constitutionaly mandated entity to be created by law a bank of issue empowered to issue currency issue legal tender can banko

ko sentral just print money? relationship bet monetary board and banko sentral function of monetary board direct management and administration of banko sentral supervision over banks issue regulations

governor of banko sentral

The new Central Bank Act (RA 7653) a) State policies SECTION 1. Declaration of Policy. _ The State shall maintain a central monetary authority that shall function and operate as an independent and accountable body corporate in the discharge of its mandated responsibilities concerning money, banking and credit. In line with this policy, and considering its unique functions and responsibilities, the central monetary authority established under this Act, while being a government-owned corporation, shall enjoy fiscal and administrative autonomy. b) Creation SEC. 2. Creation of the Bangko Sentral. _ There is hereby established an independent central monetary authority, which shall be a body corporate known as the Bangko Sentral ng Pilipinas, hereafter referred to as the Bangko Sentral. The capital of the Bangko Sentral shall be Fifty billion pesos (P50,000,000,000), to be fully subscribed by the Government of the Republic, hereafter referred to as the Government, Ten billion pesos (P10,000,000,000) of which shall be fully paid for by the Government upon the effectivity of this Act and the balance to be paid for within a period of two (2) years from the effectivity of this Act in such manner and form as the Government, through the Secretary of Finance and the Secretary of Budget and Management, may thereafter determine. c) Responsibility and primary objective - SEC. 3. Responsibility and Primary Objective. _ The Bangko Sentral shall provide policy directions in the areas of money, banking, and credit. It shall have supervision over the operations of banks and exercise such regulatory powers as provided in this Act and other pertinent laws over the operations of finance companies and non-bank financial institutions performing quasi-banking functions, hereafter referred to as quasi- banks, and institutions performing similar functions. 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. Monetary Boards - powers and functions - SEC. 5. Corporate Powers. _ The Bangko Sentral is hereby authorized to adopt, alter, and use a corporate seal which shall be judicially noticed; to enter into contracts; to lease or own real and personal property, and to sell or otherwise dispose of the same; to sue and be sued; and otherwise to do and perform any and all things that may be necessary or proper to carry out the purposes of this Act. The Bangko Sentral may acquire and hold such assets and incur such liabilities in connection with its operations authorized by the provisions of this Act, or as are essential to the proper conduct of such operations. The Bangko Sentral may compromise, condone or release, in whole or in part, any claim of or settled liability to the Bangko Sentral, regardless of the amount involved, under such terms and conditions as may be prescribed by the Monetary Board to protect the interests of the Bangko Sentral. How BSP handles banks in distress i. Conservatorship 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 the Monetary Board may appoint a conservator with such powers as the Monetary Board shall deem necessary to take charge of the assets, liabilities, and the management thereof, reorganize the management, collect all monies and debts due said institution, and exercise all powers necessary to restore its viability conservator shall report and be responsible to the Monetary Board and shall have the power to overrule or revoke the actions of the previous management and board of directors of the bank or quasi-bank The conservator should be competent and knowledgeable in bank operations and management. The conservatorship shall not exceed one (1) year. The conservator shall receive remuneration to be 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 the one-year period, the conservatorship is terminated on the ground that the institution can operate on its own, the conservator shall receive the balance of the remuneration which he would have received up to the end of the year; but if the conservatorship is terminated on other grounds, the conservator shall not be entitled to such remaining balance. The Monetary Board may appoint a conservator connected with the Bangko Sentral, in which case he shall not be entitled to receive any remuneration or emolument from the Bangko Sentral during the conservatorship. The expenses attendant to the conservatorship shall be borne by the bank or quasi-bank concerned.

d)

e)

terminate the conservatorship when it is satisfied that the institution can continue to operate on its own and the conservatorship is no longer necessary or the continuance in business of the institution would involve probable loss to its depositors or creditors in which case receivership and liquidation applies ii. Closure close the bank

iii. Receivership iv. Liquidation SEC. 30. Proceedings in Receivership and Liquidation. _ Whenever, upon report of the head of the supervising or examining department, the Monetary Board 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 extraordinary demands induced by financial panic in the banking community; (2) has insufficient realizable assets, as determined by the Bangko Sentral, to meet its liabilities; or (3) cannot continue in business without involving probable losses to its depositors or creditors; or (4) has willfully violated a cease and desist order under Section 37 that has become final, involving acts or transactions which amount to fraud or a dissipation of the assets of the institution; in which 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. For a quasi-bank, any person of recognized competence in banking or finance may be designated as receiver. The receiver shall immediately gather and take charge of all the assets and liabilities of the institution, administer the same for the benefit of its creditors, and exercise the general powers of a receiver under the Revised Rules of Court but shall not, with the exception of administrative expenditures, pay or commit any act that will involve the transfer or disposition of any asset of the institution: Provided, That the receiver may deposit or place the funds of the institution in nonspeculative investments. The receiver shall determine as soon as possible, but not later than ninety (90) days from take-over, whether the institution may be rehabilitated or otherwise placed in such a condition so that it may be permitted to resume business with safety to its depositors and creditors and the general public: Provided, That any determination for the resumption of business of the institution shall be subject to prior approval of the Monetary Board. If the receiver determines that the institution cannot be rehabilitated or permitted to resume business in accordance with the next preceding paragraph, 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. The receiver shall: (1) file ex parte with the proper regional trial court, and without 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 for general application to all closed banks. In case of quasi-banks, the liquidation plan shall be adopted by the Monetary Board. Upon acquiring jurisdiction, the court shall, upon motion by the receiver after due notice, adjudicate disputed claims against 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. The receiver shall pay the cost of the proceedings from the assets of the institution. (2) 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, and with the assistance of counsel as he may retain, institute such actions as may be necessary to collect and recover accounts and assets of, or defend any action against, the institution. The assets of an institution under receivership or liquidation shall be deemed in custodia legis in the hands of the receiver and shall, from the moment the institution was placed under such receivership or liquidation, be exempt from any order of garnishment, levy, attachment, or execution. The actions of the Monetary Board taken under this section or under Section 29 of this Act 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. The designation of a conservator under Section 29 of this Act or the appointment of a receiver under this section shall be vested exclusively with the Monetary Board. Furthermore, the designation of a conservator is not a precondition to the designation of a receiver. SEC. 31. Distribution of Assets. _ In case of liquidation of a bank or quasi-bank, after payment of the cost of proceedings, including reasonable expenses and fees of the receiver to be allowed by the court, the receiver shall pay the debts of such institution, under order of the court, in accordance with the rules on concurrence and preference of credit as provided in the Civil Code. SEC. 32. Disposition of Revenues and Earnings. _ All revenues and earnings realized by the receiver in winding up the affairs and administering the assets of any bank or quasi-bank within the purview of this Act shall be used to pay the costs, fees and expenses mentioned in the preceding section, salaries of such personnel whose employment is rendered necessary in the discharge of the liquidation together with other additional expenses caused thereby. The balance of revenues and earnings, after the payment of all said expenses, shall form part of the assets available for payment to creditors. SEC. 33. Disposition of Banking Franchise. _ 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. SEC. 85. Interest and Rediscount Rates. _ The Bangko Sentral shall collect interest and other appropriate charges on all loans and advances it extends, the closure, receivership or liquidation of the debtor-institution notwithstanding. This provision shall apply prospectively. f) How BSP handles exchange crisis - SEC. 72. Emergency Restrictions on Exchange Operations. _ In order to achieve the primary objective of the Bangko Sentral as set forth in Section 3 of this Act, or protect the international reserves of the Bangko Sentral in the imminence of, or during an exchange crisis, or in time of national emergency and 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, the Monetary Board, with the concurrence of at least five (5) of its members and with the approval of the President of the

Philippines, may temporarily suspend or restrict sales of exchange by the Bangko Sentral, and may subject all transactions in gold and foreign exchange to license by the Bangko Sentral, and may require that any foreign exchange thereafter obtained by any person residing or entity operating in the Philippines be delivered to the Bangko Sentral or to any bank or agent designated by the Bangko Sentral for the purpose, at the effective exchange rate or rates: Provided, however, That foreign currency deposits made under Republic Act No. 6426 shall be exempt from these requirements. i. Legal tender power SEC. 52. Legal Tender Power. _ All notes and coins issued by the Bangko Sentral shall be fully guaranteed by the Government of the Republic of the Philippines and shall be legal tender in the Philippines for all debts, both public and private: Provided, however, That, unless otherwise fixed by the Monetary Board, coins shall be legal tender in amounts not exceeding Fifty pesos (P50) for denominations of twenty-five centavos and above, and in amounts not exceeding Twenty pesos (P20) for denominations of ten centavos or less. Rate of exchange - SEC. 74. Exchange Rates. _ The Monetary Board shall determine the exchange rate policy of the country. The Monetary Board shall determine the rates at which the Bangko Sentral shall buy and sell spot exchange, and shall establish deviation limits from the effective exchange rate or rates as it may deem proper. The Bangko Sentral shall not collect any additional commissions or charges of any sort, other than actual telegraphic or cable costs incurred by it. The Monetary Board shall similarly determine the rates for other types of foreign exchange transactions by the Bangko Sentral, including purchases and sales of foreign notes and coins, but the margins between the effective exchange rates and the rates thus established may not exceed the corresponding margins for spot exchange transactions by more than the additional costs or expenses involved in each type of transactions.

ii.

Law on Secrecy of Bank Deposits (RA 1405 as amended) a) Purpose Section 1. It is hereby declared to be the policy of the Government to give encouragement to the people to deposit their money in banking institutions and to discourage private hoarding so that the same may be properly utilized by banks in authorized loans to assist in the economic development of the country. b) Prohibited Acts Section 3. It shall be unlawful for any official or employee of a banking institution to disclose to any person other than those mentioned in Section two hereof any information concerning said deposits. c) d) Deposits covered Exceptions Section 2. 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, except upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject matter of the litigation. Investment Management Accounts are not covered by RA 1405. Now the SC has repeated ruled that the anti-graft law has created another exception to this. Because under the Anti-graft law in determining if the public official has amassed ill-gotten wealth, the bank accounts and those of his family, his spouse, children and friends may be taken into consideration. Because of this provision, the Court said that Congress intended to create another exception to the Secrecy of Bank Deposit, because how can you determine if the official amassed ill-gotten wealth unless you can get access to their bank deposit. (violation of the Anti-graft law) With the passage of R.A. 3019, the Anti-Graft and Corrupt Practices Act, an additional exception was created under 8 of R.A. 1405 which provides that a public official, who has been found to have acquired during his incumbency an amount of property and/or money manifestly out of proportion to his salary and to his other lawful income may be dismissed or removed. Bank deposits shall be taken into consideration in the enforcement of this section, notwithstanding any provision of law to the contrary. While RA 1405 does not include anti-graft cases, as among one of the instances where deposits in a bank may be disclosed, yet the Anti-graft law directs that bank deposits shall be taken into consideration in the enforcement of the law, notwithstanding any provision of the law to the contrary. Hence, the Anti-Graft law provides an additional exception. In a prosecution for unexplained wealth, the Sandiganbayan may order the production of bank deposit records, not only of the wife and children of the accused, but also those of his friends and cronies. (Banco Filipino v. Purisima 161 SCRA 576) The Ombudsman law gives the Ombudsman the power to examine bank records in connection with any investigation he is conducting. He can subpoena bank records for violation of Anti-graft Law. The court can only subpoena records of bank if there is a pending case, and that is the subject matter of the case, and examine the accounts---According to Jack this is inconsistent with the cases of PNB & Banco Filipino. Under Revenue Code, The Commissioner of Internal Revenue may inquire a bank account of decedent to determine his correct amount of the estate. Also, when a taxpayer compromises his tax liability, there is a waiver of the secrecy of bank deposits. e) Garnishment of deposits, including foreign deposits 8 of R.A. 6426 (Foreign Currency Deposit Law), as amended by P.D. 1246, provides that foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever.

The secrecy of foreign currency deposits is given even more protection by R.A. 6426, the Foreign Currency Deposit Act of the Philippines. In order to attract greater foreign investments and currency deposits in the country, all such deposits are considered of an absolutely confidential nature and, except upon written permission of the depositor, in no instance shall such deposits be examined, inquired or looked into by any person, government official, bureau or office whether judicial, administrative or legislative or any other entity whether public or private. All foreign currency deposits are absolutely confidential. In the case of RA 1405, the Supreme Court held that bank accounts could be garnished, not covering bank deposit. Foreign Currency, therefore, are exempt from attachment, garnishment, or any other order or process of any count, legislative body, government agency. Exception if the depositor has given a written authorization (same exception applicable to the RA 1405). NOTE: UNDER RA 1405 as distinguished with RA 6426--A writ of garnishment on bank deposit of a defendant is not an inquiry into his deposit as contemplated by RA 1405. It merely requires the bank cashier to inform the court whether said debtor has a deposit in said bank only for the purpose of garnishment to be issued by it. So that the bank will hold the same intact and not allow any withdrawal until further orders. SALVACION vs CB This involved a tourist who enticed a girl with a toy and then he raped the girl. He was charged but escaped from jail and disappeared. The parents filed a separate civil action for damages and obtained a favorable decision. Since the tourist was gone and the only assets available were his account in China Bank, the bank account was garnished. China Bank argued that the foreign currency deposit law exempts currency deposits from execution. Court said that the garnishment should be allowed. The underlying idea behind the law is to encourage investments. It could not have contemplated a situation like this where it would result in patent injustice, where the victim of a crime could not get recompense because the offender managed to escape and this is the only asset left. In the name of justice, exemption was not allowed! f) Penalties for violation Section 5. Any violation of this law will subject offender upon conviction, to an imprisonment of not more than five years or a fine of not more than twenty thousand pesos or both, in the discretion of the court.

Law on Secrecy of Bank Deposits (RA 1405 as amended) g) Purpose Section 1. It is hereby declared to be the policy of the Government to give encouragement to the people to deposit their money in banking institutions and to discourage private hoarding so that the same may be properly utilized by banks in authorized loans to assist in the economic development of the country. h) Prohibited Acts Section 3. It shall be unlawful for any official or employee of a banking institution to disclose to any person other than those mentioned in Section two hereof any information concerning said deposits. i) j) Deposits covered Exceptions Section 2. 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, except upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject matter of the litigation. Investment Management Accounts are not covered by RA 1405. Now the SC has repeated ruled that the anti-graft law has created another exception to this. Because under the Anti-graft law in determining if the public official has amassed ill-gotten wealth, the bank accounts and those of his family, his spouse, children and friends may be taken into consideration. Because of this provision, the Court said that Congress intended to create another exception to the Secrecy of Bank Deposit, because how can you determine if the official amassed ill-gotten wealth unless you can get access to their bank deposit. (violation of the Anti-graft law) With the passage of R.A. 3019, the Anti-Graft and Corrupt Practices Act, an additional exception was created under 8 of R.A. 1405 which provides that a public official, who has been found to have acquired during his incumbency an amount of property and/or money manifestly out of proportion to his salary and to his other lawful income may be dismissed or removed. Bank deposits shall be taken into consideration in the enforcement of this section, notwithstanding any provision of law to the contrary. While RA 1405 does not include anti-graft cases, as among one of the instances where deposits in a bank may be disclosed, yet the Anti-graft law directs that bank deposits shall be taken into consideration in the enforcement of the law, notwithstanding any provision of the law to the contrary. Hence, the Anti-Graft law provides an additional exception. In a prosecution for unexplained wealth, the Sandiganbayan may order the production of bank deposit records, not only of the wife and children of the accused, but also those of his friends and cronies. (Banco Filipino v. Purisima 161 SCRA 576) The Ombudsman law gives the Ombudsman the power to examine bank records in connection with any investigation he is conducting. He can subpoena bank records for violation of Anti-graft Law. The court can only subpoena records of bank if there is a pending case, and that is the subject matter of the case, and examine the accounts---According to Jack this is inconsistent with the cases of PNB & Banco Filipino.

Under Revenue Code, The Commissioner of Internal Revenue may inquire a bank account of decedent to determine his correct amount of the estate. Also, when a taxpayer compromises his tax liability, there is a waiver of the secrecy of bank deposits. k) Garnishment of deposits, including foreign deposits 8 of R.A. 6426 (Foreign Currency Deposit Law), as amended by P.D. 1246, provides that foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever. The secrecy of foreign currency deposits is given even more protection by R.A. 6426, the Foreign Currency Deposit Act of the Philippines. In order to attract greater foreign investments and currency deposits in the country, all such deposits are considered of an absolutely confidential nature and, except upon written permission of the depositor, in no instance shall such deposits be examined, inquired or looked into by any person, government official, bureau or office whether judicial, administrative or legislative or any other entity whether public or private. All foreign currency deposits are absolutely confidential. In the case of RA 1405, the Supreme Court held that bank accounts could be garnished, not covering bank deposit. Foreign Currency, therefore, are exempt from attachment, garnishment, or any other order or process of any count, legislative body, government agency. Exception if the depositor has given a written authorization (same exception applicable to the RA 1405). NOTE: UNDER RA 1405 as distinguished with RA 6426--A writ of garnishment on bank deposit of a defendant is not an inquiry into his deposit as contemplated by RA 1405. It merely requires the bank cashier to inform the court whether said debtor has a deposit in said bank only for the purpose of garnishment to be issued by it. So that the bank will hold the same intact and not allow any withdrawal until further orders. SALVACION vs CB This involved a tourist who enticed a girl with a toy and then he raped the girl. He was charged but escaped from jail and disappeared. The parents filed a separate civil action for damages and obtained a favorable decision. Since the tourist was gone and the only assets available were his account in China Bank, the bank account was garnished. China Bank argued that the foreign currency deposit law exempts currency deposits from execution. Court said that the garnishment should be allowed. The underlying idea behind the law is to encourage investments. It could not have contemplated a situation like this where it would result in patent injustice, where the victim of a crime could not get recompense because the offender managed to escape and this is the only asset left. In the name of justice, exemption was not allowed! l) Penalties for violation Section 5. Any violation of this law will subject offender upon conviction, to an imprisonment of not more than five years or a fine of not more than twenty thousand pesos or both, in the discretion of the court.

Philippine Deposit Insurance Corporation Act a) Basic policy i. promote and safeguard the interests of the depositing public by way of providing permanent and continuing insurance coverage on all insured deposits.

b)

Concept of insured deposits TAKE NOTE (As amended by R.A. 9302, 12 August 2004; R.A. 9576, 2009) i. The term insured deposit means the amount due to any bona fide depositor for legitimate deposits in an insured bank net of any obligation of the depositor to the insured bank as of the date of closure, but not to exceed Five Hundred Thousand Pesos (P500,000.00).2 Such net amount shall be determined according to such regulations as the Board of Directors may prescribe. In determining such amount due to any depositor, there shall be added together all deposits in the bank maintained in the same right and capacity for his benefit either in his own name or in the name of others. A joint account regardless of whether the conjunction "and," "or," "and/or" is used, shall be insured separately from any individually-owned deposit account: Provided, That (1) If the account is held jointly by two or more natural persons, or by two or more juridical persons or entities, the maximum insured deposit shall be divided into as many equal shares as there are individuals, juridical persons or entities, unless a different sharing is stipulated in the document of deposit, and (2) if the account is held by a juridical person or entity jointly with one or more natural persons, the maximum insured deposit shall be presumed to belong entirely to such juridical person or entity: Provided, further, That the aggregate of the interest of each co-owner over several joint accounts, whether owned by the same or different combinations of individuals, juridical persons or entities, shall likewise be subject to the maximum insured deposit of Five Hundred Thousand Pesos (P500,000.00): Provided, furthermore, That the provisions of any law to the contrary notwithstanding, no owner/holder of any negotiable certificate of deposit shall be recognized as a depositor entitled to the rights provided in this Act unless his name is registered as owner/holder thereof in the books of the issuing bank: Provided, finally, That, in case of a condition that threatens the monetary and financial stability of the banking system that may have systemic consequences, as defined in section 17 hereof, as determined by the Monetary Board, the maximum deposit insurance cover may be adjusted in such amount, for such a period, and/or for such deposit products, as may be determined by a unanimous vote of the Board of Directors in a meeting called for the purpose and chaired by the Secretary of Finance, subject to the approval of the President of the Philippines. (As amended by R.A. 9302, 12 August 2004; R.A. 9576, 2009)

c)

Liability to depositors i. Deposit liabilities require to be insured with PDIC ii. Commencement of liability iii. Deposit accounts not entitled to payment iv. Extent of liability v. Determination of insured deposits vi. Calculation of liability 1. Per depositor, per capacity rule 2. Joint deposits

3. 4. 5. 6. 7.

Mode of payment Effect of payment of insured deposit Payments of insured deposits as preferred credit under Art. 2244, CC Failure to settle claim of insured depositor Failure of depositor to claim insured deposits a) Examination of banks and deposit accounts b) Prohibition against splitting of deposits c) Prohibition against issuance of TRO, etc.

Truth in Lending Act (RA 3765) a) Purpose

Section 2. 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. b) Obligation of creditors to person to whom credit is extended

Section 4. Any creditor shall furnish to each person to whom credit is extended, prior to the consummation of the transaction, a clear statement in writing setting forth, to the extent applicable and in accordance with rules and regulations prescribed by the Board, the following information: (1) the cash price or delivered price of the property or service to be acquired; (2) the amounts, if any, to be credited as down payment and/or trade-in; (3) the difference between the amounts set forth under clauses (1) and (2); (4) the charges, individually itemized, which are paid or to be paid by such person in connection with the transaction but which are not incident to the extension of credit; (5) the total amount to be financed; (6) the finance charge expressed in terms of pesos and centavos; and "Finance charge" includes interest, fees, service charges, discounts, and such other charges incident to the extension of credit as the Board may be regulation prescribe.

(7) the percentage that the finance bears to the total amount to be financed expressed as a simple annual rate on the outstanding unpaid balance of the obligation. note prior to the consummation of the transaction obligation subsists even before perfection of contract as long as creditor fulfills obligation prior to consummation or prior to payment of loan by debtor c) Covered and excluded transactions

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, or 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 of claim arising out of any of the foregoing; and any transaction or series of transactions having a similar purpose or effect d) Consequences of non-compliance with obligation

Section 6. (a) Any creditor who in connection with any credit transaction fails to disclose to any person any information in violation of this Act or any regulation issued thereunder shall be liable to such person in the amount of P100 or in an amount equal to twice the finance charged required by such creditor in connection with such transaction, whichever is the greater, except that such liability shall not exceed P2,000 on any credit transaction. Action to recover such penalty may be brought by such person within one year from the date of the occurrence of the violation, in any court of competent jurisdiction. In any action under this subsection in which any person is entitled to a recovery, the creditor shall be liable for reasonable attorney's fees and court costs as determined by the court. (b) Except as specified in subsection (a) of this section, nothing contained in this Act or any regulation contained in this Act or any regulation thereunder shall affect the validity or enforceability of any contract or transactions. (c) Any person who willfully violates any provision of this Act or any regulation issued thereunder shall be fined by not less than P1,00 or more than P5,000 or imprisonment for not less than 6 months, nor more than one year or both. (d) No punishment or penalty provided by this Act shall apply to the Philippine Government or any agency or any political subdivision thereof. (e) A final judgment hereafter rendered in any criminal proceeding under this Act to the effect that a defendant has willfully violated this Act shall be prima facie evidence against such defendant in an action or proceeding brought by any other party against such defendant under this Act as to all matters respecting which said judgment would be an estoppel as between the parties thereto.

Anti-money Laundering Law (RA 9160 as amended by RA 9194) a) Policy Section 2. Declaration of Policy. It is hereby declared the policy of the State to protect and preserve the integrity and confidentiality of bank accounts and to ensure that the Philippines shall not be used as a money laundering site for the proceeds of any unlawful activity. Consistent with its foreign policy, the State shall extend cooperation in transnational investigations and prosecutions of persons involved in money laundering activities whenever committed.

b)

Covered institution banks, non-banks, quasi-banks, trust entities, and all other institutions and their subsidiaries and affiliates supervised or regulated by the Bangko Sentral ng Pilipinas (BSP); Insurance companies and all other institutions supervised or regulated by the Insurance Commission; and i. securities dealers, brokers, salesmen, investment houses and other similar entities managing securities or rendering services as investment agent, advisor, or consultant, ii. iii. iv. mutual funds, close and investment companies, common trust funds, pre-need companies and other similar entities, foreign exchange corporations, money changers, money payment, remittance, and transfer companies and other similar entities, and other entities administering or otherwise dealing in currency, commodities or financial derivatives based thereon, valuable objects, cash substitutes and other similar monetary instruments or property supervised or regulated by Securities and Exchange Commission.

c)

Obligations of covered institutions Customer Identification, - Covered institutions shall establish and record the true identity of its clients based on official documents. They shall maintain a system of verifying the true identity of their clients and, in case of corporate clients, require a system of verifying their legal existence and organizational structure, as well as the authority and identification of all persons purporting to act on their behalf. The provisions of existing laws to the contrary notwithstanding, anonymous accounts, accounts under fictitious names, and all other similar accounts shall be absolutely prohibited. Peso and foreign currency non-checking numbered accounts shall be allowed. The BSP may conduct annual testing solely limited to the determination of the existence and true identity of the owners of such accounts. Record Keeping All records of all transactions of covered institutions shall be maintained and safely stored for five (5) years from the date of transactions. With respect to closed accounts, the records on customer identification, account files and business correspondence, shall be preserved and safety stored for at least five (5) years from the dates when they were closed. Reporting of Covered Transactions. Covered institutions shall report to the AMLC all covered transactions within five (5) working days from occurrence thereof, unless the Supervising Authority concerned prescribes a longer period not exceeding ten (10) working days.

d)

Covered transactions a transaction in cash or other equivalent monetary instrument involving a total amount in excess of Five hundred thousand pesos (PhP 500,000.00) within one (1) banking day a single, series, or combination of transactions involving a total amount in excess of Four million Philippine pesos (Php4,000,000.00) or an equivalent amount in foreign currency based on the prevailing exchange rate within five (5) consecutive banking days except those between a covered institution and a person who, at the time of the transaction was a properly identified client and the amount is commensurate with the business or financial capacity of the client; or those with an underlying legal or trade obligation, purpose, origin or economic justification. a single, series or combination or pattern of unusually large and complex transactions in excess of Four million Philippine pesos (Php4,000,000.00) especially cash deposits and investments having no credible purpose or origin, underlying trade obligation or contract.

e)

Suspicious transactions transactions with covered institutions, regardless of the amounts involved, where any of the following circumstances exist: 1. there is no underlying legal or trade obligation, purpose or economic justification; 2. 3. 4. 5. 6. 7. the client is not properly identified; the amount involved is not commensurate with the business or financial capacity of the client; taking into account all known circumstances, it may be perceived that the client's transaction is structured in order to avoid being the subject of reporting requirements under the Act; any circumstances relating to the transaction which is observed to deviate from the profile of the client and/or the client's past transactions with the covered institution; the transactions is in a way related to an unlawful activity or offense under this Act that is about to be, is being or has been committed; or any transactions that is similar or analogous to any of the foregoing."

f)

When is money laundering committed when the proceeds of an unlawful activity as herein defined are transacted, thereby making them appear to have originated from legitimate sources

g)

Unlawful activities or predicate crimes any act or omission or series or combination thereof involving or having direct relation to following: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. Kidnapping for ransom under Article 267 of Act No. 3815, otherwise known as the Revised Penal Code, as amended; Sections 4, 5, 6, 8, 9, 10, 12, 13, 14, 15, and 16 of Republic Act No. 9165, otherwise known as the Comprehensive Dangerous Act of 2002; Section 3 paragraphs B, C, E, G, H and I of republic Act No. 3019, as amended, otherwise known as the Anti-Graft and Corrupt Practices Act; Plunder under Republic Act No. 7080, as amended; Robbery and extortion under Articles 294, 295, 296, 299, 300, 301 and 302 of the Revised Penal Code, as amended; Jueteng and Masiao punished as illegal gambling under Presidential Decree No. 1602; Piracy on the high seas under the Revised Penal Code, as amended and Presidential under the Revised Penal Code, as amended and Presidential Decree No. 532; Qualified theft under Article 310 of the Revised penal Code, as amended; Swindling under Article 315 of the Revised Penal Code, as amended; Smuggling under Republic Act Nos. 455 and 1937; Violations under Republic Act No. 8792, otherwise known as the Electrinic Commerce Act of 2000; Hijacking and other violations under Republic Act No. 6235; destructive arson and murder, as defined under the Revised Penal Code, as amended, including those perpetrated by terrorists against non-combatant persons and similar targets; Fraudulent practices and other violations under Republic Act No. 8799, otherwise known as the Securities Regulation Code of 2000; Felonies or offenses of a similar nature that are punishable under the penal laws of other countries.

h)

i)

Anti-money laundering council SEC.7. Creation of Anti-Money Laundering Council (AMLC). -- The Anti-Money Laundering Council is hereby created and shall be composed of the Governor of the Bangko Sentral ng Pilipinas as chairman, the Commissioner of the Insurance Commission and the Chairman of the Securities and Exchange Commission as member. Functions The AMLC shall shall act unanimously in the discharge of its functions as defined hereunder: 1. to require and receive covered or suspicious transaction reports from covered institutions; 2. to issue orders addressed to the appropriate Supervising Authority or the covered institutions to determine the true identity of the owner of any monetary instrument or preperty subject of a covered transaction or suspicious transaction report or request for assistance from a foreign State, or believed by the Council, on the basis fo substantial evidence, to be, in whole or in part, wherever located, representing, involving, or related to directly or indirectly, in any manner or by any means, the proceeds of an unlawful activitity. 3. to institute civil forfeiture proceedings and all other remedial proceedings through the Office of th Solicitor General; 4. to cause the filing of complaints with the Department of Justice or the Ombudsman for the prosecution of money laundering offenses; 5. to investigate suspicious transactions and covered transactions deemed suspicious after an investigation by AMLC, money laundering activities and other violations of this Act; 6. to apply before the Court of Appeals, ex parte, for the freezing of any monetary instrument or property alleged to be the proceeds of any unlawful activity as defined in Section 3(i) hereof; 7. to implement such measures as may be necessary and justified under this Act to counteract money laundering; 8. to receive and take action in respect of, any request from foreign states for assistance in their own anti-money laundering operations provided in this Act; 9. to develop educational programs on the pernicious effects of money laundering, the methods and techniques used in the money laundering, the viable means of preventing money laundering and the effective ways of prosecuting and punishing offenders; 10. to enlist the assistance of any branch, department, bureau, office, agency, or instrumentality of the government, including government-owned and -controlled corporations, in undertaking any and all anti-money laundering operations, which may include the use of its personnel, facilities and resources for the more resolute prevention, detection, and investigation of money laundering offenses and prosecution of offenders; and 11. to impose administrative sanctions for the violation of laws, rules, regulations, and orders and resolutions issued pursuant thereto." Freezing of monetary instrument or property "Sec 10. Freezing of Monetary Instrument or Property. -- The Court of Appeals, upon application ex parte by the AMLC and after determination that probable cause exists that any monetary instrument or property is in any way related to an unlawful activity as defined in Section 3(i) hereof, may issue a freeze order which shall be effective immediately. The freeze order shall be for a period of twenty (20) days unless extended by the court.

j)

k)

Authority to inquire into bank deposits "Sec. 11. Authority to Inquire into Bank Deposits. -- Notwithstanding the provisions of Republic Act No. 1405, as amended, Republic Act No. 6426, as amended, Republic Act No. 8791, and other laws, the AMLC may inquire into or examine any particular deposit or investment with any banking institution or non-bank financial institution upon order of any competent court in cases of violation of this Act, when it has been established that there is probable cause that the deposits or investments are related to an unlawful activities as defined in Section 3(I) hereof or a money laundering offense under Section 4 hereof, except that no court order shall be required in cases involving unlawful activities defined in Sections 3(I)1, (2) and (12). "To ensure compliance with this Act, the Bangko Sentral ng Pilipinas (BSP) may inquire into or examine any deposit of investment with any banking institution or non-bank financial institution when the examination is made in the course of a periodic or special examination, in accordance with the rules of examination of the BSP.

Foreign Investment Act (RA 7042)

a) b)

c) d) e) f)

Policy of the law Definition of terms i. Foreign investment ii. Doing business in the Philippines iii. Export enterprise iv. Domestic market enterpise Registration of investment of non-Philippine nationals Foreign investments in export enterprises Foreign investments in domestic market enterprises Foreign investment negative list

Letters of Credit a) Definition - "letter issued by one merchant to another for the purpose of attending to a commercial transaction." b) Concept - a convenient and relatively safe mode of dealing with sales of goods to satisfy the seemingly irreconcilable interests of the seller, who refuses to part with his goods before he is paid, and a buyer, who wants to have control of the goods before paying c) Nature of the letter of credit issuing bank solidary liability with debtor / buyer d) Parties i. Buyerprocures the letter of credit and obliges himself to reimburse the issuing bank upon receipt of the documents of title. He is the one initiating the operation of the transaction as buyer of the merchandise and also of the credit instrument. His contract with the bank which is to issue the instrument and is represented by the Commercial Credit Agreement form which he signs, supported by the mutually made promises contained in the agreement ii. Sellerin compliance with the contract of sale, ships the goods to the buyer and delivers the documents of title and draft to the issuing bank to recover payment. He is also the beneficiary of the credit instrument because the instrument is addressed to him and is in his favor. While the bank cannot compel the seller to ship the goods and avail of the benefits of the instruments, however, the seller may recover from the bank the value of his shipment is made within the terms of the instrument, even though he hasnt given the bank any direct consideration for the banks promises contained in the instrument iii. opening / issuing bankusually the buyers bank which issues the letter of credit and undertakes to pay the seller upon receipt of the draft and proper documents of titles to surrender the documents to the buyer upon reimbursement. As it is the one issuing the instrument, it should be a strong bank, well known and well regarded in international trading circles. iv. Correspondent bank/advising bank / confirming bankto convey to the seller the existence of the credit or a confirming bank which will lend credence to the letter of credit issued by the lesser known issuing bank or paying bank which undertakes to encash the drafts drawn by the exporter. Furthermore, another bank known as the negotiating bank may be approached by the buyer to have the draft discounted instead of going to the place of the issuing bank to claim payment e) Basic Principles i. Doctrine of Independence the bank is responsible only for handling the documents, not the merchandise. If what was delivered to you isn't what you ordered, you have to go after the seller. Banks only deal with documents, not goods, and have no duty to verify what was indicated in the letter or credit, drafts, etc. with what was actually loaded on board for shipment A letter of credit ASSURES THE SELLER OF PROMPT PAYMENT, INDEPENDENT OF ANY BREACH OF THE MAIN SALES CONTRACT. ii. Fraud exception principle except when there is fraud or forgery in the uderlying transaction or tender of documents iii. Doctrine of strict compliance