The Bangko Sentral ng Pilipinas

Republic Act No. 7653

Monetary Board
Exercises the powers and functions of the BSP.
Composed of 7 members appointed by the President for a term of six years.
The Governor, as Chairman;
A member of the Cabinet designated by the President of the Philippines; and
5 members who shall come from the private sector, all of whom shall serve full-time.
No member shall be reappointed more than once.

Qualifications of Members
Must be a natural born citizen of the Philippines;
At least 35 years of age, with the exception of the Governor, who should be at least 40
years of age;
Of good moral character, of unquestionable integrity, of known probity and
patriotism; and
With recognized competence in social and economic disciplines.

Powers and Functions of Governor

Shall act as the head of the department.
He shall be the BSP Chief Executive Officer.
He shall be the principal representative of the Monetary Board and of the BSP.
Disqualification from being director, officer, employee, consultant, lawyer, agent or
stockholder of any bank, quasi-bank or any other institution which is subject to BSP
supervision, in which case such member shall resign from, and divest himself of any
and all interests in such institution before assumption of office.

Major Functions of MB
Issue rules and regulations ;
Direct the management, operations, and administration of Bangko Sentral, organize its
personnel;
Establish a human resource management system;
Adopt an annual budget for and authorize such expenditures by Bangko Sentral ;and
Indemnify its members and other officials of Bangko Sentral.

Disqualifications and Inhibitions on the Governor and Board Members

Members from the private sectors shall not hold any other public office or public
employment during their tenure.
No direct connection with any multilateral banking or financial institution or have any
substantial interest in any private bank in the Philippines 1 year prior to his
appointment.
Nor within 2 years after the expiration of his term except when he serves as an
official representative of the Government in such institution.

Professional activities shall be limited only to those pertaining directly to their BSP
positions ,with the exception of positions in eleemosynary, civic, cultural or religious
organizations or whenever, by designation of the President, the Governor or full-time
member is tasked to represent the interest of the Government.
Disclosure of interest to the MB and shall retire from the meeting when the matter
is taken up.

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Removal of Governor and Board Members
Subsequent disqualification;
Physical or mental incapacity that he cannot properly discharge his duties and
responsibilities and such incapacity has lasted for more than 6 months;
Guilty of acts or operations which are of fraudulent or illegal character or which are
manifestly opposed to the aims and interests of BSP; or
No longer possessing qualifications

Responsibility/Liabilities of BSP Officers and Employees

Willful Violation/Negligence/Acts of Malfeasance and Misfeasance/Failure to exercise

extraordinary diligence in the performance of duties.
Disclosure of any information of a confidential nature unless the disclosures is in
connection with the performance of official functions with BSP, or with prior
authorization of the MB or the Governor; or
Use of such information for personal gain or to the detriment of the
Government, BSP or third parties.

Examination of Banking Institutions

Conducted by the supervising and examining department head or his deputy.
Once in every 12 months and at such other times as the MB by an affirmative vote of 5
members may deem expedient.
Interval: at least 12 months between examinations.

How The BSP Handles Banks in Distress

Conservatorship
Receivership
Liquidation
Voluntary
Involuntary

Conservatorship: Basis and Grounds

Basis: Report submitted by the appropriate supervising or examining department.
Grounds/MB finds that the bank is in a state:
1. Continuing inability, or
2. Unwillingness to maintain a condition of liquidity deemed adequate to protect the
interest of depositors and creditors.

Conservators: Powers
1. Take charge of the assets, liabilities, and management of the bank,
2. Reorganize the Management,
3. Collect all monies and debts due said institution, and
4. Exercise all powers necessary to restore its viability. The conservator shall report.
Report and be responsible to the MB and shall have the power to overrule or revoke
the actions of the previous management and board of directors of banks and
quasi-bank.

First Philippine International Bank v. Court of Appeals

Cannot Impair Obligations of Contracts:
Cannot extend to the post-facto repudiation of perfected transactions.
Only takes the place of the banks board of directors.

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Conservators
Not a Precondition to the designation of receiver.
Appointment: Vested with the MB
Qualification: competent and knowledgeable in bank operations and management.
Period: Shall not exceed one year.
Remuneration: fixed by the Monetary Board in an amount not to exceed two-thirds (2/3) of
the salary of the president of the institution in one (1) year, payable in twelve (12) equal
monthly payments.
Provided, That, if at any time within one-year period, the conservatorship is terminated
on the ground that the institution can operate on its own: receive the balance of the
remuneration which he would have received up to the end of the year;
other grounds: not entitled to remaining balance.

conservator connected with the BSP: not entitled to receive any remuneration or emolument
from BSP during conservatorship.
The expenses: borne by the bank or quasi-bank concerned.

Conservatorship: Termination
1. The institution can continue to operate on its own and conservatorship is no longer
necessary.
2. MB decides based on the report of the conservator or its own findings that the
continuance in business of the institution would involve probable loss to its depositors and
creditors, in which case the provisions on receivership and liquidation shall apply.

Conservatorship
Effect: Bank cannot be compelled to pay same bonuses to employees Producers Bank
of the Philippines v. NLRC, 355 SCRA 489 (2001)
Petitioner was not only experiencing a decline in its profits, but was reeling from
tremendous losses triggered by a bank-run which began in 1983. In such a depressed
financial condition, petitioner cannot be legally compelled to continue paying the same
amount of bonuses to its employees. Thus, the conservator was justified in reducing the
mid-year and Christmas bonuses of petitioners employees.
Order: Final and Executory
Except: Petition for certiorari
Ground: action taken was in excess of jurisdiction or with such grave abuse of discretion as
to amount to lack or excess of jurisdiction.
Who can File?: Stockholders of record representing the majority of the capital stock.
When?: Within10 days from receipt of the order.

Voluntary Liquidation
How: Written notice sent to the MB before such liquidation is made.
Through its board of directors, by a trustee appointed by the bank or by a receiver
appointed to the bank.
No voluntary liquidation without prior approval of the Monetary Board accompanied
by a liquidation plan.

Bank Closure
Monetary Board of the BSP
Forbids the bank from doing business
Places the bank under receivership
Basis for closing the bank:
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 Section 30, R.A. 7653 (The New Central Bank Act)
Section 69, R.A. 8791 (The General Banking Law of 2000)
Governing Law In Re: Petition for Assistance in the Liquidation of the Rural
Bank of Bokod (Benguet), Inc., PDIC v. Bureau of Internal Revenue, 511 SCRA
123 (2006)

Receivership
How: MB, summarily and without need of prior hearing forbid an institution from
doing business in the Philippines.
PDIC- Banks
Any person with recognized competence in banking and finance- quasi bank
Basis: Report of the head of the supervising or examining department.

GROUNDS:
1. Unable to pay its liabilities,
2. Insufficient realizable assets,
3. Cannot continue business without involving probable losses to its depositors or
creditors,
4. Violated a cease and desist order, and
5. Bank holiday, or suspends the payment of its deposit liabilities continuously for more
than thirty (30) days.
Banco Filipino Savings and Mortgage Bank v. Monetary Board
Rural Bank of San Miguel, Inc. v. Monetary Board, Bangko Sentral ng Pilipinas

DUTIES:
1. Receiver shall gather and take charge of all the assets and liabilities of the
institution,
2. Administer the same for the benefit of its creditors, and
3. Exercise the general powers of a receiver under the ROC but shall not pay or
commit acts that will involve transfer or disposition of any assets of the institution except
administrative expenditures.
Larrobis, Jr. v. Philippine Veterans Bank, 440 SCRA 34 (2004)

Receivership
Period: Not later than 90 days determine whether the institution may be rehabilitated or
not.
Approval: Determination for the resumption of business is subject to the prior approval of
the Monetary Board.
Cannot be Rehabilitated:
MB notify in writing the board of directors of its findings and direct the receiver to proceed
with the liquidation of the institution.

Close Now-Hear Later Doctrine Central Bank of the Philippines v. Court of

Appeals, 220 SCRA 536 (1993)
This "close now and hear later" scheme is grounded on practical and legal considerations to
prevent unwarranted dissipation of the bank's assets and as a valid exercise of police power
to protect the depositors, creditors, stockholders and the general public.

Close Now-Hear Later Doctrine Rural Bank of Buhi v. Court of Appeals, 162 SCRA
288 (1988)

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 Due process does not necessarily require a prior hearing; a hearing or an opportunity to be
heard may be subsequent to the closure. One can just imagine the dire consequences of a
prior hearing: bank runs would be the order of the day, resulting in panic and hysteria. In
the process, fortunes may be wiped out and disillusionment will run the gamut of the entire
banking community.

Process Flow: Closure-Liquidation

BSP BANK CLOSURE

PDIC RECEIVERSHIP

BSP CAN BE
YES
PDIC REHABILITATED?
REHABILITATION
NO
PDIC
Liquidation LIQUIDATION
Court
Process Flow: Liquidation

Notify in writing the BOD of its findings and direct receiver to

liquidate.

File ex-parte with RTC a petition for assistance in the liquidation pursuant to a
liquidation plan.

Upon motion of the bank, adjudicate disputed claims against the bank, assist in the
enforcement of individual liabilities of the stockholders, directors and officers, and decide on other issues
relevant to the liquidation.

- Convert assets of bank to money to pay debts in accordance with the rules on
concurrence and preference of credits under the CC.

- Institute actions necessary to collect and recover accounts and assets of, or defend any action against
the bank.

In custodia legis, exempt from any order of garnishment, levy, attachment , or

execution.

As opposed to rehabilitation Philippine Veterans Bank Employees Union-N.U.B.E. v.

Hon. Benjamin Vega, 360 SCRA 33 (2001)
Liquidation, is the winding up of a corporation so that assets are distributed to those
entitled to receive them. It is the process of reducing assets to cash, discharging liabilities
and dividing surplus or loss.
Rehabilitation contemplates a continuance of corporate life and activities in an effort to
restore and reinstate the corporation to its former position of successful operation and
solvency.

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 All claims filed in liquidation court Ong v. Court of Appeals, 253 SCRA 105 (1996)
The judicial liquidation is intended to prevent multiplicity of actions against the
insolvent bank. It is a pragmatic arrangement designed to establish due process and
orderliness in the liquidation of the bank, to obviate the proliferation of
litigations and to avoid injustice and arbitrariness.

Manalo v. Court of Appeals, 366 SCRA 752 (2001)

The legal provision only finds operation in cases where there are claims against an insolvent
bank. In fine, the exclusive jurisdiction of the liquidation court pertains only to the
adjudication of claims against the bank . It does not cover the reverse situation
where it is the bank which files a claim against another person or legal entity.

Disposition of banking franchise Sec. 33, NCBA

The Bangko Sentral may, if public interest so requires, award to an institution, upon such
terms and conditions as the Monetary Board may approve, the banking franchise of a
bank under liquidation to operate in the area where said bank or its branches
were previously operating: Provided, That whatever proceeds may be realized from such
award shall be subject to the appropriate exclusive disposition of the Monetary Board.

Effects of Receivership and Liquidation

Restriction on capacity to act Villanueva v. Court of Appeals, 244 SCRA 395 (1995)
In a nutshell, the insolvency of a bank and the consequent appointment of a receiver restrict
the bank's capacity to act, especially in relation to its property, Applying Article 1323 of the
Civil Code, Ong's offer to purchase the subject lots became ineffective because the PVB
became insolvent before the bank's acceptance of the offer came to his knowledge.

Restriction on capacity to act Abacus Real Estate Development Center, Inc. v. The
Manila Banking Corporation, 455 SCRA 97 (2005)
Clearly, the receiver appointed by the Central Bank to take charge of the properties of
Manila Bank only had authority to administer the same for the benefit of its
creditors. Granting or approving an exclusive option to purchase is not an act of
administration, but an act of strict ownership, involving, as it does, the disposition of
property of the bank.

Effect on garnishment, levy on attachment or execution Sec. 30, NCBA; Lipana v.

Development Bank of Rizal, 154 SCRA 257 (1987)
In Central Bank of the Philippines, et al. vs. Court of Appeals, et al. wherein the original
plaintiff Algue Inc. was able to obtain a writ of preliminary attachment against the original
defendant Island Savings Bank, this Court refused to recognize any preference resulting
from such attachment and ruled that after a declaration of insolvency, the remedy of the
depositors is to intervene in the liquidation proceedings.

Stoppage of business Provident Savings Bank v. Court of Appeals, 222 SCRA 125
(1993)
When a bank is prohibited to do business by the Central Bank and a receiver is appointed
for such bank, that bank would not be able to do new business, i.e., to grant new loans or to
accept new deposits. However, the receiver of the bank is obliged to collect debts
owing to the bank, which debts form part of the assets of the bank.

Effects of Receivership and Liquidation

Interest on deposits Fidelity Savings and Mortgage Bank v. Cenzon, 184 SCRA 141
(1990); But See Rural Bank of Sta. Catalina, Inc. v. Land Bank of the Philippines,

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 435 SCRA 183 (2004)
A bank cannot be held liable for interest on bank deposits which accrued from the time it
was prohibited by the Central Bank to continue with its banking operations.

Judicial Review
Ground: grave abuse of discretion Central Bank v. Court of Appeals, 106 SCRA
143 (1981); Banco Filipino Savings and Mortgage Bank v. Monetary Board,
204 SCRA 767 (1991)
Jurisdiction Sec. 4, Rule 65, Rules of Court: Certiorari, Prohibition and Mandamus

Who may question Central Bank of the Philippines v. Court of Appeals, 220
SCRA 537 (1993); Central Bank of the Philippines v. Court of Appeals, 208
SCRA 652 (1992)
Actions of the MB may be assailed in an appropriate pleading filed by the
stockholders of record representing the majority of the capital stock within ten
(10) days from receipt of notice by the said majority stockholders of the order
placing the bank under conservatorship or receivership.

Actions of the MB final and executory; Injunction Central Bank of the Philippines
v. Dela Cruz, 191 SCRA 346 (1990); Sec. 22, PDIC Charter
The actions of the Monetary Board in proceedings on insolvency are explicitly
declared by law to be final and executory. They may not be set aside, or
restrained, or enjoined by the courts, except upon convincing proof that the
action is plainly arbitrary and made in bad faith.

Effect of Filing Petition for Review Banco Filipino Savings and Mortgage Bank v.
Ybaez, SCRA (2004)
Liability of the MB and PDIC Miranda v. Philippine Deposit Insurance
Corporation, 501 SCRA 288 (2006)

The Peso, Currency, Legal Tender, and Bank Deposit Accounts

The Peso
The unit of monetary value in the Philippines which is represented by the sign P.
It is divided into one hundred (100) equal parts called centavos, which are represented by
the sign c.

Currency
Meaning all Philippine notes and coins issued or circulating.
BSP has the sole power and authority to issue currency, within the territory of the
Philippines.

Legal Tender (Sec. 52, NCBA and BSP Circular No. 537, Series of 2006)
All notes and coins issued by BSP are fully guaranteed by the Republic of the Philippines and
shall be legal tender in the Philippines for all debts, both public and private.
Unless otherwise provided by MB, coins shall be legal tender in amounts not
exceeding
One thousand pesos (P1,000.00) for denominations of 1-Piso, 5-Piso and 10-Piso coins;
and
One hundred pesos (P100.00) for denominations of 1-sentimo, 5-sentimo, 10-sentimo,
and 25-sentimo coins.

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