.00 per
additional branch at the exchange rate on the date of effectivity of this law.
Total number of branches for each new foreign bank entrant shall not exceed six (6).
The head office of foreign bank branches shall guarantee prompt payment of all
liabilities of its Philippine branches.
Equal treatment
Foreign banks authorized to operate under the law shall perform the same functions,
enjoy the same privileges, and be subject to the same limitations imposed upon a
Philippine bank of the same category.
These limits include, among others, the single borrowers limit and capital to risk asset
ratio as well as the capitalization required for expanded commercial banking activities
under the General Banking Act and other related laws of the Philippines.
39
Offshore banking
Offshore banking unit shall mean a branch, subsidiary or affiliate of a foreign banking
corporation which is duly authorized by the Central Bank to transact offshore banking
business in the Philippines.
Deposits
Deposits shall mean funds in foreign currencies which are accepted and held by an
offshore banking unit in the regular course of business, with the obligation to return
an equivalent amount to the owner thereof, with or without interest.
Only banks which are organized under any law other than those of the Republic of
the Philippines, their branches, subsidiaries or affiliates, shall be qualified to operate
offshore banking units in the Philippines.
In issuing such certificate, the Monetary Board shall take into consideration the
applicants:
1.
2.
3.
4.
5.
6.
The Central Bank is authorized to collect a fee of not less than US $20,000 upon
issuing any certificate of authority to operate and annually thereafter on the
anniversary date of such certificate.
Corporate undertaking
2.
the operations of its offshore banking unit shall be managed soundly and with
prudence;
3.
4.
it will provide and maintain in its offshore banking unit net office funds in the
minimum amount of US $ 1,000,000; and
5.
it will start operations of its offshore banking unit within 180 days from receipt
of its certificate of authority to operate such unit.
The transactions of offshore banking units with local commercial banks, including
branches of foreign banks that may be authorized by the Central Bank to transact
business with offshore banking units, shall likewise be subject to the same tax, except
net income from such transactions as may be specified by the Secretary of Finance,
upon recommendation of the Monetary Board, to be subject to the usual income tax
payable by banks.
Any income of non-residents from transactions with said offshore banking units shall
be exempt from any tax.
In the case of transaction with residents (other than other offshore banking units or
local commercial banks including local branches of foreign banks that may be
authorized by the Central Bank to transact business with offshore banking units),
interest income from loans granted to such residents shall be subject only to a ten
percent (10%) withholding tax as final tax.
The Usury Law, Uniform Currency Law, and PDIC law shall not apply to transactions
and/or deposits in offshore banking units in the Philippines.
The provisions of RA 1405 or the Law on Secrecy of Bank Deposits shall apply to
deposits in offshore banking units.
42
Any person, natural or juridical, may deposit with such Philippine banks in good
standing, as may upon application be designated by the Central Bank for the purpose,
foreign currencies which are acceptable as part of the international reserve.
Exception
The banks designated by the Central Bank shall have the authority:
1.
2.
3.
4.
5.
Depositary banks shall maintain at all times a one hundred percent (100%) foreign
currency cover for their liabilities, except as the Monetary Board may otherwise
prescribe or allow.
At least fifteen percent (15%) of such cover shall be in the form of foreign currency
deposit with the Central Bank and the balance in the form of foreign currency loans or
securities, which loans or securities shall be of short term maturities and readily
marketable.
Foreign currency cover shall be in the same currency as that of the corresponding
foreign currency deposit liability, unless the Monetary Board may otherwise prescribe
or allow.
43
The Central Bank may pay interest on the foreign currency deposit, and if requested,
shall exchange the foreign currency notes and coins into foreign currency instruments
drawn on its depositary banks.
Central Bank may exempt from the 15% foreign currency cover in the form of foreign
currency deposit with the Central Bank in cases of depository banks which, on
account of their net worth, resources, past performance, or other pertinent criteria,
have been qualified by the Monetary Board to function under an expanded foreign
currency deposit system.
Said banks may also be exempt from the limitations on the maturity periods for loans
and securities subject to prior approval by the Central Bank.
Tax exemption
All foreign currency deposits made under RA 6426, as amended, as well as foreign
currency deposits authorized under PD 1304, including interest and all other income
or earnings of such deposits, are hereby exempted from any and all taxes whatsoever
irrespective of whether or not these deposits are made by residents or non-residents
so long as the deposits are eligible or allowed under the said laws and, in the case of
non-residents, irrespective of whether or not they are engaged in trade or business in
the Philippines.
Unlike the Law on Secrecy of Banks Deposits Act, there is only one exception for
foreign currency deposits and that is when there is a written permission from the
depositor.
other order or process of any court, legislative body, government agency, or any
administrative body whatsoever.
45
Further, the SC said: In fine, the application of the law depends on the extent of its justice.
Eventually, if we rule that the questioned Section 113 of Central Bank Circular No. 960 which exempts
from attachment, garnishment, or any other order or process of any court, legislative body,
government agency or any administrative body whatsoever, is applicable to a foreign transient,
injustice would result especially to a citizen aggrieved by a foreign guest like accused Greg Bartelli.
This would negate Article 10 of the New Civil Code which provides that in case of doubt in the
interpretation or application of laws, it is presumed that the lawmaking body intended right and
justice to prevail.
The deposits under RA 6426 shall be insured under the provisions of RA 3591, as
amended, or the Charter of the Philippine Deposit Insurance Corporation.
Insurance payment shall be in the same currency in which the insured deposits are
denominated.
46
Creation of PDIC
There is hereby created a Philippine Deposit Insurance System which shall insure the
deposits of all banks which are entitled to the benefits of insurance under RA 3591.
Deposit
The term deposit means the unpaid balance of money or its equivalent received by
a bank in the usual course of business and for which it has given or is obliged to give
credit to a commercial, checking, savings, time or thrift account or which is evidenced
by a passbook, check and/or certificate of deposit, printed or issue in accordance
with Central Bank rules and regulations and other applicable laws, together with such
other obligations of the bank which, consistent with banking usages and practices,
the Board of Directors shall determine and prescribe by regulations to be deposit
liabilities of the bank.
Provided that any obligation of a bank which is payable at the office of the bank
located outside of the Philippines shall not be a deposit for any of the purposes of
this Act or included as part of the total deposits or of insured deposits.
Provided further, that, subject to the approval of the Board of Directors, any insured
bank which is incorporated under the laws of the Philippines which maintains a
branch outside the Philippines may elect to include for insurance its deposit
obligations payable only at such branch.
Insured deposit
The term insured deposit means the net amount due to any depositor for deposits
in an insured bank (after deducting offsets) less any part thereof which is in excess of
one hundred thousand pesos (P100,000). Therefore, the maximum amount of
insured deposit for every depositor is only P100,000.
has all three types of accounts, he can only recover up to P100,000. He is considered as one
depositor.
In determining such amount due to any depositor, there shall be added together
47
all deposits in the bank maintained in the same capacity and the same right for
his benefit either in his own name or in the name of others. Banks and its
branches considered as one unit.
Deposit insurance coverage and payment for insured deposits maintained in foreign
currencies in a closed insured bank shall be determined in accordance with the
following rules:
1.
The deposit in foreign currency shall be converted into its equivalent amount
in Philippine pesos at the interbank rate obtaining on the date the bank was
closed or on insolvency, and the insurance coverage shall extend to such
computed amount, but in no case to exceed P40,000 for each depositor; and
2.
Trust funds
The term means funds held by an insured bank in a fiduciary capacity and include,
without being limited to, funds as trustee, executor, administrator, guardian or
agent.
The deposit liabilities of any bank or banking institution, which is engaged in the
business of receiving deposits, shall be insured with the PDIC.
Coverage is compulsory.
Should any bank fail or refuse to pay any assessment required to be paid by such
bank, and should the bank not correct such failure or refusal within 30 days after
written notice has been given by the PDIC, the insured status of such bank shall be
terminated by the Board of Directors.
The bank shall give written notice of such termination to each of the depositors
and the PDIC shall publish the notice of the termination of the insured status of
the bank.
After the termination of the insured status of the bank, deposits of each depositor
in the bank, less all subsequent withdrawals from any deposits of such depositor,
shall continue to be insured for a period of 90 days.
These refer to any action or lack of action which is contrary to generally accepted
standards of prudent operation, the possible consequences of which, if continued,
would result in abnormal risk of loss or damage to a bank, depositors and its
shareholders or even the depletion of the Insurance Fund administered by the PDIC.
A cease and desist order shall refer to the Order issued by PDIC, through its Board of
Directors, to a member insured bank, or its directors or agents to correct (a) unsafe
or unsound practices in conducting the business of the bank, (b) violations of any law
or regulation to which the insured bank is subject, or (c) violations of the provisions
of RA 3591, as amended or any order, rule or instruction issued by the PDIC or any
written condition imposed by PDIC in connection with any transaction with or grant
by the PDIC.
The object of the CDO is to protect depositors and the PDIC against existing or
potential risk exposures from said practices or violations.
Proof of claims may be required by PDIC before payment. If it is not satisfied, PDIC
may require the final determination of a court of competent jurisdiction before
paying such claim.
Depositor shall retain his claim against the bank for any uninsured portion of his
deposit.
If, after the PDIC shall have given at least three months notice to the depositor by
mailing a copy thereof to his last known address appearing on the records of the
closed bank, the depositor in the closed bank shall fail to file a claim for his insured
deposit from the PDIC within eighteen (18) months after the Monetary Board shall
have ordered the closure of said bank, all rights of the depositor against the PDIC
with respect to the insured deposit shall be barred, and all rights of the depositor
against the closed bank and its shareholders or the receivership estate to which the
PDIC may have become subrogated, shall thereupon revert to the depositor.
Provided, that the claimant shall enforce his duly filed claim against the PDIC within
one year after the eighteen-month period heretofore mentioned.
Subrogation
The PDIC, upon payment, shall be subrogated to all rights of the depositor against
the closed bank to the extent of such payment.
The PDIC shall be discharged from its obligation to a depositor upon payment of an
insured deposit by itself or upon payment of a transferred deposit to any person by
the new bank or by an insured bank in which a transferred deposit has been made
available.
Receiver
51
Declaration of policy
It is hereby declared to be the policy of the State to protect its citizens from a lack of
awareness of the true cost of credit to the user by assuring a full disclosure of such
cost with a view of preventing the uninformed use of credit to the detriment of the
national economy.
Finance charge
Finance charge includes interest, fees, service charges discounts, and such other
charges incident to the extension of credit.
Credit
Credit means any loan, mortgage, deed of trust, advance, or discount; any
conditional sales contract; any contract to sell, or sale or contract of sale of property
or services, either for present or future delivery, under which part or all of the price is
payable subsequent to the making of such sale or contract; any rental purchase
contract; any contract or arrangement for the hire, bailment, or leasing of property;
any option, demand, lien, pledge of other claim against, or for the delivery of,
property or money; any purchase, or other acquisition of, or any credit upon the
security of, any obligation or claim arising out of any of the foregoing; and any
transaction or series of transactions having a similar purpose or effect.
Creditor
Any creditor shall furnish to each person to whom credit is extended, prior to the
consummation of transaction, a clear statement in writing setting forth the following
information:
1.
the cash price or delivered price of the property or service to be
acquired;
52
2.
3.
4.
5.
6.
7.
Any creditor who, in connection with any credit transaction, fails to disclose to any
person any information in violation of Republic Act No. 3765 or any regulation
issued pursuant thereto shall be liable to such person in the amount of P100 or in
an amount equal to twice the finance charge required by such creditor in
connection with such transaction, whichever is greater, except that such liability
shall not exceed P2000 on any credit transaction.
Action to recover such penalty may be brought by such person within one year
from the date of occurrence of the violation in any court of competent jurisdiction.
In any such action in which any person is entitled to a recovery, the creditor shall be
liable for reasonable attorneys fees and court costs as determined by the court.
Any person who willfully violates any provision of this Act or any regulation extended
thereto shall be fined by not less than P1000 nor more than P5000, or imprisonment
for not less than six (6) months nor more than one year, or both.
53
54
company which is subrogated in the place of the seller as creditor of the installment buyer.
The transaction between IHMI and Medina did not involve any discounting, factoring or
assignment of IHMIs credit against Medina to a finance company. The transaction was bilateral, not
trilateral. No financing company stepped into the shoes of IHMI as assignee or purchaser of IHMIs
credit against Medina. Medina himself, not a financing company, paid IHMI for the truck engines.
Medina made his installment payments or amortization to IHMI and not to a financing company.
Since IHMIs business of selling trucks in installment is not the business of a financing
company under Republic Act No. 5980, it did not need SEC authorization to engage in it.
55
General rule
All deposits of whatever nature with banks or banking institutions in the Philippines
including investments in bonds issued by the Government of the Philippines, its
political subdivisions and its instrumentalities, are hereby considered as of an
absolutely confidential nature and may not be examined, inquired or looked into by
any person, government official, bureau or office. [Section 2, RA 1405]
It shall be unlawful for any official or employee of a bank to disclose to any person,
other than those mentioned in Section 2 hereof, any information concerning said
deposits. [Section 3, RA 1405]
Exceptions
1.
2.
3.
In cases of impeachment;
Upon order of a competent court in cases of bribery or dereliction of duty of public
officials;
In cases where the money deposited or invested is the subject matter of the litigation;
and
Cases of unexplained wealth under Republic Act No. 3019 or the Anti-Graft and
Corrupt Practices Act.
4.
5.
Any violation of this law will subject offender upon conviction to an imprisonment of
not more than five (5) years or a fine of not more than twenty thousand pesos
(P20,000) or both, in the discretion of the court. [Section 5, RA 1405]
56
PNB then filed an action for declaratory judgment in the CFI of Manila which ruled that
Section 8 of the Anti-Graft and Corrupt Practices Act clearly intended to provide an additional ground
for the examination of bank deposits. Hence, this appeal.
ISSUE: Whether or not a bank can be compelled to disclose the records of accounts of a depositor
who is under investigation for unexplained wealth?
HELD: Yes. Republic Act No. 3019 provided another exception to Section 2 of Republic Act No. 1405.
RATIO: No reconciliation is possible between Republic Act No. 1405 and Republic Act No. 3019 as the
two laws are so repugnant to each other. Thus, while Section 2 of Republic Act No. 1405 provides that
bank deposits are absolutely confidential and, therefore, may not be examined, inquired or looked
into, except in those cases enumerated therein, Section 8 of Republic Act No. 3019 (Anti-graft law)
directs in mandatory terms that bank deposits shall be taken into consideration in the enforcement of
57
this section, notwithstanding any provision of law to the contrary. The only conclusion possible is that
Section 8 of the Anti-Graft Law is intended to amend Section 2 of Republic Act No. 1405 by providing
an additional exception to the rule against the disclosure of bank deposits.
With regard to the claim that disclosure would be contrary to the policy making bank deposits
confidential, it is enough to point out that while Section 2 of Republic Act No. 1405 declares bank
deposits to be absolutely confidential, it nevertheless allows such disclosure in the following
instances: (1) Upon written permission of the depositor; (2) In cases 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 is the subject of the litigation.
Cases of unexplained wealth are similar to cases of bribery or dereliction of duty and no
reason is seen why these two classes of cases cannot be excepted from the rule making bank deposits
confidential. The policy as to one cannot be different from the policy as to the other. This policy
expresses the notion that a public office is a public trust and any person who enters upon its discharge
does so with the full knowledge that his life, so far as relevant to his duty, is open to public scrutiny.
subpoena duces tecum of bank records of transactions by or in the names of the wife, children and
friends of a special agent of the Bureau of Customs accused before the Tanodbayan of having
allegedly acquired property manifestly out of proportion to his salary and other lawful income in
violation of RA 3019?
The Supreme Court ruled in the negative.
In PNB v. Gancayco, we ruled that: while Section 2 of Republic Act No. 1405 provides that
bank deposits are absolutely confidential and, therefore, may not be examined, inquired or looked
into, except in those cases enumerated therein, Section 8 of Republic Act No. 3019 (Anti-graft law)
58
directs in mandatory terms that bank deposits shall be taken into consideration in the enforcement of
this section, notwithstanding any provision of law to the contrary. The only conclusion possible is that
Section 8 of the Anti-Graft Law is intended to amend Section 2 of Republic Act No. 1405 by providing
an additional exception to the rule against the disclosure of bank deposits.
The inquiry into illegally acquired property - or property not legitimately acquired - extends to
cases where such property is concealed by being held by or recorded in the name of other persons.
This proposition is made clear by RA 3019 which quite categorically states that the term legitimately
acquired property of a public officer or employee shall not include property unlawfully acquired by
the respondent, but its ownership is concealed by its being recorded in the name of, of held by,
respondents spouse, ascendants, descendants, relatives or any other persons.
To sustain the petitioners theory, and restrict the inquiry only to property held by or in the
name of the government official or employee, or his spouse and unmarried children is unwarranted in
the light of the provisions of the statutes in question, and would make available to persons in
government who illegally acquire property an easy and fool-proof means of evading investigation and
prosecution; all they have to do would be to simply place the property in the possession or name of
persons other than their spouse and unmarried children. This is an absurdity that we will not ascribe to
the lawmakers.
Philippine Commercial & Industrial Bank, et. al. v. Court of Appeals, et. al.
GR no. 84526, 28 January 1991
A group of laborers obtained a favorable judgment against the Marinduque Mining and
Industrial Corporation for the payment of backwages amounting to P205,853 before the National
Labor Relations Commission. A writ of execution was issued and the Deputy Sheriff served the writ, but
it was unsatisfied. The sheriff prepared on his own a Notice of Garnishment addressed to six banks in
Bacolod City, including petitioner PCIB, directing the bank concerned to issue a check in satisfaction of
the judgment.
While the in house lawyer of the Corporation warned the PCIB to withhold any release of its
deposit with the bank, the bank issued a managers check in the amount of P37,466 which was the
exact balance of the private respondents account as of that day. The said check was also encashed by
the sheriff the next day.
Marinduque Mining thus filed a complaint before the RTC of Manila against PCIB and the
deputy sheriff, alleging that its current deposit with the petitioner bank was levied upon, garnished,
and with undue haste unlawfully allowed to be withdrawn, and notwithstanding the alleged
unauthorized disclosure of the said current deposit and unlawful release thereof, the latter have failed
and refused to restore the amount of P37,466 to the formers account despite repeated demands.
Trial court rendered judgment in favor of Marinduque Mining Corporation. On appeal, the
Court of Appeals initially reversed the trial courts order but later affirmed it. Thus, this petition to the
SC.
The issue is whether or not the petitioners violated RA 1405, otherwise known as the Secrecy
of Bank Deposits Act, when they allowed the sheriff to garnish the deposit of Marinduque Mining
59
It is clear from the discussion of the conference committee report on Senate Bill No.
351 and House Bill No. 3977, which later became Republic Act No. 1405, that the
prohibition against examination of or inquiry into a bank deposit under Republic Act
No. 1405 does not preclude its being garnished to insure satisfaction of a judgment.
Indeed, there is no real inquiry in such a case, and if existence of the deposit is
disclosed, the disclosure is purely incidental to the execution process. It is hard to
conceive that it was ever within the intention of Congress to enable debtors to evade
payment of their just debts, even if ordered by the Court, through the expedient of
converting their assets into cash and depositing the same in a bank.
Since there is no evidence that the petitioners themselves divulged the information that the
private respondent had an account with the petitioner bank and it is undisputed that the said
account was properly the object of the notice of garnishment and writ of execution carried out
by the deputy sheriff, a duly authorized officer of the court, we cannot therefore hold the
petitioners liable under RA 1405.
60
an action to recover the purchase price of said real property. SC ruled that the filing of a recovery suit
in the US does not preclude the filing of an action in the Philippines for the recovery of the purchase
price.
With regard to our subject matter, Erlinda Baylosis of the Philippine Veterans Bank and
Pilologo Red, Jr. of Hongkong and Shanghai Banking Corporation were required to give testimonies
with regard to the deposits and checks issued by the private respondents Javier, et. al.. These
testimonies were questioned for being immaterial and irrelevant as well as covered by RA 1405 on
confidentiality.
SC said: Private respondents protestations that to allow the questioned testimonies to remain
on record would be in violation of the provisions of RA 1405 on the secrecy of bank deposits is
unfounded. Section 2 of said law allows the disclosure of bank deposits in cases where the money
deposited is the subject matter of the litigation. Inasmuch as the civil case is aimed at recovering the
amount converted by the Javiers for their own benefit, necessarily, an inquiry into the whereabouts of
the illegally acquired amount extends to whatever is concealed by being held or recorded in the name
of persons other than the one responsible for the illegal acquisition.
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Investment houses
Under its Rules and Regulations, an investment house is defined an any enterprise
which engages or purports to engage, whether regularly or on an isolated basis, in the
underwriting of securities of another person or enterprise, including securities of the
Government and its instrumentalities.
Underwriting
Underwriting is the act or process of guaranteeing the distribution and sale within the
Philippines of securities of any kind issued by another corporation.
The distribution and sale may be on public or private placement basis.
Private placement
Public placement
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At least forty percent (40%) of the voting stock of any Investment House shall be owned
by citizens of the Philippines.
In approving foreign equity applications in Investment Houses, the SEC shall approve
such applications only if the same or similar rights are enjoyed by Philippine nationals in
the applicants country.
Foreign nationals may become members of the board of directors to the extent of the
foreign participation in the equity of said enterprise.
Capital requirements
In the case of newly-organized Investment Houses, the minimum paid-in capital shall be
three hundred million pesos (P300,000,000).
The Monetary Board may prescribe a higher minimum capitalization in order to promote
and ensure the stability of the Philippine capital market and the competitiveness of the
investment house industry in line with the national economic goals.
The Securities and Exchange Commission shall not register the articles of incorporation
of any Investment House, or any amendment thereto, unless it is satisfied from the
evidence submitted to it:
a.
That all the requirements of the PD 129 and of existing laws or regulations to
engage in the business have been complied with;
b.
That the proposed enterprise will not be in conflict with public interest and
economic growth; and
c.
Prohibition
2.
3.
4.
5.
6.
7.
8.
9.
Act as trustee of a trust fund or trust property, subject to the provisions of the
General Banking Act.
Investment Houses shall be subject to such regulations of the Central Bank on non-bank
financial intermediaries as may be promulgated.
The regulations which may include, but need not be limited to a) minimum size of fund
acceptance or receipt, b) methods of marketing and distribution, c) terms of placement
and maturities, and d) uses of funds may be modified by the Monetary Board insofar as
they apply to Investment Houses.
Quasi-banking powers
The Monetary Board may, at its discretion, determine whether Investment Houses may
be permitted to perform quasi-banking functions.
Whenever the Monetary Board authorizes an Investment House to engage in quasibanking functions, it may subject said Investment House to further regulations, which
may include but need not necessarily be limited to a) liquidity reserve requirements; b)
capital-to-risk assets ratios; c) interest rate ceilings; and d) such other constraints as the
Board may deem necessary.
Dealer or broker
An Investment House may engage in the business of a dealer or a broker under the
Securities Act without obtaining a separate license for the purpose.
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Investment company
Any issuer which is or holds itself out as being engaged primarily in the business of
investing, reinvesting, or trading in securities.
Investment companies are financial institutions that raise funds by selling their own
issues of securities to individual investors. The funds obtained will be used to invest in
securities of other enterprises.
The objective of an investment company is to provide individual investors with safe and
profitable use of their savings and to relieve them of the burden of direct responsibility
of managing their own savings.
Offer for sale, sell, or deliver after sale, within the Philippines, any security or any interest
in any security, whether the issuer of such security is the investment company or another
person.
2.
Security
Any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of
interest or participation in any profit-sharing agreement, collateral trust certificate, preorganization certificate or subscription, investment contract, voting trust certificate,
certificate of deposit for a security, fractional undivided interest in oil, gas, or other
mineral rights, or, in general, any interest or instrument commonly known as a security
or any certificate of interest or participation in, temporary or interim certificate for,
receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the
foregoing. (Section 3(bb), RA 2629).
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Note that there is an expanded definition under the Revised Securities Act.
Form
All shares of its capital stock shall be common and voting shares.
Capitalization
No public offering may be made unless the investment company has a paid up capital of
at least P500,000 (Section 13(1), RA 2629). However, Rule 2.1 provides that the minimum
subscribed and paid in capital should be at least 50 million.
Declaration of policy
It is hereby declared to be the policy of the State to regulate the activities of financing
and leasing companies:
1.
2.
3.
As such, they may be in a better position to extend efficient service in a fair manner to
the general public and to industry, commerce and agriculture and thereby more fully
contribute to the sound development of the national economy.
Financing companies
Financing companies are corporations, except banks, investment houses, savings and
loans associations, insurance companies, cooperatives, and other financial institutions
organized or operating under special laws, which are primarily organized for the purpose
of extending credit facilities to consumers and to industrial, commercial, or agricultural
enterprises.
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3.
4.
Financial leasing
During the two-year period, the lessee has the right to hold and use the leased property
with the right to expense the lease rentals paid to the lessor. Lessee also bears the cost
of repairs, maintenance, insurance and preservation of the leased property.
However, lessee has no obligation or option to purchase the leased property from the
owner-lessor at the end of the lease contract.
Liability of lessors
Financing companies shall not be liable for loss, damage or injury caused by a motor
vehicle, aircraft, vessel, equipment, machinery or other property leased to a third person
or entity except where the motor vehicle, aircraft, vessel, equipment, machinery or other
property is operated by the financing company, its employees or agents at the time of
the loss, damage or injury.
Financing companies shall have the following powers, in addition to those granted by
this Act and by other laws:
1.
2.
3.
4.
5.
Engage in quasi-banking and money market operations with the prior approval
of the Bangko Sentral.
Engage in trust operations subject to the provisions of the General Banking Act
upon prior approval of the Bangko Sentral.
Issue bonds and other capital instruments subject to pertinent rules and
regulations of the Bangko Sentral.
Rediscount their paper with governmental financial institutions subject to
relevant laws, rules and regulations.
Participate in special loan or credit programs sponsored by or made available
through governmental financial institutions.
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6.
Provide foreign currency loans and leases to enterprises who earn foreign
currency by exports or other means, subject to existing laws and rules and
regulations of the Bangko Sentral.
Financing companies shall be organized in the form of stock corporations at least forty
percent (40%) of the voting stock of which is owned by citizens of the Philippines.
They shall have paid-up capital of not less than ten million pesos (P10,000,000) in case
the financing company is located in Metro Manila and first class cities, five million pesos
(P5,000,000) in other classes of cities, and two million five hundred thousand pesos
(P2,500,000) in municipalities.
No foreign national may be allowed to own stock in any financing company unless the
country of which he is a national accords the same reciprocal rights to Filipinos in the
ownership of financing companies or their counterpart entities in such country.
Aside from requiring compliance with the provisions of the Corporation Code, the SEC
shall not register the articles of incorporation of any financing company unless its office
is satisfied on the evidence submitted to it, that:
1. All the requirements of existing laws to engage in the business for which the applicant
is proposed to be incorporated or organized have been complied with;
2. The organization, direction and administration, as well as the integrity and
responsibility of the organizers and administrators reasonably assure the protection of
the interest of the general public; and
3. All the requirements of RA 5980 have been complied with.
The SEC is empowered to enforce the provisions of RA 5980, as amended, and issue
implementing regulations except insofar as the Bangko Sentral may have supervisory
authority for financing companies licensed to perform quasi-banking functions, and
insofar as the Monetary Board has authority to prescribe financing company rates and
charges.
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Prohibited acts
of not more than six(6)months or both, at the discretion of the court, on "persons, associations,
partnerships or corporations, including managing officers thereof," upon the following unlawful
acts:
1.
Engaging in the business of finance companies without authority from the SEC
through advertisement in whatever from, or through other representations
without authority.
2.
Using trade or firm name containing the words "financing company" or "leasing
company" or "finance and leasing company" or "finance and investment
company" or any other designation that would give the public the impression
that it is engaged in the business of a financing company or leasing company
without authority.
3.
4.
Any officer, employee, or agent of a financing company who shall knowingly and
willingly make any statement in any application, report or document required to
be filed under the Act, which is false or misleading with respect to any material
fact, or overvalue or aid in overvaluing any securities for the purpose of
influencing in any way the action of the company on any loan, or discounting.
5.
Any officer, employee or examiner of the SEC directly charged with the
implementation of the Act who shall commit, connive, aid or assist in the
commission of acts enumerated above.
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PAWNSHOPS
Presidential Decree 114
in relation to CB Circular No. 374
Pawnshop
stable basis:
1.
2.
3.
Registration
a.
b.
c.
d.
2.
3.
4.
Citizenship
a.
b.
c.
d.
Owner who has other businesses not directly related or incidental to his pawnshop
business must keep the latter separate from his other businesses.
Maintain adequate security i.e. fire and burglar proof safe where pawns/records are kept.
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Conduct of business
1.
2.
3.
4.
5.
6.
7.
8.
9.
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TRUST CORPORATIONS
Chapter VII
General Banking Act
Trust Corporation
A trust corporation is any corporation formed or organized for the purpose of acting as
trustee, administering any trust or holding property in trust or on deposit for the use,
benefit or behooved of others.
Standard of care
A trust company or any bank authorized to engaged in the business of a trust company
shall administer the funds or property under its custody with the skill, care, prudence and
diligence necessary under the circumstances then prevailing that a prudent man, acting
under like capacity and familiar with such matters, would exercise in the conduct of an
enterprise of a like character and with similar aims.
No trust company or bank engaged in the business of a trust company shall, for the
account of the trustor or the beneficiary of the trust, purchase or acquire property from,
or sell, transfer, assign or lend money or property to, or purchase debt instruments of
any of the departments, directors, officers, stockholders, or employees of the trust
company or bank, or relatives within the first degree of consanguinity or affinity, or the
related interests, of such director, officers, and stockholders, unless the transaction is
specifically authorized by the trustor and the relationship of the trustee and the other
party involved in the transaction is fully disclosed to the trustor or beneficiary of the trust
prior to the transaction.
2.
To act under the order or appointment of any court of record as guardian, receiver,
trustee or depository of the estate of any minor, insane person, idiot, habitual drunkard,
or other incompetent or irresponsible person, and as receiver and depository of any
moneys paid into court by parties to any legal proceedings and of property of any kind
which may be brought under the jurisdiction of the court by property legal proceedings.
3.
To act as the executor of any last will or testament when it is named in the last will and
testament as the executor thereof.
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4.
5.
To accept and execute any legal trust confided to it by any court of record or by any
person or corporation for the holding, management, and administration of any estate,
real or personal, and the rents, issues, and profits thereof.
6.
To establish and manage common trust funds, subject to such rules and regulations as
may be prescribed by the Monetary Board.
A trust company may, with the approval of the Monetary Board, do a commercial
banking business, but such business must be kept separate and distinct from its trust
business.
Any banking corporation may, with the approval of the Monetary Board, be authorized
to engage in the business of a trust company, but it shall be subject to the provisions on
trust operations.
Except as may otherwise be provided in this Act, no bond or other security shall be
required from any trust company for the faithful performance of its duties as trustee,
executor, administrator, guardian, receiver or depositary.
However, the court officer appointing such company as trustee, executor, administrator,
guardian, receiver or depositary may, upon proper application, showing special cause
therefor, require any corporation which shall seek to be or shall have been so appointed
to give adequate security for the protection of the funds or property confided to the
corporation and, upon failure of such corporation to give the security required, its
appointment as trustee, executor, administrator, guardian, receiver or depositary shall be
revoked.
Section 65, however, provides: As security for the faithful performance of its trust duties,
every trust company, before transacting trust business, shall carry on deposit with the
Central Bank, cash or securities approved by the Monetary Board in an amount equal to
not less than two hundred and fifty thousand pesos (P250,000). This may be increased by
the Central Bank.
Paid in capital and surplus of the company must be at least equal to the amount
required to be deposited with the central Bank.
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All moneys, properties, or securities received by any trust company shall be kept
separate and distinct from all other funds, properties and assets of its general business.
The accounts of all such moneys, properties or securities shall likewise be kept separate
and distinct from the accounts of its general business.
The capital stock and funds of a trust company may be loaned or otherwise invested as
its by-laws prescribe; if it does a commercial banking business in addition to its trust
business, the investment of its funds other than trust funds shall be governed by the
relevant provisions of the General Banking Act.
profits accruing since the last preceding dividend until the surplus shall amount to 20% of its
authorized capital stock and no part of the surplus shall at any time be paid out in dividends,
but losses accruing in the course of its business may be charged against the surplus.
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