BANKING LAWS

Bank Secrecy Law

(1) What are the exceptions to the Bank Secrecy Rule under RA 1405?

SUGGESTED ANSWER:

(P-I-S-O)
A. written P-ermission of the depositor;
B. I-mpeachment;
C. money deposited or invested is S-ubject of litigation; and
D. O-rder of competent court in bribery and dereliction of duty of
public officials

*note: exemptions under special laws are (H-E-A-T-B-U-D):

examination when there is probable cause under the H-uman
Security Act
determination of E-state of deceased depositor
examination of A-MLC under AMLA
investigation under T-errorism Financing Prevention and
Suppression Act
disclosure to B-SP
U-nexplained wealth
disclosure to Phil. Treasurer for D-ormant deposits

(2) May the Ombudsman order the concerned bank to allow in camera
inspection of bank records and documents, if s/he is convinced that
there is a violation of law upon investigation of a complaint alleging
illicit bank deposits of a public officer? Explain.

SUGGESTED ASNWER:

No. The power of the Ombudsman under Sec. 15 of RA 6770 to,

among others, examine and have access to bank accounts and records,
is subject to limitations. Before an "in camera inspection" of the
documents pertaining to a bank account may be orered by the
Ombudsman, there must be a pending case before a court. Investigation
by the Ombudsman is not one of those cases when the law allows the
examination of the bank records and documents. (Marquez v. Desierto
2001)
 Anti-Money Laundering Act

(3) Bingbong, a known jueteng operator, has been unemployed for

several years. He has never been charged much less convicted of any
crime. He maintains multiple bank accounts in different banks and
has purchased five house and lots for his children from Nonoy
Realty, Inc. Him having no visible job for years, Nonoy Realty, Inc.
reported said purchases with the AMLC. Later, he was charged for
violation of the Anti-Money Laundering Law, and was subsequently
convicted thereof. Can Rudy move to dismiss said case on the
ground that he has no criminal record?

SUGGESTED ANSWER:

No, the Anti-Money Laundering Law does not require prior

conviction of any of the predicate crimes. The crime of money laundering
is separate from the unlawful activities defined as predicate offenses
under said law. Bingbong can still be found guilty of money laundering
even if he has no criminal record. (Bar 2006; Aquino, 2015, Essentials of
Credit Transactions and Banking Laws, p. 655)

Grant of Loans and Security Requirements

(4) What are the provisions for credit card operations to not be subject
of DOSRI regulations?

SUGGESTED ANSWER:

A. The privilege to become a credit card holder is open to all

qualified persons based on selective criteria applied to all
applicants thereof; and
B. Bank director, officer, or stockholder/related interest concerned
reimburses or pays the bank for the billed amount in full on or
before the payment due date in the billing or statement of
account as set by the bank for all other qualified credit card
holders. (BSP Circular No. 423, 2004)

(5) X applied for a loan in the amount of 25 million pesos from A Bank,
which has a net worth of 100 million pesos. However, the
application was rejected, on the sole basis that the amount applied
exceeds the 20% single borrower's limit under the General Banking
Law of 2000. X, on the other hand, argued that by virtue of BSP
 Circular No. 425, the Manual of Regulations for Banks has
implemented the current limit of 25%. A Bank countered, stating
that the MORB is allegedly inconsistent with the GBL, hence,
invalid. Is A Bank's contention correct?

SUGGESTED ANSWER:

No. Under the General Banking Law, the Monetary Board is given
the authority to increase the percentage of 20% for reasons of national
interest, in granting loans, credit accommodations and guarantees.
Hence, the BSP Circular is in harmony with the General Banking Law in
adopting the increased single borrower's limit to 25% of the total net
worth of the bank.

Distinction of Banks from Quasi-banks and Trust Entities

(6) XYZ Corp. is engaged in lending funds to small vendors in various

public markets. To fund the lending, XYZ Corp. raised funds through
borrowings from friends and investors. Is XYZ Corp. engaged in the
business of banking?

SUGGESTED ANSWER:

No. The funds that XYZ Corp. lends do not come from deposit. XYZ
Corp. rather, is engaged in quasi-banking. Quasi-banks, under Sec. 4 of
the General Banking Law, is referred to as entities engaged in the
borrowing of funds through issuance, endorsement, or assignment with
recourse or acceptance of deposit substitutes for purposes of relending or
purchasing of receivables and other obligations. The business of XYZ
Corp. categorically falls under said definition. (2012 Bar; Aquino, 2015,
Essentials of Credit Transactions and Banking Laws, p. 523)

Receivership

(7) What are the grounds for a receiver to be appointed?

SUGGESTED ANSWER:

When the Monetary Board finds that the bank:

A. is unable to pay its liabilities due in the ordinary course of
business;
B. has insufficient realizable assets to meet its liabilities;
 C. cannot continue in business without involving probable losses
to its depositors or creditors; or 4) has wilfully violate a cease
and desist order that has become final, involving acts or
transactions which amount to fraud or dissipation of the assets
of the institution. (Sec. 30, New Central Bank Act)

Responsibility and Primary Objective of BSP

(8) What are the primary objectives of the Bangko Sentral ng Pilipinas?

SUGGESTED ANSWER:

Primary Objectives
A. Maintain price stability conducive to a balanced and sustainable
growth of the economy; and
B. Promote and maintain monetary stability and the convertibility of the
peso.

Monetary Board - Powers and Functions

(9) Ana, a minority stockholder of FilBank, filed a complaint before the

RTC against FilBank's board of directors for allegedly having
engaged in unsafe, unsound and fraudulent banking practices and
violating the Corporation Code. She prayed, among others, that the
bank be placed under receivership and a management committee be
created pursuant to law. Is Ana correct in filing the same with the
RTC?

SUGGESTED ANSWER:

No, the RTC has no jurisdiction to place banks under receivership.

It is clear under Sec. 30 of the New Central Bank Act that the
"appointment of a receiver under this section shall be vested exclusively
with the Monetary Board." The term "exclusively" connotes that only the
Monetary Board can resolve the issue of whether a bank is to be placed
under receivership and, upon an affirmative finding, it also has authority
to appoint a receiver. This is further affirmed by the fact that the law
allows the Monetary Board to take action "summarily and without need
for prior hearing." (Koruga v. Arcenas, Jr., June 19, 2009)
 TRUST RECEIPTS LAW (P.D. NO. 115)
(10) What constitutes a trust receipt transaction?

SUGGESTED ANSWER:

Any transaction between the entruster and the entrustee where the
entruster owning or holding beneficial title or security interests over
certain goods, documents or instruments, releases the same to the
possession of the entrustee upon the latter's execution and delivery to
the entruster the "trust receipt" wherein the entrustee binds himself to
hold said goods, documents or instruments with the obligation to turn
over to the entruster the proceeds thereof to the extent of the amount
owing to the entruster or as appears in the trust receipt or the goods,
documents or instruments themselves if they are unsold or otherwise
disposed of, in accordance with the terms and conditions specified in the
trust receipt.

(11) ABC Corp. was held liable under a trust receipt transaction.
Director X, the signatory under said transaction, was then held
criminally liable for the same. However, he argued that he cannot be
held liable, having a distinct and separate personality from that of
the corporation and he was merely acting for the corporation. Is
Director Xs contention correct?

SUGGESTED ANSWER:

No. The Trust Receipts Law recognizes the impossibility of

imposing the penalty of imprisonment on a corporation. Hence, if the
entrustee is a corporation, the law makes the officers or employees or
other persons responsible for the offense liable to suffer the penalty of
imprisonment. The reason is obvious: corporations, partnerships,
associations and other juridical entities cannot be put to jail. Hence, the
criminal liability falls on the human agent responsible for the violation of
the Trust Receipts Law. (Ong v. CA, 2003)

(12) John Doe obtained a loan of P1M from SSS Bank to purchase bags
of cement for his hardware. He executed a trust receipt in favor of
SSS Bank over said bags of cement. On the way to his hardware,
John Doe met armed robbers who took the bags of cement. He now
claims that his obligation to pay the loan is extinguished, since the
loss was not due to his fault. Is his contention correct?
 SUGGESTED ANSWER:

No. Under Section 10 of the Trust Receipts Law, the loss of goods
subject of a trust receipt, whether or not it was due to the fault or
negligence of the entrustee shall not extinguish his (entrustee) obligation
to the entruster. In this case, the fact that the loss due to robbery was
not his fault does not excuse him from liability, the trust receipt serving
only as security for the payment of loan. (Bar 2008)

WAREHOUSE RECEIPTS LAW (ACT NO. 2137)

(13) When can there be an attachment or levy upon the goods for
which a negotiable receipt has been issued?

SUGGESTED ANSWER:

If goods are delivered to a warehouseman by the owner or by a

person whose act would bind the owner(agent), and a negotiable receipt(if
the receipt is non-negotiable, the goods are subject to attachment or
execution because no third person can be prejudiced thereby and
because of Section 42) is issued for them, the goods cannot thereafter,
while in the possession of the warehouseman, be attached by
garnishment or otherwise (such as replevin), or be levied upon under an
execution unless the receipt be first surrendered to the warehouseman or
its negotiation enjoined (by the Court). The warehouseman shall in no
case be compelled to deliver the actual possession of the goods until the
receipt is surrendered to him or impounded by the court.

(14) What are the remedies available to a warehouseman for enforcing

his lien?

SUGGESTED ANSWER:

(R-E-F)
A. R-efuse to deliver the goods until the lien is satisfied (Sec. 31);
B. cause the E-xtrajudicial sale of the property and apply the proceeds
to the value of the lien (Secs. 33 and 34); and
C. F-ile a civil action for the unpaid charges (Secs. 32 and 35)