BANKS AND FINANCIAL INTERMEDIARIES | MGG
GENERAL BANKING LAW
REPUBLIC ACT NO. 8791
I.
Banks and the Business of Banking
A. Declared Policy of the state and the Banking System
Declaration of Policy:
The State recognizes the vital role of banks providing an environment
conducive to the sustained development of the national economy and the
fiduciary nature of banking that requires high standards of integrity and
performance. In furtherance thereof, the State shall promote and
maintain a stable and efficient banking and financial system that is
globally competitive, dynamic and responsive to the demands of a
developing economy. (Sec. 2, GBL)
History of Banking
• 16th Century: First organized credit institution in the PH is the Obras
Pias.
• Obras Pias - served as commercial banks and marine insurance
companies, with the bulk of their funds invested in the galleon
trade
• 1800s: opening of the Suez Canal which facilitated trade between the
PH and Europe.
• Numerous European banks established in the PH
• End of Spanish Regime: El Banco Espanol Filipino de Isabel was given
the sole mandate under a Special Royal Decree to issue bank notes
called Pesos Fuertes.
• American period:
• American Bank was established.
• Other foreign banks subsequently made presence in the PH.
• During this period, the PH banking system was largely dominated
by foreign bank branches whose capital were devoted to financing
commerce and trade, rather than the development of the country’s
natural resources.
• 1916: PNB was organized to break the foreign banking monopoly
and to remedy the lack of credit facilities.
• PNB was meant to function as a gov’t enterprise that would
widen the variety of banking services beyond trade finance in
exportation and importation, etc.
• It empowered to issue bank notes and act as a depositary of
governmental funds.
• Commonwealth Period: more foreign bank branches were established.
• Japanese Occupation: only Filipino-owned and Japanese banks were
allowed to operate during WW2.
• After liberation: all domestic banks that operated during the Japanese
occupation were unable to reopen because greater part of their assets
consisted of worthless Japanese war notes, bonds, etc.
• Post-war:
• EO No. 48 paved the way for the reopening of some banks, such as,
National City Bank of NY (Citybank), Chartered Bank of India,
Australia, and China, HSBC, etc.
• Post-Independence: (“Republic Act” na yung mga batas)
• 1949: Central Bank of the PH (BSP) was established and started its
operations, the banking system consisted of 7 commercial banks, 3
thrift banks, the sole gov’t specialized bank, the agricultural and
industrial bank and 7 bank branches.
• Same year which General Banking Act was enacted and became
effective. Explicit rules and regulations governing bank
organization and operations were laid down.
• The GBA prescribed rules covering the establishment of domestic
banks, the licensing of foreign banks, and the powers of banking
institutions, branches and agencies of foreign banks.
• 1952: Rural Banks act was enacted;
• 2 years later, AIB merged with Reconstruction and Rehabilitation
fund to form DBP.
• 1963: Phil. Deposit Insurance Commission was passed.
• 1970s: CB imposed prudential measures which banks widened their
market by extending trust business services to corporations and
individuals with high net worth.
• 1971: Joint International Monetary Fund-Central Bank of the PH Survey
Commission (IMF-CBPSS) was created.
• Commission studied the banking system and proposed several
measures that resulted in amending the GBA and Central Bank Act.
• 1980s: CB issued rules creating investment management accounts that
did not qualify as trust accounts.
• Post-EDSA
• 1990s: classified into foreign exchange liberalization, financial
liberalization, and the passage of the General Banking Law of 2000;
• 1992:
• The Bankers’ Association of the Philippines created the
Philippine Dealing System (PDS). The PDS linked bank
participants through an electronic screen-based network that
enabled information sharing and the undertaking of foreign
exchange transactions.
• The same year, the Rural Banks Act of 1992 repealed Republic Act
No. 720, as amended. The Rural Banks Act was passed to
encourage and assist in the establishment of a rural banking
system that would make credit available and readily accessible in
the rural areas on reasonable terms.
• 1993: pursuant to its constitutional mandate to establish an
independent central monetary authority, Congress passed House
Bill 7037 and Senate Bill 1235, which were later signed into law as
Republic Act 7653, otherwise known as The New Central Bank Act.
• 1994: Republic Act 7721 or An Act Liberalizing the Entry of Foreign
Banks in the Philippines was enacted.
• 1995: Thrift Banks Act was enacted to meet the needs for capital,
or personal and investment credit or medium- and long-term for
Filipino entrepreneurs. At the same time, the law placed mediumand long-term credit facilities (at reasonable cost) within the
Filipino people’s easy reach.
• After 2000: the emergence of non-traditional banking products
and services
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• April 12, 2000: Republic Act 8791, also known as the General
Banking Law of 2000, was enacted -- repealing the 52-yearold banking law.
• The passage of the General Banking Law of 2000 strengthened
the Bangko Sentral’s policy agenda and institutionalized
banking reforms in the Philippines.
B. Definition and Nature of Banks
Banks : entities engaged in the lending of funds obtained in the form of
deposits where funds are obtained from the public; Conditions (which
also apply to Quasi-banks):
a) Entity is a stock corporation
b) Funds obtained from public, which shall mean 20 or more
persons; and
c) Minimum capital requirements prescribed by the Monetary
Board for each category of banks are satisfied
Nature of Banks:
• its funds are obtained from the public, which shall mean twenty or
more persons (Sec. 8.2, GBL)
Quasi-banks: entities engaged in the borrowing of funds through the
issuance, endorsement or assignment with recourse or acceptance of
deposit substitutes for purposes of relending or purchasing receivables
and other obligations
Elements of quasi-banking
The essential elements of quasi-banking are:
1. Borrowing funds for the borrower’s own account;
2. Twenty (20) or more lenders at any one (1) time;
3. Methods of borrowing are issuance, endorsement, or acceptance of
debt instruments of any kind, other than deposits, such as
acceptances, promissory notes, participations, certificates of
assignments or similar instruments with recourse, trust certificates,
repurchase agreements, and such other instruments as the Monetary
Board may determine; and
4. The purpose of which is (1) relending, or (2) purchasing receivables or
other obligations.
Pre-conditions for the exercise of quasi-banking functions
No bank shall engage in ` functions without authority from the Bangko
Sentral: Provided, however, That banks authorized by the Bangko Sentral
to perform universal or commercial banking functions shall automatically
have the authority to engage in quasi- banking functions: Provided,
further, That the authority to obtain funds from the public, which shall
mean twenty (20) or more persons under Section 8.2 of R.A. 8791, is not a
condition but an authorization for the bank or quasi-bank, once the
Monetary Board has granted the quasi-banking license.
Section 96. Articles of Incorporation.
The articles of incorporation of a close corporation may provide for:
a) A classification of shares or rights, the qualifications for owning
or holding the same, and restrictions on their transfers, subject
to the provisions of the following section;
b) A classification of director into one (1) or more classes, each of
whom may be voted for and elected solely by a particular class of
stock; and
c) Greater quorum or voting requirements in the meetings of
stockholders or directors than those provided in this Code.
The articles of incorporation of a close corporation may provide that the
business of the corporation may provide that the business of the
corporation shall be managed by the stockholders of the corporation
rather than by a board of directors. So long as this provision continues in
effect, no meeting of stockholders need be called to elect directors:
Provided, That the stockholders of the corporation shall be deemed to be
directors for the purpose of applying the provisions of this Code, unless
the context clearly requires otherwise: Provided, further, That the
stockholders of the corporation shall be subject to all liabilities of
directors.
Article 1980. Fixed, savings, and current deposits of money in banks and
similar institutions shall be governed by the provisions concerning
simple loan.
Case # 1: Consolidated Bank and Trust Company v. Court of Appeals,
410 SCRA 562 (2003)
The bank must not only exercise “high standards of integrity and
performance,” it must also insure that its employees do likewise because
this is the only way to insure that the bank will comply with its fiduciary
duty.
Case # 2: BDO-EPCI v. JAPRL Development Corp. G.R. No. 179901, Apr.
14, 2008
Under Sec. 40 of the General Banking Law, should such statements
(financial) prove to be false or incorrect in any material detail, the bank
may terminate any loan or credit accommodation granted on the basis of
said statements and shall have the right to demand immediate
repayment or liquidation of the obligation.
Case # 3: Philippine Banking Corp v. Court of Appeals, G.R. No. 127469,
419 SCRA 487 (2004)
The ︎f iduciary nature of banking requires banks to assume a degree of
diligence higher than that of a good father of a family.
Case # 4: UCPB v. Basco, G.R. No. 142668, Aug. 31, 2004
The banking business will thrive only as long as it maintains the trust and
confidence of its customers/clients. Indeed, the very nature of their
work, the degree of responsibility, care and trustworthiness expected of
officials and employees of the bank is far greater than those of ordinary
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officers and employees in the other business firms.
C. Classification of Banks - How do they differ from each other
Section 4.6, GBL: Enforcing prompt corrective action. (n)
The Bangko Sentral shall also have supervision over the operations of and
exercise regulatory powers over quasi-banks, trust entities and other
financial institutions which under special laws are subject to Bangko
Sentral supervision.
For the purposes of this Act, "quasi-banks" shall refer to entities engaged
in the borrowing of funds through the issuance, endorsement or
assignment with recourse or acceptance of deposit substitutes as defined
in Section 95 of Republic Act No. 7653 (hereafter the "New Central Bank
Act") for purposes of relending or purchasing of receivables and other
obligations.
1. Universal Banks
Universal banks have the same powers and functions as with
commercial banks. In addition, universal banks may perform the
following:
a) Powers of an investment house
b) Power to invest in non-allied enterprises
c) Power to own up to 100% of the equity in a thrift bank, rural
bank, a financial allied enterprise or a non-financial allied
enterprise.
d) In case of listed universal banks, the power to own up to 100% of
voting stock of ONLY one universal bank or commercial bank.
2. Commercial Banks
Have the powers to exercise all such powers to carry out commercial
banking such as accepting drafts and issuing letters of credit,
discounting and negotiating promissory notes, drafts, bills of
exchange and other evidences of debt, accepting or creating demand
deposits, receiving other types of deposit substitutes, buying and
selling foreign exchange and gold or silver bullion, acquiring
marketable bonds and other debt securities, and extending credit.
Commercial banks may also invest in allied enterprises; purchase,
hold or convey real estate; receive custody funds, documents and
valuable objects; act as financial agent and buy and sell by order of
and for the account of their customers, evidences of indebtedness
and all types of securities; make collections and payments for the
account of others; upon prior approval of the Monetary Board act as
managing agent, adviser, consultant or administrator of investment
accounts; rent out safety deposit box; and, engage in quasi-banking
functions.
3. Thrift Banks
Composed of (a) savings and mortgage banks, (b) stock savings and
loan associations and (c) private development banks. Thirft banks
may perform the following: grant secured or unsecured loans; invest
in readily marketable bonds and other debt securities, commercial
papers and accounts receivable, drafts, bills of exchange, acceptances
or commercial notes; issue domestic letters of credit; extend credit
facilities to private and government employees; extend credit against
the security of jewelry and similar items; accept savings and time
deposits; rediscount paper with Land Bank of the Phils, Devt Bank of
the Phils, and other GOCCs; accept foreign currency deposits; act as
correspondent for other financial institutions; purchase, hold or
convey real estate; and, offer other banking services provided in Sec
53 of RA no. 8791. With prior approval of the Monetary Board, thrift
banks may also: open current/checking accounts; engage in trust,
quasi-banking functions and money market operations; act as
collection agent for government entities; act as official depository or
national agencies and local government funds in the local
government unit the bank is located; issue mortgage and chattel
mortgage certificates; invest in equity of allied undertakings; issue
foreign letters of credit; and, pay/accept/negotiate import/export
draft bills of exchange.
4. Rural Banks
Rural banks may perform the following: extend loans and advances to
farmers, fishermen, farm families, cooperatives, merchants, private
and public employees; accept savings and time deposits; act as
correspondent for other financial institutions; rediscount paper with
Land Bank of the Phils, Devt Bank of the Phils or any other bank; act
as collection agent; offer other banking services provided in Sec 53 of
RA 8791. With prior approval of the Monetary Board, an RB may
perform: accept current or checking account provided rural bank has
a net asset of at least PHP5 million; accept negotiable order of
withdrawal accounts; act as trustee over estates/properties of
farmers and merchants; act as official depository of local government
unit in the local government unit where bank is locates; sell domestic
drafts; and invest in allied undertakings.
a) Designed to make needed credit available and readily accessible
in rural areas on reasonable terms
b) Provide adequate credit facilities to farmers and merchants, or to
coops of such merchants and farmers and, in general, to the
people of the rural communities, and to supervise the operation
of such banks.
5. Cooperative Banks
A Coop Bank shall primarily provide financial, banking and credit
services cooperatives and their members, and to general public. It
may also perform any or all of the banking services offered by other
types of banks subject to prior approval of the BSP.
Bank organized by the majority shares of which is owned and
controlled by, coops primarily to provide financial and credit services
to coops.
a) Formed by at least 15 persons whose primary objective is to
provide goods and services to members and enable them to
attain increased income and savings, investment.
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b) Purpose is primarily to provide financial and credit services to
cooperative organizations and their members
6. Specialized Government Banks
a) DBP: provide banking services principally to serve medium and
long term needs of agricultural and industrial enterprises,
particularly in the country-side and preferably for small and
medium scale enterprises
b) Landbank: to finance the acquisition by the Government of
landed estates for division and resale to small landowners, as
well as the purchase of the landholding by the agricultural lessee.
7. Islamic Banks
An islamic bank, insofar as not inconsistent or incompatible with RA
6848, may perform: open savings accounts for safekeeping with no
participation in profit or loss unless authorized by the holder; accept
investment account placements and invest the same for a term with
the bank's funds in Islamically permissible transactions on
participation basis; accept foreign currency deposits; buy and sell
foreign exchange; handle remittances and fund transfers; accept
drafts and issue letters of credit, negotiate notes and bills of
exchange and other evidence of indebtedness; act as collection
agent; provide financing; handle storage operations for goods or
commodity financing; issue shares for the account of institutions and
companies assisted by the bank; undertake various investments in all
transactions allowed by Islamic Shari'a; and other services allowed by
Monetary Board.
Al Amanah Islamic Bank (Government bank) to promote and
accelerate the socio-economic development of the ARMM by
performing banking, financing and investment operations and to
establish and participate in agricultural, commercial and industrial
ventures based on the Islamic concept of banking
a) Shari’a Advisory Council – 5 member board that offer advice
pertaining to application of Islamic Shari’a principles to the
bank’s transactions
b) Can’t charge interest.
8. Non-Stock Savings and Loan Association
Non-stock savings and loan association shall mean a non-stock, nonprofit corporation engaged in the business of accumulating the
savings of its members and using such accumulations for loans to
members to service the needs of households by providing long term
financing for home building and development and for personal
finance;
Policy of the State to:
a) encourage industry, frugality and the accumulation of savings,
and judicious utilization of credit among the members of nonstock savings and loan associations;
b) regulate and supervise the activities of non-stock savings and
loan associations in order to place their operations on a sound,
stable, and efficient basis to the end that they may be able to
better provide for the establishment of additional savings and
credit facilities in a fair manner to their members and to curtail
or prevent acts or practices of these Associations which are
prejudicial to their members' interest;
c) lay down the minimum requirements and the standards under
which non-stock savings and loan Associations may organize and
operate; and
d) maximize the protection of members of non-stock savings and
loan associations against misfeasance and malfeasance of the
trustees and officers thereof.
9. Foreign Banks in the Philippines
• Modes of Entry:
The Monetary Board may authorize foreign banks to operate in the
Philippine banking system through any one of the following modes
of entry:
(1) by acquiring, purchasing or owning up to one hundred
percent (100%) of the voting stock of an existing bank;
(2) by investing in up to one hundred percent (100%) of the
voting stockof a new banking subsidiary incorporated
under the laws of the Philippines; or
(3) by establishing branches with full banking authority.
• Qualification requirements:
• A foreign bank seeking to operate in the Philippines through
any of the modes of entry provided under Items “a” to “c”
under this Section on Modes of entry of foreign banks must, in
addition to satisfying the criteria prescribed under this
Section on Guidelines for selection, be –
• Widely-owned and publicly-listed in the country of origin,
unless the foreign bank applicant is owned and controlled by
the government of its country of origin; and
• Established, reputable and financially sound.
• Capital requirements of foreign banks.
• For locally incorporated subsidiaries.
• A foreign bank subsidiary shall comply with the minimum
capital and prudential capital ratios applicable to domestic
banks of the same category as prescribed under prevailing
regulations.
• For foreign bank branches
• A foreign bank branch shall comply with the minimum capital
and prudential capital ratios applicable to
domestic banks of the same category as prescribed under
prevailing regulations.
• For purposes of compliance with minimum capital regulations,
the term “capital of a foreign bank branch” shall refer to the
sum of: (a) permanently assigned capital, (b) undivided profits,
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and (c) accumulated net earnings, which is composed of
unremitted profits not yet cleared by the Bangko Sentral for
outward remittance and losses in operations, net of applicable
capital adjustments enumerated in Sec. 121.
• Permanently assigned capital shall be inwardly remitted and
converted into Philippine currency at the exchange rate
prevailing at the time of remittance.
• Any Net due from head office, branches and subsidiaries
outside the Philippines, excluding accumulated net earnings,
shall be deducted from capital.
For purposes of compliance with the SBL, the capital of a
foreign bank branch, subject to prescribed adjustments, shall
be synonymous to its “net worth”.
a) Subsidiaries
A subsidiary is a juridical entity separate and distinct from that of
its parent company, hence its liabilities are generally not
regarded as the liabilities of the parent company.
Taxability:
(a) Subject to income tax on worldwide income
(b) Dividends paid by a Philippine subsidiary to nonresident shareholders is subject to 30% in general or
15% subject to certain conditions or preferential tax
treaty rates.
(c) A subsidiary is liable to pay DST on the original issuance
of shares of stock at the rate of P2.00 for every P200.00
or fractional part of the par value of the shares of the
outstanding shares of stock
(d) The Philippine subsidiary is not entitled to the allocation
of overhead expenses of its parent company.
(e) A subsidiary is liable to pay the 10% improperly
accumulated earnings tax.
b) Branches
A branch office is merely an extension of the head office, thus its
liabilities are considered liabilities of the head office
Taxability:
(a) Subject to income tax only on Philippine source income
(b) Profits remitted by the branch to its head office are subject
to branch profit remittance tax of 15% or 10% depending on
certain tax treaties; however, if located in a special economic
zone then they are tax exempt.
(c) A branch office is not subject to documentary stamp tax
(DST) simply because it does not issue shares of stock
(d) Subject to certain conditions, overhead expenses of the
Head Office may be allocated to the Philippine branch office
(e) A branch is not liable to pay the 10% improperly
accumulated earnings tax
c) Offshore Banking Units(OBUs)
"Offshore Banking" shall refer to the conduct of banking
transactions in foreign currencies involving the receipt of funds
from external sources and the utilization of such funds as
provided in this Decree.
"Offshore Banking Unit" shall mean a branch, subsidiary or
affiliate of a foreign banking corporation which is duly
authorized by the Central Bank of the Philippines to transact
offshore banking business in the Philippines.
Qualification Requirements:
Subject to such regulatory guidelines as the Monetary Board may
prescribe, 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. However, local branches of
foreign banks already authorized to accept foreign currency
deposits under the provisions of R.A. No. 6426 may opt to apply
for authority to operate an offshore banking unit under the
provisions of this Decree: Provided, that, upon their receipt of a
corresponding certificate of authority to operate as an offshore
banking unit, the license to transact business under the
provisions of R.A. No. 6426 shall be deemed automatically
withdrawn.
d) Representative Offices
Form of a resident foreign corporation in the Philippines where
the legal entity of a foreign corporation is being brought into
the Philippines to engage in some activities allowed by law.
D. Authority to Engage in Banking and Quasi Banking Functions
Section 6, GBL. Authority to Engage in Banking and Quasi-Banking
Functions.
• No person or entity shall engage in banking operations or quasibanking functions without authority from the Bangko Sentral:
• Provided, however, That an entity authorized by the Bangko
Sentral to perform universal or commercial banking functions
shall likewise have the authority to engage in quasi-banking
functions.
• The determination of whether a person or entity is performing
banking or quasi-banking functions without Bangko Sentral
authority shall be decided by the Monetary Board. To resolve such
issue, the Monetary Board may;
• through the appropriate supervising and examining department
of the Bangko Sentral, examine, inspect or investigate the books
and records of such person or entity.
• Upon issuance of this authority, such person or entity may
commence to engage in banking operations or quasi-banking
function and shall continue to do so unless such authority is
sooner surrendered, revoked, suspended or annulled by the
Bangko Sentral in accordance with this Act or other special laws.
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• The department head and the examiners of the appropriate
supervising and examining department are hereby authorized to
administer oaths to any such person, employee, officer, or director
of any such entity and to compel the presentation or production of
such books, documents, papers or records that are reasonably
necessary to ascertain the facts relative to the true functions and
operations of such person or entity.
• Failure or refusal to comply with the required presentation or
production of such books, documents, papers or records within
a reasonable time shall subject the persons responsible
therefore to the penal sanctions provided under the New Central
Bank Act.
• Persons or entities found to be performing banking or quasi-banking
functions without authority from the Bangko Sentral shall be subject
to appropriate sanctions under the New Central Bank Act and other
applicable laws. (4a)
Central Bank – independent central monetary authority in the Philippines
Principal Responsibilities:
a. Provide independent policy direction in the areas of money,
banking, and credit
• Monetary board may prescribe ratios, ceilings, limitations, or other
forms of regulation on the diff types of accounts and practices of
banks and quasi-banks.
• MB may exempt particular transactions from such ratios, ceilings,
or limitations.
b. Supervision over the operations of banks finance companies and
other institutions performing similar functions
• Rule-making
• Examination and oversight Powers
• Including an enterprise wholly or majority-owned or controlled
by the bank
• Visitorial powers
• Enforcement of prompt action
• Licensing
Principal objectives
a. Maintain price stability
b. Control of domestic inflation by keeping it low and stable; utilization of
monetary policy/money supply tools
c. Promote and maintain monetary stability and the convertibility of the peso
Members
• must be natural-born citizens, of known probity, integrity and patriotism,
and Majority of members of Monetary Board must come from private
sector
Enjoys Fiscal Autonomy
• full flexibility to allocate and utilize their resources with the wisdom and
dispatch that their needs require (SC)
Administrative Autonomy
• freedom from interference and intervention by other agencies.
Organization:
• Body corporate
• Government-owned (but not controlled)
• Outstanding and paid-in capital of P50 billion
• Initial paid-in capital came from the assets of the predecessor Central Bank
of the Philippines.
Sec. 45, NCBA. Revaluation Profits and Losses
• Unrealized profits or losses arising from any revaluation of the Bangko
Sentral’s assets, liabilities or derivative instruments denominated in foreign
currencies with respect to the movements of prices and exchange rates from
third currencies to Philippine peso shall not be included in the computation
of the annual profits and losses of the Bangko Sentral.
• Any profits or losses arising in this manner shall be offset by any amounts
which, as a consequence of such revaluations, are owed by the Philippines to
any international or regional intergovernmental financial institution of which
the Philippines is a member or are owed by these institutions to the
Philippines.
• Any remaining unrealized profit or loss shall be carried in an account which
shall be named ‘Revaluation of International Reserve (RIRY, and the net
balance of which shall appear either among the liabilities or among the assets
of the Bangko Sentral, depending on whether the revaluations have produced
net profits or net losses.
• The RIR account shall be credited or debited for the periodic revaluation as
authorized in this section and to reflect the corresponding adjustment
resulting to reduction in the Bangko Sentral’s net foreign assets, liabilities and
foreign currency-denominated derivative instruments.
• The RIR shall be adjusted and recognized in the income statement upon sale
of gold and foreign securities, or when the foreign currency is repatriated to
local currency or is used to pay foreign obligations, or upon maturity of a
foreign currency-denominated forward or option contract involving the
Philippine peso.
Section 16, RCC.
• Grounds When Articles of Incorporation or Amendment May be Disapproved.
• The Commission may disapprove the articles of incorporation or any
amendment thereto if the same is not compliant with the requirements of
this Code: Provided, That the Commission shall give the incorporators,
directors, trustees, or officers as reasonable time from receipt of the
disapproval within which to modify the objectionable portions of the
articles or amendment. The following are ground for such disapproval:
a. The articles of incorporation or any amendment thereto is not
substantially in accordance with the form prescribed herein;
b. The purpose or purposes of the corporation are patently
unconstitutional, illegal, immoral or contrary to government rules
and regulations;
c. The certification concerning the amount of capital stock subscribed
and/or paid is false; and
d. The required percentage of Filipino ownership of the capital stock
under existing laws or the Constitution has not been complied with.
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Section 45, RCC.
• Adoption of Bylaws
• For the adoption of bylaws by the corporation, the affirmative vote of
the stockholders representing at least a majority of the outstanding
capital stock, or of at least a majority of the members in case on
nonstock corporations, shall be necessary.
• The bylaws shall be signed by the stockholders or members voting
for them and shall be kept in the principal office of the
corporation, subject to the inspection of the stockholders or
members during office hours.
• A copy thereof, duly certified by a majority of the directors or
trustees and countersigned by the secretary of the corporation,
shall be filed with the Commission and attached to the original
articles of incorporation.
• Notwithstanding the provisions of the preceding paragraph, bylaws
maybe adopted and filed prior to incorporation; in such case, such
bylaws shall be approved and signed by all incorporators and submitted
to the Commission, together with the articles of incorporation.
• In all cases, bylaws shall be effective only upon the issuance by the
Commission of a certification that the bylaws are in accordance with
this Code.
• The Commission shall not accept for filing the bylaws or any
amendment thereto of any bank, banking institution, building and loan
association, trust company, insurance company, public utility,
educational institution, or any other corporations governed by special
laws, unless accompanied by a certificate of the appropriate
government agency to the effect that such by laws or amendments are
in accordance with law.
Section 25, NCBA, Supervision and Examination
• The Bangko Sentral shall have supervision over, and conduct periodic or
special examinations of, banking institutions and quasi-banks, including their
subsidiaries and affiliates engaged in allied activities.
• For purposes of this section, 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.
• The department heads and the examiners of the supervising and/or
examining departments are hereby authorized to administer oaths to any
director, officer, or employee of any institution under their respective
supervision or subject to their examination and to compel the presentation of
all books, documents, papers or records necessary in their judgment to
ascertain the facts relative to the true condition of any institution as well as
the books and records of persons and entities relative to or in connection
with the operations, activities or transactions of the institution under
examination, subject to the provision of existing laws protecting or
safeguarding the secrecy or confidentiality of bank deposits as well as
investments of private persons, natural or juridical, in debt instruments
issued by the Government.
• 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 the Bangko Sentral, in an
amount to be fixed by the court. The provisions of Rule 58 of the New Rules
of Court insofar as they are applicable and not inconsistent with the
provisions of this section shall govern the issuance and dissolution of the
restraining order or injunction contemplated in this section.
II. Organization, Management and Administration of Banks
A. Organization of Banks
1. Conditions
SECTION 8, Organization, GBL
The Monetary Board may authorize the organization of a bank or
quasi-bank subject to the following conditions:
8.1. That the entity is a stock corporation (7);
8.2. That its funds are obtained from the public, which shall mean
twenty (20) or more persons (2-Da); and
8.3.
That the minimum capital requirements prescribed by the
Monetary Board for each category of banks are satisfied. (n)
No new commercial bank shall be established within three (3) years
from the effectivity of this Act. In the exercise of the authority
granted herein, the Monetary Board shall take into consideration
their capability in terms of their financial resources and technical
expertise and integrity. The bank licensing process shall incorporate
an assessment of the bank's ownership structure, directors and
senior management, its operating plan and internal controls as well
as its projected financial condition and capital base.
102 MORB, Basic Guidelines Establishing Domestic Banks
A new banking organization must have suitable/fit shareholders,
adequate financial strength, a legal structure in line with its
operational structure, a management with sufficient expertise and
integrity to operate the bank in a sound and prudent manner.
Prerequisites for the grant of a universal banking authority
a) Compliance with guidelines: A domestic bank seeking authority
to operate as a UB shall submit an application to the appropriate
supervising department of the Bangko Sentral. The applicant
shall comply with the guidelines for the issuance of a UB
authority and shall submit all the documentary requirements
enumerated in Appendix 1.
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b) Public offering of bank shares: A domestic bank applying for a
UB authority shall, as a condition to the approval of its
application, make a public offering of at least ten percent (10%)
of the required minimum capital and this condition must be
complied with before it can be granted the license for authority
to operate as a UB.
The term public offering shall mean the offer to sell equity shares
to the public.
Public shall refer to all prospective stockholders, excluding the
bank’s directors, shareholders owning twenty percent (20%) or
more of the bank’s subscribed capital stock, together with those
of their relatives within the fourth degree of consanguinity or
affinity, and corporations controlled by or affiliated with them.
A bank whose shares of stock are already listed in the Philippine
Stock Exchange (PSE) at the time of filing of its application for
UB authority shall be deemed to have complied with the public
offering requirement. Likewise, an applicant bank may opt to
have its shares listed in the PSE directly instead of passing
through the process of public offering. In either case, at least ten
percent (10%) of the applicant bank’s capital stock should be held
by public stockholders before it can be granted the license for
authority to operate as a UB.
c) Listing of bank shares in the stock exchange: Domestic banks
granted a UB license, existing or new, must list their shares in
the PSE within three (3) years: Provided, That in the case of new
UBs, the three (3) year period shall be reckoned from the date
the license to operate as a UB was granted. In the case of existing
UBs which have not listed their shares in the exchange, the three
(3) year period lapsed on 27 December 1998.
Establishment of new domestic banks.
There shall be a moratorium on the establishment of new
domestic banks, except as follows: (i) grant of new universal/
commercial banking license in connection with the upgrading of
an existing thrift bank under Phase 1, and (ii) establishment of
new banks in cities or municipalities where there are no existing
banking offices, both of which shall comply with the required
minimum capitalization under Sec. 121 and other qualification
requirements prescribed under existing regulations.
The moratorium on the establishment of new domestic banks
shall be fully lifted and locational restrictions shall be fully
liberalized under Phase 2 starting 01 January 2018.
Establishment of microfinance-oriented banks.
A microfinance-oriented bank is a bank that provides financial
services and caters primarily to the credit needs of the basic or
disadvantaged sectors such as farmers, peasants, artisanal
fisherfolk, workers in the formal sector and migrant workers,
workers in the informal sectors, indigenous peoples and cultural
communities, women, differently-abled persons, senior citizens,
victims of calamities and disasters, youth and students, children,
urban poor and low income households for their
microenterprises and small businesses so as to enable them to
raise their income levels and improve their living standards.
Microfinance loans are granted on the basis of the borrower’s
cash flow and are typically unsecured.
2. Capital Requirements
121 MORB, Minimum Required Capital
Definition of Capital.
The following provisions shall govern the capital requirements for
banks.
The term capital shall be synonymous to unimpaired capital and
surplus, combined capital accounts and net worth and shall refer to
the total of the unimpaired paid-in capital, surplus and undivided
profits. For this purpose, the following items shall likewise be added
to or deducted from capital:
• Deposits for stock subscription recognized as equity pursuant to
Section 123 shall be added to capital.
• The following shall be deducted from capital:
1. Treasury stock;
2. Unbooked allowance for probable losses (which includes
allowance for credit losses and impairment losses) and
other capital adjustments as may be required by the
Bangko Sentral;
3. Total outstanding unsecured credit accommodations,
both direct and indirect, to directors, officers,
stockholders, and their related interests (DOSRI)
granted by the bank proper;
4. Total outstanding unsecured loans, other credit
accommodations and guarantees granted to
subsidiaries;
5. Total outstanding loans, other credit accommodations
and guarantees granted to related parties, as defined in
Item “n”, Section 131 (Definition of Terms), that are not at
arm’s length terms as determined by the appropriate
supervising department of the Bangko Sentral;
6. Deferred tax assets that rely on future profitability of
the bank to be realized, net of any (a) allowance for
impairment and (b) associated deferred tax liability, if
the conditions cited in PAS 12 on Income Taxes are met:
Provided, That, if the resulting figure is a net deferred
tax liability, such excess cannot be added to net worth;
7. Reciprocal investment in equity of other banks/
enterprises, whether foreign or domestic, the deduction
shall be the lower of the investment of the bank or the
reciprocal investment of the other bank or enterprise;
and
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8. In the case of RBs/Coop Banks, the government
counterpart equity, except those arising from
conversion of arrearages under the Bangko Sentral
rehabilitation program.
Minimum Capitalization
Bank Category
Required Minimum Capitalization
P3.00 billion
6.00 billion
15.00 billion
20.00 billion
KB
Head Office Only
Up to 10 branches
11 to 100 branches
More than 100 branches
P2.00 billion
4.00 billion
10.00 billion 1
5.00 billion
TB
Head office in NCR
Head Office Only
Up to 10 branches
11 to 100 branches
More than 100 branches
P500 million
750 million
1.00 billion
2.00 billion
Head office in all other areas outside NCR
Head Office Only
Up to 10 branches
11 to 100 branches
More than 100 branches
P200 million
300 million
400 million
800 million
RB and Coop Banks
Head office in NCR
Head Office Only
Up to 10 branches
11 to 100 branches
More than 100 branches
P20 million
30 million
40 million
80 million
Head office in all other areas outside NCR (4th class to 6th class municipalities)
UB
Head Office Only
Up to 10 branches
11 to 100 branches
More than 100 branches
Head Office Only
Up to 10 branches
11 to 100 branches
More than 100 branches
P50 million
75 million
100 million
200 million
Head office in all other areas outside NCR (All cities up to 3rd class
municipalities)
Head Office Only
Up to 10 branches
11 to 100 branches
More than 100 branches
P10 million
15 million
20 million
40 million
3. Incorporators/Subscribers
SECTION 9, Issuance of Stocks, GBL
The Monetary Board may prescribe rules and regulations on the
types of stock a bank may issue, including the terms thereof and
rights appurtenant thereto to determine compliance with laws and
regulations governing capital and equity structure of banks: Provided,
That banks shall issue par value stocks only.
SECTION 19, Prohibition on Public Officials, GBL
Except as otherwise provided in the Rural Banks Act, no appointive or
elective public official, whether full-time or part-time shall at the
same time serve as officer of any private bank, save in cases where
such service is incident to financial assistance provided by the
government or a government-owned or controlled corporation to the
bank or unless otherwise provided under existing laws.
4. Bank Branches
SECTION 20, Bank Branches, GBL
Universal or commercial banks may open branches or other offices
within or outside the Philippines upon prior approval of the Bangko
Sentral.
Branching by all other banks shall be governed by pertinent laws.
A bank may, subject to prior approval of the Monetary Board, use any or
all of its branches as outlets for the presentation and/or sale of the
financial products of its allied undertaking or of its investment house
units.
A bank authorized to establish branches or other offices shall be
responsible for all business conducted in such branches and offices to
the same extent and in the same manner as though such business had all
been conducted in the head office. A bank and its branches and offices
shall be treated as one unit.
Case # 1: Citibank N.A. v. Sabeniano, 504 SCRA 378 (2006)
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It bears to emphasize that banking is impressed with public interest and
its fiduciary character requires high standards of integrity and
performance. A bank is under the obligation to treat the accounts of its
depositors with meticulous care whether such accounts consist only of a
few hundred pesos or of millions of pesos. The bank must record every
single transaction accurately, down to the last centavo, and as promptly
as possible. Petitioner Citibank evidently failed to exercise the required
degree of care and transparency in its transactions with respondent,
thus, resulting in the wrongful deprivation of her property.
B. Stockholdings
1. Issuance of Stocks
SECTION 9, Issuance of Stocks, GBL
The Monetary Board may prescribe rules and regulations on the
types of stock a bank may issue, including the terms thereof and
rights appurtenant thereto to determine compliance with laws and
regulations governing capital and equity structure of banks: Provided,
That banks shall issue par value stocks only.
SECTION 12, Stockholdings of Family Groups or Related Interests,
GBL
Stockholdings of individuals related to each other within the fourth
degree of consanguinity or affinity, legitimate or common-law, shall
be considered family groups or related interests and must be fully
disclosed in all transactions by such an individual with the bank.
SECTION 13, Corporate Stockholdings, GBL
Two or more corporations owned or controlled by the same family
group or same group of persons shall be considered related interests
and must be fully disclosed in all transactions by such corporations
or related groups of persons with the bank.
2. Treasury Stocks
SECTION 10, Treasury Stocks, GBL
No bank shall purchase or acquire shares of its own capital stock or
accept its own shares as a security for a loan, except when
authorized by the Monetary Board: Provided, That in every case the
stock so purchased or acquired shall, within six (6) months from the
time of its purchase or acquisition, be sold or disposed of at a public
or private sale
3. Foreign Stockholdings
SECTION 11, Foreign Stockholdings, GBL
Foreign individuals and non-bank corporations may own or control
up to forty percent (40%) of the voting stock of a domestic bank. This
rule shall apply to Filipinos and domestic non-bank corporations.
The percentage of foreign-owned voting stocks in a bank shall be
determined by the citizenship of the individual stockholders in that
bank. The citizenship of the corporation which is a stockholder in a
bank shall follow the citizenship of the controlling stockholders of
the corporation, irrespective of the place of incorporation.
Sec. 5. Head Office Guarantee, R.A. 7353
The head office of foreign bank branches shall guarantee prompt
payment of all liabilities of its Philippine branches.
Sec. 7, Board of Directors, R.A. 7353
Non-Filipino citizens may become members of the Board of Directors
of a bank to the extent of the foreign participation in the equity of
said bank.
4. Risk-Based Capital
SECTION 34, Risk-Based Capital, GBL
The Monetary Board shall prescribe the minimum ratio which the net
worth of a bank must bear to its total risk assets which may include
contingent accounts.
For purposes of this Section, the Monetary Board may require that
such ratio be determined on the basis of the net worth and risk
assets of a bank and its subsidiaries, financial or otherwise, as well as
prescribe the composition and the manner of determining the net
worth and total risk assets of banks and their subsidiaries: Provided,
That in the exercise of this authority, the Monetary Board shall, to
the extent feasible, conform to internationally accepted standards,
including those of the Bank for International Settlements (BIS),
relating to risk-based capital requirements: Provided, further, That it
may alter or suspend compliance with such ratio whenever necessary
for a maximum period of one (1) year: Provided, finally, That such
ratio shall be applied uniformly to banks of the same category.
In case a bank does not comply with the prescribed minimum ratio,
the Monetary Board may limit or prohibit the distribution of net
profits by such bank and may require that part or all of the net profits
be used to increase the capital accounts of the bank until the
minimum requirement has been met. The Monetary Board may,
furthermore, restrict or prohibit the acquisition of major assets and
the making of new investments by the bank, with the exception of
purchases of readily marketable evidences of indebtedness of the
Republic of the Philippines and of the Bangko Sentral and any other
evidences of indebtedness or obligations the servicing and
repayment of which are fully guaranteed by the Republic of the
Philippines, until the minimum required capital ratio has been
restored.
In case of a bank merger or consolidation, or when a bank is under
rehabilitation under a program approved by the Bangko Sentral, the
Monetary Board may temporarily relieve the surviving bank,
consolidated bank, or constituent bank or corporations under
rehabilitation from full compliance with the required capital ratio
under such conditions as it may prescribe.
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Before the effectivity of the rules which the Monetary Board is
authorized to prescribe under this provision, Section 22 of the
General Banking Act, as amended, Section 9 of the Thrift Banks Act,
and all pertinent rules issued pursuant thereto, shall continue to be
in force.
C. Organizational Set-up
1. Directors and Officers
SECTION 15, Board of Directors, GBL
The provisions of the Corporation Code to the contrary
notwithstanding, there shall be at least five (5), and a maximum of
fifteen (15) members of the board of directors of bank, two (2) of
whom shall be independent directors. An "independent director" shall
mean a person other than an officer or employee of the bank, its
subsidiaries or affiliates or related interests.
Non-Filipino citizens may become members of the board of directors
of a bank to the extent of the foreign participation in the equity of
said bank. (Sec. 7, RA 7721)
The meetings of the board of directors may be conducted through
modern technologies such as, but not limited to, teleconferencing
and video-conferencing.
SECTION 17, Directors of Merged or Consolidated Banks, GBL
In the case of a bank merger or consolidation, the number of
directors shall not exceed twenty-one (21).
SEC. 22. The Board of Directors or Trustees of a Corporation;
Qualification and Term, RCC
Unless otherwise provided in this Code, the board of directors or
trustees shall exercise the corporate powers, conduct all business,
and control all properties of the corporation.
Directors shall be elected for a term of one (1) year from among the
holders of stocks registered in the corporation’s books, while
trustees shall be elected for a term not exceeding three (3) years from
among the members of the corporation. Each director and trustee
shall hold office until the successor is elected and qualified. A
director who ceases to own at least one (1) share of stock or a trustee
who ceases to be a member of the corporation shall cease to be such.
The board of the following corporations vested with public interest
shall have independent directors constituting at least twenty percent
(20%) of such board:
a. Corporations covered by Section 17.2 of Republic Act No. 8799,
otherwise known as “The Securities Regulation Code,” namely those
whose securities are registered with the Commission, corporations
listed with an exchange or with assets of at least Fifty million pesos
(P50,000,000.00) and having two hundred (200) or more holders of
shares, with at least one hundred (100) shares of a class of its equity
shares;
b. Banks and quasi-banks, NSSLAs, pawnshops, corporations engaged
in money service business, pre-need, trust and insurance companies,
and other financial intermediaries; and
c. Other corporations engaged in business vested with public interest
similar to the above, as may be determined by the Commission, after
taking into account relevant factors which are germane to the
objective and purpose of requiring the election of an independent
director, such as the extent of minority ownership, type of financial
products or securities issued or offered to investors, public interest
involved in the nature of business operations, and other analogous
factors.
An independent director is a person who, apart from shareholdings
and fees received from the corporation, is independent of
management and free from any business or other relationship which
could, or could reasonably be perceived to materially interfere with
the exercise of independent judgment in carrying out the
responsibilities as a director.
Independent directors must be elected by the shareholders present
or entitled to vote in absentia during the election of directors.
Independent directors shall be subject to rules and regulations
governing their qualifications, disqualifications, voting requirements,
duration of term and term limit, maximum number of board
memberships and other requirements that the Commission will
prescribe to strengthen their independence and align with
international best practices.
SEC. 24. Corporate Officers, RCC
Immediately after their election, the directors of a corporation must
formally organize and elect: (a) a president, who must be a director;
(b) a treasurer, who must be a resident; (c) a secretary, who must be a
citizen and resident of the Philippines; and (d) such other officers as
may be provided in the bylaws. If the corporation is vested with
public interest, the board shall also elect a compliance officer. The
same person may hold two (2) or more positions concurrently, except
that no one shall act as president and secretary or as president and
treasurer at the same time, unless otherwise allowed in this Code.
The officers shall manage the corporation and perform such duties as
may be provided in the bylaws and/or as resolved by the board of
directors.
SEC. 29. Compensation of Directors or Trustees, RCC
In the absence of any provision in the by-laws fixing their
compensation, the directors or trustees shall not receive any
compensation in their capacity as such, except for reasonable per
diems: Provided however, That the stockholders representing at least
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a majority of the outstanding capital stock or majority of the
members may grant directors or trustees with compensation and
approve the amount thereof at a regular or special meeting.
In no case shall the total yearly compensation of directors exceed ten
(10%) percent of the net income before income tax of the corporation
during the preceding year.
Directors or trustees shall not participate in the determination of
their own per diems or compensation.
Corporations vested with public interest shall submit to their
shareholders and the Commission, an annual report of the total
compensation of each of their directors or trustees.
SECTION 18. Compensation and Other Benefits of Directors and
Officers. — To protect the funds of depositors and creditors, the
Monetary Board may regulate the payment by the bank to its
directors and officers of compensation, allowance, fees, bonuses,
stock options, profit sharing and fringe benefits only in exceptional
cases and when the circumstances warrant, such as but not limited
to the following:
18.1. When a bank is under comptrollership or conservatorship; or
18.2. When a bank is found by the Monetary Board to be conducting
business in an unsafe or unsound manner; or
18.3. When a bank is found by the Monetary Board to be in an
unsatisfactory financial condition.
Section 26. Organizational Security Measures, IRR of DPA
Where appropriate, personal information controllers and personal
information processors shall comply with the following guidelines for
organizational security:
a. Compliance Officers. Any natural or juridical person or other body
involved in the processing of personal data shall designate an
individual or individuals who shall function as data protection officer,
compliance officer or otherwise be accountable for ensuring
compliance with applicable laws and regulations for the protection of
data privacy and security.
2. Fit and Proper Rule
SECTION 16. Fit and Proper Rule, GBL
To maintain the quality of bank management and afford better
protection to depositors and the public in general, the Monetary
Board shall prescribe, pass upon and review the qualifications and
disqualifications of individuals elected or appointed bank directors or
officers and disqualify those found unfit.
After due notice to the board of directors of the bank, the Monetary
Board may disqualify, suspend or remove any bank director or officer
who commits or omits an act which render him unfit for the position.
In determining whether an individual is fit and proper to hold the
position of a director or officer of a bank, regard shall be given to his
integrity, experience, education, training, and competence.
3. Prohibition on Public Officials
SECTION 19, Prohibition on Public Officials, GBL
Except as otherwise provided in the Rural Banks Act, no appointive or
elective public official, whether full-time or part-time shall at the
same time serve as officer of any private bank, save in cases where
such service is incident to financial assistance provided by the
government or a government-owned or controlled corporation to the
bank or unless otherwise provided under existing laws.
D. Management and Administration
SECTION 21, Banking Days and Hours, GBL
Unless otherwise authorized by the Bangko Sentral in the interest of the
banking public, all banks including their branches and offices shall
transact business on all working days for at least six (6) hours a day. In
addition, banks or any of their branches or offices may open for business
on Saturdays, Sundays or holidays for at least three (3) hours a day:
Provided, That banks which opt to open on days other than working days
shall report to the Bangko Sentral the additional days during which they
or their branches or offices shall transact business.
For purposes of this Section, working days shall mean Mondays to
Fridays, except if such days are holidays.
SECTION 22, Strikes and Lockouts, GBL
The banking industry is hereby declared as indispensable to the national
interest and, not withstanding the provisions of any law to the contrary,
any strike or lockout involving banks, if unsettled after seven (7) calendar
days shall be reported by the Bangko Sentral to the Secretary of Labor
who may assume jurisdiction over the dispute or decide it or certify the
same to the National Labor Relations Commission for compulsory
arbitration. However, the President of the Philippines may at any time
intervene and assume jurisdiction over such labor dispute in order to
settle or terminate the same.
III. Banking Functions - Deposit Taking
A. Deposit-Taking and Lending, Nature of Bank Deposits
Article 1980, NCC
Fixed, savings, and current deposits of money in banks and similar
institutions shall be governed by the provisions concerning simple loan.
Case # 1: Citibank N.A. v. Sabeniano, 504 SCRA 378 (2006)
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Citibank was the creditor of respondent for her outstanding loans. At the
same time, respondent was the creditor of petitioner Citibank, as far as
her deposit account was concerned, since bank deposits, whether fixed,
savings, or current, should be considered as simple loan or mutuum by
the depositor to the banking institution. Both debts consist in sums of
money.
Case # 2: In the Matter of the Intestate Estate of Reynaldo Rodriguez v.
Rodriguez, 854 SCRA 63 (2018)
A joint account is one that is held jointly by two or more natural persons,
or by two or more juridical persons or entities. The depositors are coowners of the said account, and their share in the deposits shall be
presumed equal, unless the contrary is proved. The nature of joint
accounts is governed by the rule on co-ownership embodied in Art. 485
of the Civil Code
General Rule: Shares of the owners of the joint account holders are equal
Exception: When overturned by evidence to the contrary or when there
is survivorship agreement between the co-depositors.
Hence, the mere fact that an account is joint is not conclusive of the fact
that the owners thereof have equal claims over the funds in question.
Case # 3: Citystate Savings Bank v. Tobias, 858 SCRA 63 (2018)
The contract between the bank and its depositor is governed by the
provisions of the Civil Code on simple loan or mutuum, with the bank as
the debtor and the depositor as the creditor.
In light of these, banking institutions may be held liable for damages for
failure to exercise the diligence required of it resulting to contractual
breach or where the act or omission complained of constitutes an
actionable tort.
Case # 4: Philippine National Bank v. Bacani, 867 SCRA 104 (2018)
Bank deposits are in the nature of a simple loan or mutuum, which must
be paid upon demand by the depositor. As such, the deposit of whatever
amount to PNB creates a debtor-creditor relationship between the bank
and the depositor. PNB, as the recipient of the deposit, is duty-bound to
pay or release the amount deposited whenever the depositor so requires.
B. Kinds of Deposits
1. Demand Deposits
All those liabilities of the BSP 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; accounts
which pay funds on demand without notice of intended withdrawal
Only a universal or commercial bank can accept or create demand
deposits
Unless other banks acquire prior approval, and subject to condition
prescribed by the MB
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 MB
Checks representing demand deposits do not have legal tender
power and their acceptance in the payment of debts, both public and
private, is at the option of the creditor:
Provided, however, That 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.
2. Savings Deposits
Banks are prohibited from issuing/accepting withdrawal slips or any
other similar instruments designed to effect withdrawals of savings
deposits without requiring the depositors concerned to present their
passbooks and accomplishing the necessary withdrawal slips, except
for banks authorized by the Bangko Sentral to adopt the no passbook
withdrawal system.
The provisions of Item “b” of Sec. 203 shall also apply to withdrawals
from savings deposits.
3. Negotiable Order of Withdrawal Accounts
Negotiable Order of Withdrawal (NOW) accounts are interestbearing deposit accounts that combine the payable on demand
feature of checks and investment feature of savings accounts.
A UB/KB may offer NOW accounts without prior authority of the
Monetary Board.
A TB/RB/Coop Bank may accept NOW accounts upon prior approval
of the Monetary Board.
Prerequisites to accept negotiable order of withdrawal accounts for
thrift banks/rural banks/cooperative banks.
In addition to the Standard Pre-qualification Requirements for the
Grant of Banking Authorities enumerated in Appendix 5, a TB/RB/
Coop Bank applying for authority to accept NOW accounts shall also
comply with the following requirements:
1. The applicant TB must have complied with the minimum
capital required under Sec. 121.
In the case of RB/Coop Bank, it must have net assets of at
least P5.0 million: Provided, That RBs which have been
authorized to accept or create NOW accounts prior to the
approval of R.A. No. 7353 (Rural Banks Act of 1992) shall be
allowed to continue servicing such deposits. The terms
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capital and net assets shall have the same meaning as in Sec.
121.
2. It has neither unpaid assessment due nor past due
obligations with the PDIC.
Minimum features.
Deposit substitute instruments issued by entities performing quasibanking functions shall have the following minimum features:
Requirements for accepting negotiable order of withdrawal
accounts.
a. The present value and maturity value and/or the principal amount
and interest rate and such other information as may be necessary to
enable the parties to determine the cost or yield of the borrowing or
placement shall be specified.
After a TB’s/RB’s/Coop Bank’s application to accept NOW account
has been approved, it may actually accept the same subject to the
following conditions:
1. Submission of a certification signed by the president/
chairman of the board of the bank stating that the
requirements enumerated in this Section on Prerequisites to
accept negotiable order of withdrawal accounts for thrift
banks/rural banks/cooperative banks have been complied
with up to the day before the NOW account services are
actually offered/extended to the public; and
2. That it has complied with all other conditions that the
Bangko Sentral may impose.
The applicant bank shall submit a written notice to the
appropriate supervising department of the Bangko Sentral of
the actual date when the NOW account deposit service is
offered to the public not later than ten (10) banking days
from such offering of the service.
4. Time Deposits
Time deposits shall be issued for a specific period of term.
Certificates of Time Deposit
a) Negotiable Certificates of Time Deposits (NCTDs)
(1) UBs/KBs may issue NCTDs without approval of the Bangko
Sentral.
(2) TBs/RBs/Coop Banks may issue NCTDs upon the prior
approval of the Bangko Sentral.
b) Non-Negotiable Certificates of Time Deposit
Banks may issue long-term non-negotiable tax-exempt
certificates of time deposit without approval of the Bangko
Sentral.
5. Deposit Substitute Operations
Any deposit substitute transaction by a bank performing quasibanking functions shall be limited to its own promissory notes,
repurchase agreements, and certificates of assignment/participation
with recourse.
Sec 95 , NCBA
A deposit substitute refers to a form of obtaining funds from the
public, other than deposits, through the issuance, endorsement or
acceptance of debt instruments for the purpose of relending or
purchase of other receivables and obligations.
b. The date of issuance shall be indicated at the upper right corner
of the instrument, and directly below which shall be the maturity
period or the word “demand”, if it is a demand instrument.
c. The payee may be identified by his trust account/deposit account
number in both negotiable and non-negotiable instruments.
d. Securities which are the subject of a repurchase agreement or a
certificate of assignment/participation with recourse, shall be
particularly described on the face of said instruments or on a
separate instrument attached and specifically referred to therein and
made an integral part thereof as to the maker, value, maturity, serial
number, and such other particulars as shall clearly identify the
securities.
e. The instrument shall provide for the payment of liquidated
damages, in addition to stipulated interest, in case of default by the
maker or issuer, as well as attorney’s fees and costs of collection in
case of suit
f. A conspicuous notice at the lower center margin of the face of the
instrument that the transaction is not insured by the PDIC shall be
indicated.
g. The corporate name of the issuer shall be printed at the upper
center margin of the instrument and directly below which shall be a
designation of the instrument, such as “Promissory Note” or
“Repurchase Agreement”.
h. The words “duly authorized officer” shall be placed directly
below the signature of the person signing for the maker or issuer.
i. Each instrument shall be serially pre-numbered.
j. The copy delivered to the payee shall bear the word “Original” and
the copies retained by the issuer shall be identified as “Duplicate”,
“File Copy” or words of similar import.
k. Only security paper with adequate safeguards against alteration
or falsification shall be used.
6. Foreign Currency Deposits
Section 4, Foreign currency cover requirements, RA 6426
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BANKS AND FINANCIAL INTERMEDIARIES | MGG
Except as the Monetary Board may otherwise prescribe or allow, the
depository banks shall maintain at all times a one hundred percent
foreign currency cover for their liabilities, of which cover at least
fifteen percent 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. Such foreign currency loans may
include loans to domestic enterprises which are export-oriented or
registered with the Board of Investments, subject to the limitations
to be prescribed by the Monetary Board on such loans. Except as the
Monetary Board may otherwise prescribe or allow, the foreign
currency cover shall be in the same currency as that of the
corresponding foreign currency deposit liability. 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 depository banks. (As amended
by PD No. 1453, June 11, 1978.)
Depository banks which, on account of networth, resources, past
performance, or other pertinent criteria, have been qualified by the
Monetary Board to function under an expanded foreign currency
deposit system, shall be exempt from the requirements in the
preceding paragraph of maintaining fifteen percent (15%) of the cover
in the form of foreign currency deposit with the Central Bank.
Subject to prior Central Bank approval when required by Central
Bank regulations, said depository banks may extend foreign currency
loans to any domestic enterprise, without the limitations prescribed
in the preceding paragraph regarding maturity and marketability, and
such loans shall be eligible for purposes of the 100% foreign currency
cover prescribed in the preceding paragraph. (As added by PD No.
1035.)
Section 5, Withdrawability and transferability of deposits. R.A. 6426
There shall be no restriction on the withdrawal by the depositor of
his deposit or on the transferability of the same abroad except those
arising from the contract between the depositor and the bank.
Section 6, Tax exemption, R.A. 6426
All foreign currency deposits made under this Act, as amended by PD
No. 1035, as well as foreign currency deposits authorized under PD
No. 1034, 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 nonresidents so long as the deposits are eligible or allowed under
aforementioned laws and, in the case of nonresidents, irrespective of
whether or not they are engaged in trade or business in the
Philippines. (As amended by PD No. 1246, prom. Nov. 21, 1977.)
7. Anonymous and Numbered Accounts
Anonymous bank account, also referred to as “Numbered bank
accounts: are bank accounts wherein the identity of the holder is
replaced with a multi-digit number known only to the client and
select private bankers. The name of the client is only accessible to
the client and a small circle senior staff the bank.
Demand v. Time deposit
Case # 1: BPI Family Savings Bank v. First Metro Investment Corporation, 429
SCRA 30 (2004)
A “time deposit” is defined as “one the payment of which cannot legally be
required within such a specified number of days” while “demand deposits” are “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 (depositor’s) checks.
Case # 2: Philippine Banking Corporation v. Commissioner of Internal
Revenue, 577 SCRA 366 (2009)
Savings Account
Time Deposit
SSDA
Interest rate
Period
Regular savings
interest
None
Higher interest
rate
Fixed Term
Higher interest
rate
Fixed Term
Evidence d by:
Passbook
Passbook
Pre-termination
None
Certificate of
Time Deposit
With penalty
Holding Period
None
Yes
Yes
Withdrawal
Allowed
Withdrawal
amounts to pretermination
Allowed provided
the minimum
amount to
earn the
interest
maintained,
otherwise, the
regular
With penalty
Deposit substitutes
Case # 3: Banco de Oro v. Republic, 800 SCRA 392 (2016)
Deposits of money in banks and similar institutions are considered simple loans.
Hence, the relationship between a depositor and a bank is that of creditor and
debtor. The ownership of the amount deposited is transmitted to the bank upon
the perfection of the contract and it can make use of the amount deposited for its
own transactions and other banking operations. Although the bank has the
obligation to return the amount deposited , it has no obligation to return or
deliver the same money that was deposited.
The definition of deposit substitutes in the banking laws was brought about by an
observation that banks and non-bank financial intermediaries have increasingly
resorted to issuing a variety of debt instruments, other than bank deposits, to
obtain funds from the public. The definition also laid down the groundwork for
the supervision by the Central Bank of quasi-banking functions.
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BANKS AND FINANCIAL INTERMEDIARIES | MGG
Foreign currency deposits
Case # 4: Cancio v. Court of Tax Appeals, 154 SCRA 731 (1987)
The transferability abroad of foreign currency deposits is unrestricted, and the
only exception is a restriction arising from contract between depositor and bank
damages.
Case # 5: Salvacion v. Central Bank of the Philippines, 278 SCRA 27 (1997)
The foreign currency deposit made by a transient or a tourist is not the kind of
deposit encouraged by PD Nos. 1034 and 1035 and given incentives and
protection by said laws because such depositor stays only for a few days in the
country and, therefore, will maintain his deposit in the bank only for a short time.
General Rule: Shares of the owners of the joint account holders are equal
Exception: When overturned by evidence to the contrary or when there is
survivorship agreement between the co-depositors.
C. Survivorship Agreement
Definition: A contract wherein the parties agree that money in bank account or
other certain properties are theirs in common. However, upon death of any one
of the parties, such property will belong to the surviving party and has an effect
of a donation.
Case # 3: In the Matter of the Intestate Estate of Reynaldo Rodriguez v.
Rodriguez, 854 SCRA 63 (2018), supra
Hence, the mere fact that an account is joint is not conclusive of the fact that the
owners thereof have equal claims over the funds in question.
Survivorship agreement overrides the co-ownership. If there is no survivorship
agreement, co ownership will follow.
Case # 1: Ana Rivera v. People’s Bank and Trust Company, 73 Phil 546 (1942)
It is well established that a bank account may be so created that two persons shall
be joint owners thereof during their mutual lives, and the survivor take the whole
on the death of the other. The right to make such joint deposits has generally
been held not to be done with by statutes abolishing joint tenancy and
survivorship generally as they existed at common law.
Case # 2: Vitug v. Court of Appeals, 183 SCRA 755 (1990)
The validity of the contract, with the survivorship agreement, seems debatable by
reason of its “survivor-take-all” feature, but in reality, that contract imposed a
mere obligation with a term, the term being death. Such agreements are
permitted by the Civil Code.
D. Duties of Banks
1. Meticulous Care
2. Payment to Proper Party
3. In case of Death of Depositor
Case # 1: Bank of the Philippine Islands v. Court of Appeals, 326 SCRA 641
(2000), supra
The banking business is affected with public interest. By the nature of its
functions, a bank is under obligation to treat the accounts of its depositors "with
meticulous care, always having in mind the fiduciary nature of their relationship."
As such, in dealing with its depositors, a bank should exercise its functions not
only with the diligence of a good father of a family but it should do so with the
highest degree of care.
Case #2: Serfino v. Far East Bank and Trust Company, 683 SCRA 380 (2012)
As current laws provide, the bank’s contractual relations are with its depositor,
not with the third party;"a bank is under obligation to treat the accounts of its
depositors with meticulous care and always to have in mind the fiduciary nature
of its relationship with them. In the absence of any positive duty of the bank to an
adverse claimant, there could be no breach that entitles the latter to moral
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BANKS AND FINANCIAL INTERMEDIARIES | MGG
ANTI-MONEY LAUNDERING ACT
(Rep. Act No. 9160, as amended by Rep. Acts No. 9194, 10167, 10168, and 10365)
A. Nature and Purpose
Overview of AMLA:
- Criminalizes money laundering
- Created a Financial Intelligence Unit -AMLC
- Imposes requirements on customer identification, record-keeping and
reporting of covered and suspicious transactions
- Relaxes strict bank deposit secrecy laws
- Provides for freezing/seizure/forfeiture recovery of dirt money/property
- Provides for international cooperation - mutuality and reciprocity
What is Money Laundering? (Section 4, AMLA)
A crime committed by any person who, knowing that any monetary
instrument or property involves the proceeds of any unlawful activity
It is committed by the following:
(a) Any person knowing that any monetary instrument or property represents,
involves, or relates to, the proceeds of any unlawful activity, transacts or
attempts to transact said monetary instrument or property.
(b) Any person knowing that any monetary instrument or property involves
the proceeds of any unlawful activity, performs or fails to perform any act as a
result of which he facilitates the offense of money laundering referred to in
paragraph (a) above.
(c) Any person knowing that any monetary instrument or property is required
under this Act to be disclosed and filed with the Anti-Money Laundering
Council (AMLC), fails to do so.
request for assistance from a foreign State, or believed by the Council, on the
basis of 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 activity;
(3) to institute civil forfeiture proceedings and all other remedial proceedings
through the Office of the 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 initiate investigations of covered transactions, money laundering
activities and other violations of this Act;
(6) to freeze any monetary instrument or property alleged to be proceeds of
any unlawful activity;
(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 money laundering, the viable
means of preventing money laundering and the effective ways of prosecuting
and punishing offenders; and
(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.
B. Structure and Functions of the Anti-Money Laundering Council
Section 7, AMLA
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 members. The AMLC shall act
unanimously in the discharge of its functions as defined hereunder:
(1) to require and receive covered transaction reports from covered
institutions;
(2) to issue orders addressed to the appropriate Supervising Authority or the
covered institution to determine the true identity of the owner of any
monetary instrument or property subject of a covered transaction report or
C. Covered Institutions
Section 3(a), AMLA, as amended by Sec. 1 of Rep. Act No. 10365
(a) ‘Covered persons’, natural or juridical, refer to:
(1) banks, non-banks, quasi-banks, trust entities, foreign exchange dealers,
pawnshops, money changers, remittance and transfer companies and other
similar entities and all other persons and their subsidiaries and affiliates
supervised or regulated by the Bangko Sentral ng Pilipinas (BSP);
(2) insurance companies, pre-need companies and all other persons
supervised or regulated by the Insurance Commission (IC);
(3) (i) securities dealers, brokers, salesmen, investment houses and other
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BANKS AND FINANCIAL INTERMEDIARIES | MGG
similar persons managing securities or rendering services as investment
agent, advisor, or consultant, (ii) mutual funds, close-end investment
companies, common trust funds, and other similar persons, and (iii) 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
the Securities and Exchange Commission (SEC);
(4) jewelry dealers in precious metals, who, as a business, trade in precious
metals, for transactions in excess of One million pesos (P1,000,000.00);
(5) jewelry dealers in precious stones, who, as a business, trade in precious
stones, for transactions in excess of One million pesos (P1,000,000.00);
(6) company service providers which, as a business, provide any of the
following services to third parties: (i) acting as a formation agent of juridical
persons; (ii) acting as (or arranging for another person to act as) a director or
corporate secretary of a company, a partner of a partnership, or a similar
position in relation to other juridical persons; (iii) providing a registered
off ice, business address or accommodation, correspondence or
administrative address for a company, a partnership or any other legal person
or arrangement; and (iv) acting as (or arranging for another person to act as) a
nominee shareholder for another person; and
(7) persons who provide any of the following services:
(i) managing of client money, securities or other assets;
(ii) management of bank, savings or securities accounts;
(iii) organization of contributions for the creation, operation or management
of companies; and
(iv) creation, operation or management of juridical persons or arrangements,
and buying and selling business entities.
(b) “Covered transaction” is 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.
It likewise refers to 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. Money Laundering; how committed; Unlawful Activities or Predicate
Crimes
Sec. 3(i), AMLA, as amended by Sec. 2 of Rep. Act No. 10365
“(i) ‘Unlawful activity’ refers to any act or omission or series or combination
thereof involving or having direct relation to the following:
“(1) Kidnapping for ransom under Article 267 of Act No. 3815, otherwise known
as the Revised Penal Code, as amended;
“(2) Sections 4, 5, 6, 8, 9, 10, 11, 12, 13, 14, 15 and 16 of Republic Act No. 9165,
otherwise known as the Comprehensive Dangerous Drugs Act of 2002;
“(3) 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;
Notwithstanding the foregoing, the term ‘covered persons’ shall exclude
lawyers and accountants acting as independent legal professionals in relation
to information concerning their clients or where disclosure of information
would compromise client confidences or the attorney-client relationship:
Provided, That these lawyers and accountants are authorized to practice in
the Philippines and shall continue to be subject to the provisions of their
respective codes of conduct and/or professional responsibility or any of its
amendments.
“(4) Plunder under Republic Act No. 7080, as amended;
***New Covered Persons***
1. Casinos
2. Real Estate Developer
3. Real Estate Broker
4. Offshore gaming operators
5. OGO-Service Providors
“(7) Piracy on the high seas under the Revised Penal Code, as amended and
Presidential Decree No. 532;
D. Covered and suspicious transactions
Section 3(b), AMLA
“(5) Robbery and extortion under Articles 294, 295, 296, 299, 300, 301 and 302
of the Revised Penal Code, as amended;
“(6) Jueteng and Masiao punished as illegal gambling under Presidential
Decree No. 1602;
“(8) Qualified theft under Article 310 of the Revised Penal Code, as amended;
“(9) Swindling under Article 315 and Other Forms of Swindling under Article
316 of the Revised Penal Code, as amended;
“(10) Smuggling under Republic Act Nos. 455 and 1937;
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BANKS AND FINANCIAL INTERMEDIARIES | MGG
“(11) Violations of Republic Act No. 8792, otherwise known as the Electronic
Commerce Act of 2000;
Unlawful Possession, Manufacture, Dealing In, Acquisition or Disposition of
Firearms, Ammunition or Explosives;
“(12) Hijacking and other violations under Republic Act No. 6235; destructive
arson and murder, as defined under the Revised Penal Code, as amended;
“(27) Violation of Presidential Decree No. 1612, otherwise known as the AntiFencing Law;
“(13) Terrorism and conspiracy to commit terrorism as defined and penalized
under Sections 3 and 4 of Republic Act No. 9372;
“(28) Violation of Section 6 of Republic Act No. 8042, otherwise known as the
Migrant Workers and Overseas Filipinos Act of 1995, as amended by Republic
Act No. 10022;
“(14) Financing of terrorism under Section 4 and offenses punishable under
Sections 5, 6, 7 and 8 of Republic Act No. 10168, otherwise known as the
Terrorism Financing Prevention and Suppression Act of 2012:
“(15) Bribery under Articles 210, 211 and 211-A of the Revised Penal Code, as
amended, and Corruption of Public Officers under Article 212 of the Revised
Penal Code, as amended;
“(16) Frauds and Illegal Exactions and Transactions under Articles 213, 214, 215
and 216 of the Revised Penal Code, as amended;
“(29) Violation of Republic Act No. 8293, otherwise known as the Intellectual
Property Code of the Philippines;
“(30) Violation of Section 4 of Republic Act No. 9995, otherwise known as the
Anti-Photo and Video Voyeurism Act of 2009;
“(31) Violation of Section 4 of Republic Act No. 9775, otherwise known as the
Anti-Child Pornography Act of 2009;
“(17) Malversation of Public Funds and Property under Articles 217 and 222 of
the Revised Penal Code, as amended;
“(32) Violations of Sections 5, 7, 8, 9, 10(c), (d) and (e), 11, 12 and 14 of Republic
Act No. 7610, otherwise known as the Special Protection of Children Against
Abuse, Exploitation and Discrimination;
“(18) Forgeries and Counterfeiting under Articles 163, 166, 167, 168, 169 and 176
of the Revised Penal Code, as amended;
“(33) Fraudulent practices and other violations under Republic Act No. 8799,
otherwise known as the Securities Regulation Code of 2000; and
“(19) Violations of Sections 4 to 6 of Republic Act No. 9208, otherwise known
as the Anti-Trafficking in Persons Act of 2003;
“(34) Felonies or offenses of a similar nature that are punishable under the
penal laws of other countries.”
“(20) Violations of Sections 78 to 79 of Chapter IV, of Presidential Decree No.
705, otherwise known as the Revised Forestry Code of the Philippines, as
amended;
Sec. 4, AMLA, as amended by Sec. 4 of Rep. Act No. 10365
“(21) Violations of Sections 86 to 106 of Chapter VI, of Republic Act No. 8550,
otherwise known as the Philippine Fisheries Code of 1998;
“(22) Violations of Sections 101 to 107, and 110 of Republic Act No. 7942,
otherwise known as the Philippine Mining Act of 1995;
“(23) Violations of Section 27(c), (e), (f), (g) and (i), of Republic Act No. 9147,
otherwise known as the Wildlife Resources Conservation and Protection Act;
“(24) Violation of Section 7(b) of Republic Act No. 9072, otherwise known as
the National Caves and Cave Resources Management Protection Act;
“(25) Violation of Republic Act No. 6539, otherwise known as the AntiCarnapping Act of 2002, as amended;
“(26) Violations of Sections 1, 3 and 5 of Presidential Decree No. 1866, as
amended, otherwise known as the decree Codifying the Laws on Illegal/
Money laundering is committed by any person who, knowing that any
monetary instrument or property represents, involves, or relates to the
proceeds of any unlawful activity:
“(a) transacts said monetary instrument or property;
“(b) converts, transfers, disposes of, moves, acquires, possesses or uses said
monetary instrument or property;
“(c) conceals or disguises the true nature, source, location, disposition,
movement or ownership of or rights with respect to said monetary
instrument or property;
“(d) attempts or conspires to commit money laundering offenses referred to
in paragraphs (a), (b) or (c);
“(e) aids, abets, assists in or counsels the commission of the money laundering
offenses referred to in paragraphs (a), (b) or (c) above; and
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BANKS AND FINANCIAL INTERMEDIARIES | MGG
“(f) performs or fails to perform any act as a result of which he facilitates the
offense of money laundering referred to in paragraphs (a), (b) or (c) above.
“Money laundering is also committed by any covered person who, knowing
that a covered or suspicious transaction is required under this Act to be
reported to the Anti-Money Laundering Council (AMLC), fails to do so.”
F. Safe Harbor Provision
Sec. 9(c), AMLA, as amended by Sec. 7 of Rep. Act No. 10365
Prevention of Money Laundering; Customer Identification Requirements
and Record Keeping.
(a) 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.
(b) Record Keeping. — All records of all transactions of covered institutions
shall be maintained and safely stored for five (5) years from the dates of
transactions. With respect to closed accounts, the records on customer
identification, account files and business correspondence, shall be preserved
and safely stored for at least five (5) years from the dates when they were
closed.
(c) Reporting of Covered Transactions.
Covered persons shall report to the AMLC all covered transactions and
suspicious transactions within five (5) working days from occurrence thereof,
unless the AMLC prescribes a different period not exceeding fifteen (15)
working days.
“Lawyers and accountants acting as independent legal professionals are not
required to report covered and suspicious transactions if the relevant
information was obtained in circumstances where they are subject to
professional secrecy or legal professional privilege.
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.
When reporting covered transactions to the AMLC, covered institutions and
their officers, employees, representatives, agents, advisors, consultants or
associates shall not be deemed to have violated Republic Act No. 1405, as
amended; Republic Act No. 6426, as amended; Republic Act No. 8791 and other
similar laws, but are prohibited from communicating, directly or indirectly, in
any manner or by any means, to any person the fact that a covered
transaction report was made, the contents thereof, or any other information
in relation thereto. In case of violation thereof, the concerned officer,
employee, representative, agent, advisor, consultant or associate of the
covered institution, shall be criminally liable. However, no administrative,
criminal or civil proceedings, shall lie against any person for having made a
covered transaction report in the regular performance of his duties and in
good faith, whether or not such reporting results in any criminal prosecution
under this Act or any other Philippine law.
When reporting covered transactions to the AMLC, covered institutions and
their officers, employees, representatives, agents, advisors, consultants or
associates are prohibited from communicating, directly or indirectly, in any
manner or by any means, to any person, entity, the media, the fact that a
covered transaction report was made, the contents thereof, or any other
information in relation thereto. Neither may such reporting be published or
aired in any manner or form by the mass media, electronic mail, or other
similar devices. In case of violation thereof, the concerned officer, employee,
representative, agent, advisor, consultant or associate of the covered
institution, or media shall be held criminally liable.
***Intended to protect the employees of the institution who made the
report**
G. Application for Freeze Orders
Sec. 10, AMLA, as amended by Sec. 8 of Rep. Act No. 10365
Freezing of Monetary Instrument or Property. – Upon a verified ex parte
petition 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, the Court of Appeals may issue a
freeze order which shall be effective immediately, and which shall not exceed
six (6) months depending upon the circumstances of the case: Provided, That
if there is no case filed against a person whose account has been frozen
within the period determined by the court, the freeze order shall be deemed
ipso facto lifted: Provided, further, That this new rule shall not apply to
pending cases in the courts. In any case, the court should act on the petition
to freeze within twenty-four (24) hours from filing of the petition. If the
application is filed a day before a nonworking day, the computation of the
twenty-four (24)-hour period shall exclude the nonworking days.
A person whose account has been frozen may file a motion to lift the freeze
order and the court must resolve this motion before the expiration of the
freeze order.
No court shall issue a temporary restraining order or a writ of injunction
against any freeze order, except the Supreme Court.
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BANKS AND FINANCIAL INTERMEDIARIES | MGG
A. Who may apply
B. Effectivity
C. Duties of Covered Institutions
Case # 1: Ligot v. Republic, 692 SCRA 509 (2013)
The effectivity of a freeze order may be extended by the CA for a period not
exceeding six months. Before or upon the lapse of this period, ideally, the
Republic should have already filed a case for civil forfeiture against the property
owner with the proper courts and accordingly secure an asset preservation order
or it should have filed the necessary information. Otherwise, the property owner
should already be able to fully enjoy his property without any legal process
affecting it.
H. Authority to inquire into bank deposits
Sec. 11, AMLA
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 involved are in any way related to a money laundering
offense: Provided, That this provision shall not apply to deposits and
investments made prior to the effectivity of this Act.
Case # 1: Republic v. Eugenio, G.R. No. 174629, Feb. 14, 2008
Any exception to the rule of absolute confidentiality must be specifically
legislated. Section 2 of the Bank Secrecy Act itself prescribes exceptions whereby
these bank accounts may be examined by any person, government official, bureau
or offial; namely when: (1) upon written permission of the depositor; (2) in cases
of impeachment; (3) the examination of bank accounts is upon order of a
competent court in cases of bribery or dereliction of duty of public officials; and
(4) the money deposited or invested is the subject matter of the litigation. Section
8 of R.A. Act No. 3019, the Anti-Graft and Corrupt Practices Act, has been
recognized by this Court as constituting an additional exception to the rule of
absolute confidentiality, and there have been other similar recognitions as well.
The AMLA also provides exceptions to the Bank Secrecy Act. Under Section 11,
the AMLC may inquire into a bank account upon order of any competent court in
cases of violation of the AMLA, it having been established that there is probable
cause that the deposits or investments are related to unlawful activities as
defined in Section 3(i) of the law, or a money laundering offense under Section 4
thereof. Further, in instances where there is probable cause that the deposits or
investments are related to kidnapping for ransom,[certain violations of the
Comprehensive Dangerous Drugs Act of 2002,hijacking and other violations
under R.A. No. 6235, destructive arson and murder, then there is no need for the
AMLC to obtain a court order before it could inquire into such accounts. It
cannot be successfully argued the proceedings relating to the bank inquiry order
under Section 11 of the AMLA is a litigation encompassed in one of the exceptions
to the Bank Secrecy Act which is when money deposited or invested is the
subject matter of the litigation. The orientation of the bank inquiry order is
simply to serve as a provisional relief or remedy. As earlier stated, the application
for such does not entail a full-blown trial. Nevertheless, just because the AMLA
establishes additional exceptions to the Bank Secrecy Act it does not mean that
the later law has dispensed with the general principle established in the older law
that all deposits of whatever nature with banks or banking institutions in the
Philippines x x x are hereby considered as of an absolutely confidential
nature. Indeed, by force of statute, all bank deposits are absolutely confidential,
and that nature is unaltered even by the legislated exceptions referred to above.
Case # 2: Subido Law Office v. Court of Appeals, G.R. No. 216914, Dec. 6, 2016
Section 11 of the Anti-Money Laundering Act (AMLA), authorizing a bank inquiry
court order, cannot be said to violate Subido Pagente Certeza Mendoza & Binay
Law Firm’s (SPCMB’s) constitutional right to procedural due process.—Plainly, the
AMLC’s investigation of money laundering offenses and its determination of
possible money laundering offenses, specifically its inquiry into certain bank
accounts allowed by court order, does not transform it into an investigative body
exercising quasi-judicial powers. Hence, Section 11 of the AMLA, authorizing a
bank inquiry court order, cannot be said to violate SPCMB’s constitutional right
to procedural due process.
Anti-Money Laundering Council; Jurisdiction; Nowhere from the text of the law
nor its Implementing Rules and Regulations (IRR) can we glean that the AntiMoney Laundering Council (AMLC) exercises quasi-judicial functions whether the
actual preliminary investigation is done simply at its behest or conducted by the
Department of Justice (DOJ) and the Ombudsman.—Nowhere from the text of the
law nor its IRR can we glean that the AMLC exercises quasi-judicial functions
whether the actual preliminary investigation is done simply at its behest or
conducted by the Department of Justice and the Ombudsman. Again, we hark
back to Secretary of Justice v. Lantion, 322 SCRA 160 (2000), citing Ruperto v.
Torres, where the Court had occasion to rule on the functions of an investigatory
body with the sole power of investigation: [Such a body] does not exercise judicial
functions and its power is limited to investigating facts and making findings in
respect thereto. The Court laid down the test of determining whether an
administrative body is exercising judicial functions or merely investigatory
functions: Adjudication signifies the exercise of power and authority to
adjudicate upon the rights and obligations of the parties before it. Hence, if the
only purpose for investigation is to evaluate evidence submitted before it based
on the facts and circumstances presented to it, and if the agency is not
authorized to make a final pronouncement affecting the parties, then there is an
absence of judicial discretion and judgment.
I.
Forfeitures
Sec. 12, AMLA, as amended by Sec. 9, Rep. Act No. 10365
Forfeiture Provisions.
(a) Civil Forfeiture. – Upon determination by the AMLC that probable cause
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exists that any monetary instrument or property is in any way related to an
unlawful activity as defined in Section 3(i) or a money laundering offense
under Section 4 hereof, the AMLC shall file with the appropriate court
through the Office of the Solicitor General, a verified ex parte petition for
forfeiture, and the Rules of Court on Civil Forfeiture shall apply.
Obligations of covered persons:
1. Customer Identification
2. Record Keeping - 5 years from date of transaction
3. Reporting of Covered/Suspicious Transactions - Within 5 days from occurrence;
AMLC can provide another period (max: 15 days)
The forfeiture shall include those other monetary instrument or property
having an equivalent value to that of the monetary instrument or property
found to be related in any way to an unlawful activity or a money laundering
offense, when with due diligence, the former cannot be located, or it has been
substantially altered, destroyed, diminished in value or otherwise rendered
worthless by any act or omission, or it has been concealed, removed,
converted, or otherwise transferred, or it is located outside the Philippines or
has been placed or brought outside the jurisdiction of the court, or it has
been commingled with other monetary instrument or property belonging to
either the offender himself or a third person or entity, thereby rendering the
same difficult to identify or be segregated for purposes of forfeiture.
Suspicious transactions (Section 3, (b-1), AMLA)
- Regardless of the amounts involved, where any of the following circumstances
exist: Client is not properly identified, No underlying legal or trade obligation/
purpose/economic justification
(b) Claim on Forfeited Assets. – Where the court has issued an order of
forfeiture of the monetary instrument or property in a criminal prosecution
for any money laundering offense defined under Section 4 of this Act, the
offender or any other person claiming an interest therein may apply, by
verified petition, for a declaration that the same legitimately belongs to him
and for segregation or exclusion of the monetary instrument or property
corresponding thereto. The verified petition shall be filed with the court
which rendered the judgment of forfeiture, within fifteen (15) days from the
date of the finality of the order of forfeiture, in default of which the said order
shall become final and executor. This provision shall apply in both civil and
criminal forfeiture.
(c) Payment in Lieu of Forfeiture. – Where the court has issued an order of
forfeiture of the monetary instrument or property subject of a money
laundering offense defined under Section 4, and said order cannot be
enforced because any particular monetary instrument or property cannot,
with due diligence, be located, or it has been substantially altered, destroyed,
diminished in value or otherwise rendered worthless by any act or omission,
directly or indirectly, attributable to the offender, or it has been concealed,
removed, converted, or otherwise transferred to prevent the same from being
found or to avoid forfeiture thereof, or it is located outside the Philippines or
has been placed or brought outside the jurisdiction of the court, or it has
been commingled with other monetary instruments or property belonging to
either the offender himself or a third person or entity, thereby rendering the
same difficult to identify or be segregated for purposes of forfeiture, the court
may, instead of enforcing the order of forfeiture of the monetary instrument
or property or part thereof or interest therein, accordingly order the
convicted offender to pay an amount equal to the value of said monetary
instrument or property. This provision shall apply in both civil and criminal
forfeiture.
From resource person:
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UNCLAIMED BALANCES LAW
A. Secrecy of Bank Deposits
A. Exceptions
A. Under Bank Secrecy Law
B. Garnishment
C. Graft and Corruption
D. Anti-Money Laundering Act
E. Periodic or Special Examination
F. In camera inspection by Ombudsman
G. Preliminary Attachment
H. Disclosure of Dormant Accounts
I. Commissioner of Internal Revenue
J. Waiver by DOSRI
The Bank Secrecy Law protects all deposits of whatever nature in banks or
banking institutions in the Philippines as well as investments in government
bond. This law prohibits any person, subject to the exceptions below, from
disclosing to any person any information, relative to the funds or properties
belonging to the depositors in the custody of the bank. Simply put, no one can
just go to your bank and ask for your bank balance. However, the rule is not
absolute. The following are the exceptions to the bank secrecy law:
1. Written permission or consent in writing by the depositor;
2. In cases of impeachment;
3. Upon order of the court in cases of bribery or dereliction of duty of public
officials;
4. Upon order of the court in cases where the money deposited or invested is
the subject matter of the litigation;
5. Upon a subpoena issued by the Ombudsman concerning an investigation it is
conducting, provided that there must already be a case pending in court, the
account be clearly identified, the inspection be limited to the subject matter
of the pending case; and the bank personnel and the depositor must be
notified to be present during the inspection;
6. The BIR can inquire into bank deposits in an application for compromise of
tax liability or determination of a decedent’s gross estate;
7. The Anti-Money Laundering Council (“AMLC”) can examine bank accounts
pursuant to a court order, where there is probable cause that the deposits are
related to an unlawful activity or money laundering offense;
8. The AMLC can examine bank accounts, WITHOUT a court order, where there
is probable cause that the deposits are related to certain crimes such as
kidnapping for ransom, violation of the Dangerous Drugs Act, hijacking,
destructive arson, murder and violations of RA 6235 (acts inimical to civil
aviation);
9. The Bangko Sentral can examine bank accounts in the course of its periodic
or special examination regarding compliance with Anti-Money Laundering
Law.
PROVISION/S
R.A. 1405 (Bank Secrecy Law)
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.
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.
SEC. 6. Power of the Commissioner to Make Assessments and Prescribe
Additional Requirements for Tax Administration and Enforcement
(NIRC)
(F) Authority of the Commissioner to Inquire into Bank Deposit
Accounts and Other Related information held by Financial Institutions. Notwithstanding any contrary provision of Republic Act No. 1405,
Republic Act No. 6426, otherwise known as the Foreign Currency Deposit
Act of the Philippines, and other general or special laws, the
Commissioner is hereby authorized to inquire into the bank deposits and
other related information held by financial institutions of:
1. A decedent to determine his gross estate; and
2. Any taxpayer who has filed an application for compromise of his tax
liability under Section 204(A)(2) of this Code by reason of financial
incapacity to pay his tax liability.
In case a taxpayer files an application to compromise the payment of his
tax liabilities on his claim that his financial position demonstrates a clear
inability to pay the tax assessed, his application shall not be considered
unless and until he waives in writing his privilege under Republic Act No.
1405, Republic Act No. 6426, otherwise known as the Foreign Currency
Deposit Act of the Philippines, or under other general or special laws, and
such waiver shall constitute the authority of the Commissioner to inquire
into the bank deposits of the taxpayer.
3. A specific taxpayer or taxpayers subject of a request for the supply of
tax information from a foreign tax authority pursuant to an
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international convention or agreement on tax matters to which the
Philippines is a signatory or a party of: Provided, That the information
obtained from the banks and other financial institutions may be used
by the Bureau of Internal Revenue for tax assessment, verification,
audit and enforcement purposes.
In case of a request from a foreign tax authority for tax information
held by banks and financial institutions, the exchange of information
shall be done in a secure manner to ensure confidentiality thereof
under such rules and regulations as may be promulgated by the
Secretary of Finance, upon recommendation of the Commissioner.
The Commissioner shall provide the tax information obtained from
banks and financial institutions pursuant to a convention or
agreement upon request of the foreign tax authority when such
requesting foreign tax authority has provided the following
information to demonstrate the foreseeable relevance of the
information to the request:
a. The identity of the person under examination or investigation;
b. A statement of the information being sought, including its
nature and the form in which the said foreign tax authority
prefers to receive the information from the Commissioner;
c. The tax purpose for which the information is being sought;
d. Grounds for believing that the information requested is held
in the Philippines or is in the possession or control of a
person within the jurisdiction of the Philippines;
e. To the extent known, the name and address of any person
believed to be in possession of the requested information;
f. A statement that the request is in conformity with the law and
administrative practices of the said foreign tax authority, such
that if the requested information was within the jurisdiction
of the said foreign tax authority then it would be able to
obtain the information under its laws or in the normal course
of administrative practice and that it is in conformity with a
convention or international agreement; and
g. A statement that the requesting foreign tax authority has
exhausted all means available in its own territory to obtain the
information, except those that would g ive rise to
disproportionate difficulties.
The Commissioner shall forward the information as promptly as possible
to the requesting foreign tax authority. To ensure a prompt response, the
Commissioner shall confirm receipt of a request in writing to the
requesting tax authority and shall notify the latter of deficiencies in the
request, if any, within sixty (60) days from receipt of the request.
If the Commissioner is unable to obtain and provide the information
within ninety (90) days from receipt of the request, due to obstacles
encountered in furnishing the information or when the bank or financial
institution refuses to furnish the information, he shall immediately
inform the requesting tax authority of the same, explaining the nature of
the obstacles encountered or the reasons for refusal.
The term “foreign tax authority,” as used herein, shall refer to the tax
authority or tax administration of the requesting State under the tax
treaty or convention to which the Philippines is a signatory or a party of.
Act No. 3936 (Unclaimed Balances Law)
Sec. 1. “Unclaimed balances”, within the meaning of this Act, shall include
credits or deposits of money, bullion, security or other evidence of
indebtedness of any kind, and interest thereon with banks, buildings and
loan associations, and trust corporations, as hereinafter defined, in favor
of any person known to be dead or who has not made further deposits or
withdrawals during the preceding ten years or more. Such unclaimed
balances, together with the increase and proceeds thereof, shall be
deposited with the Treasurer of the Philippines to the credit of the
Government of the Republic of the Philippines to be used as the National
Assembly may direct.
Sec. 3. Whenever the Solicitor General shall be informed of such
unclaimed balances, he shall commence an action or actions in the name
of the People of the Republic of the Philippines in the Court of First
Instance of the province or city where the bank, building and loan
association or trust corporation is located, in which shall be joined as
parties the bank, building and loan association or trust corporation and
all such creditors or depositors. All or any of such creditors or depositors
or banks, building and loan association or trust corporations may be
included in one action. Service of process in such action or actions shall
be made by delivery of a copy of the complaint and summons to the
president, cashier, or managing officer of each defendant bank, building
and loan association or trust corporation and by publication of a copy of
such summons in a newspaper of general circulation, either in English, in
Filipino, or in a local dialect, published in the locality where the bank,
building and loan association or trust corporation is situated, if there be
any, and in case there is none, in the City of Manila, at such time as the
court may order. Upon the trial, the court must hear all parties who have
appeared therein, and if it be determined that such unclaimed balances
in any defendant bank, building and loan association or trust corporation
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are unclaimed as hereinbefore stated, then the court shall render
judgment in favor of the Government of the Republic of the Philippines,
declaring that said unclaimed balances have escheated to the
Government of the Republic of the Philippines and commanding said
bank, building and loan association or trust corporation to forthwith
deposit the same with the Treasurer of the Philippines to credit of the
Government of the Republic of the Philippines to be used as the National
Assembly may direct.
At the time of issuing summons in the action above provided for, the
clerk of court shall also issue a notice signed by him, giving the title and
number of said action, and referring to the complaint therein, and
directed to all persons, other than those named as defendants therein,
claiming any interest in any unclaimed balance mentioned in said
complaint, and requiring them to appear within sixty days after the
publication or first publication, if there are several, of such summons,
and show cause, if they have any, why the unclaimed balances involved in
said action should not be deposited with the Treasurer of the Philippines
as in this Act provided and notifying them that if they do not appear and
show cause, the Government of the Republic of the Philippines will apply
to the court for the relief demanded in the complaint. A copy of said
notice shall be attached to, and published with the copy of, said
summons required to be published as above, and at the end of the copy
of such notice so published, there shall be a statement of the date of
publication, or first publication, if there are several, of said summons and
notice. Any person interested may appear in said action and become a
party thereto. Upon the publication or the completion of the publication,
if there are several, of the summons and notice, and the service of the
summons on the defendant banks, building and loan associations or trust
corporations, the court shall have full and complete jurisdiction in the
Republic of the Philippines over the said unclaimed balances and over the
persons having or claiming any interest in the said unclaimed balances,
or any of them, and shall have full and complete jurisdiction to hear and
determine the issues herein, and render the appropriate judgment
thereon.
R.A. 9160 (Anti-Money Laundering Act)
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 involved are in any way related to a money laundering
offense: Provided, That this provision shall not apply to deposits and
investments made prior to the effectivity of this Act.
Sec. 10, Rule 57, Rules of Court
Section 10. Examination of party whose property is attached and
persons indebted to him or controlling his property; delivery of
property to sheriff.
Any person owing debts to the party whose property is attached or
having in his possession or under his control any credit or other personal
property belonging to such party, may be required to attend before the
court in which the action is pending, or before a commissioner appointed
by the court, and be examined on oath respecting the same. The party
whose property is attached may also be required to attend for the
purpose of giving information respecting his property, and may be
examined on oath. The court may, after such examination, order personal
property capable of manual delivery belonging to him, in the possession
of the person so required to attend before the court, to be delivered to
the clerk of the court or sheriff on such terms as may be just, having
reference to any lien thereon or claim against the same, to await the
judgment in the action
Sec. 57, Rep. Act No. 9372 (Human Security Act)
SEC. 57. Ban on Extraordinary Rendition.
No person suspected or convicted of the crime of terrorism shall be
subjected to extraordinary rendition to any country unless his or her
testimony is needed for terrorist related police investigations or judicial
trials in the said country and unless his or her human rights, including
the right against torture, and right to counsel, are officially assured by
the requesting country and transmitted accordingly and approved by the
Department of Justice.
Sec. 8, Rep. Act No. 3591, PDIC Law
The Corporation as a corporate body shall have the power—
First.— To adopt and use a corporate seal.
Second.— To have succession until dissolved by an Act of Congress.
Third.— To make contracts.
Fourth.— To sue and be sued, complain and defend, in any court of law in
the Philippines. All suits of a civil nature to which the corporation shall be
a part shall be deemed to arise under the laws of the Philippines. No
attachment or execution shall be issued against the Corporation or its
property before final judgment in any suit, action, or proceeding in any
court. The Board of Directors shall designate an agent upon whom
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service of process may be made in any province or city or jurisdiction in
which any insured bank is located.
Fifth.— To appoint by its Board of Directors such officers and employees
as are not otherwise provided for in this Act to define their duties, fix
their compensation, require bonds of them and fix penalty thereof and to
dismiss such officers and employees for cause.
Sixth.— To prescribe, by its Board of Directors, by-laws not inconsistent
with law, regulating the manner in which its general business may be
conducted, and the privileges granted to it by law may be exercised and
enjoyed.
Seventh.— To exercise by its Board of Directors, or duly authorized
officers or agents, all powers specifically granted by the provisions of this
Act, and such incidental powers as shall be necessary to carry on the
powers so granted.
Eighth.— To make examination of and to require information and
reports from banks, as provided in this Act.
Ninth.— To act as receiver.
Tenth.— To prescribe by its Board of Directors such rules and regulations as
it may deem necessary to carry out the provisions of this Act.
Sec. 55.1(b), GBL
Without order of a court of competent jurisdiction, disclose to any
unauthorized person any information relative to the funds or properties
in the custody of the bank belonging to private individuals, corporations,
or any other entity: Provided, That with respect to bank deposits, the
provisions of existing laws shall prevail;
Case # 1: BSB Group v. Sally Go, G.R. No. 168644, Feb. 16, 2010
Case # 2: Standard Chartered Bank v. Senate Committee on Banks, 541 SCRA
456 (2007)
Case # 3: Ejercito v. Sandiganbayan, 509 SCRA 190 (2006)
B. Foreign Currency Deposits
PROVISION/S
R.A. 6426 (as amended) (Foreign Currency Deposits)
Section 8. Secrecy of foreign currency deposits. – All foreign currency
deposits authorized under this Act, as amended by PD No. 1035, as well as
foreign currency deposits authorized under PD No. 1034, are hereby
declared as and considered of an absolutely confidential nature and,
except upon the written permission of the depositor, in no instance shall
foreign currency deposits be examined, inquired or looked into by any
person, government official, bureau or office whether judicial or
administrative or legislative, or any other entity whether public or
private; Provided, however, That said 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. (As amended by PD No. 1035, and further amended by PD
No. 1246, prom. Nov. 21, 1977.)
Case # 4: Intengan v. Court of Appeals, G.R. No. 128996, Feb. 15, 2002
Case # 5: Benedicto v. Court of Appeals, 364 SCRA 334 (2001)
Case # 6: GSIS v. Court of Appeals, 651 SCRA 661 (2011)
Case # 7: Chinabank v. Court of Appeals, G.R. No. 140687, 511 SCRA 123 (2006)
B. Garnishment of Bank Deposits
Rule 57, Rules of Court
Preliminary Attachment
The provisional remedy in virtue of which a plaintiff or other party may, at the
commencement of the action or at any time thereafter, have the property of the
adverse party taken into the custody of the court as security for the satisfaction
of any judgment that may be recovered [Davao Light v. CA, G.R. No. 93262 (1991)]
Purposes
1. To seize the property of the debtor in advance of final judgment and to hold it
for purposes of satisfying said judgment, as in the grounds stated in Sec. 1(a)
to (e), Rule 57, or
2. To acquire jurisdiction over the action by actual or constructive seizure of the
property in those instances where personal or substituted service of
summons on the defendant cannot be effected, as in Sec. 1( f), Rule 57 [PCIB v.
Alejandro, G.R. No. 175587 (2007)]
Kinds of attachment as to availability and effects
1. Preliminary attachment - one issued at the commencement of the action or at
any time before entry of the judgment as security for the satisfaction of any
judgment that may be recovered in the cases provided for by the rules;[Sec 1,
Rule 57]
2. Final or levy on execution - writ issued by the court after judgment by which
the property of the judgment obligor is taken into custody of the court before
the sale of the property on execution before the satisfaction of a final
judgment [Sec. 8, Rule 39] [1 Regalado 691, 2010 Ed.]
Kinds of attachment as to form and procedure of attachment:
1. Regular form of attachment – attachment which refers to attachment of
corporeal property in possession of the party involved [1 Regalado 691, 2010
Ed.]
2. Garnishment - a kind of attachment in which the plaintiff seeks to subject
either the property of the defendant in the hands of a third person called
garnishee, to his claim or the money which said third person owes the
defendant; [Virata v. Aquino, G.R. L-35027 (1973)].
Grounds for issuance
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In an action
1. For the recovery of a specified amount of money or damages, other than
moral and exemplary, on a cause of action arising from law, contract, quasicontract, delict or quasi-delict against a party who is about to depart from the
Philippines with intent to defraud his creditors
2. For money or property embezzled or fraudulently misapplied or converted to
his own use by a public officer, or an officer of a corporation, or an attorney,
factor, broker, agent, or clerk, in the course of his employment as such, or by
any other person in a fiduciary capacity, or for a willful violation of duty
3. To recover the possession of property unjustly or fraudulently taken, detained
or converted, when the property, or any part thereof, has been concealed,
removed, or disposed of to prevent its being found or taken by the applicant
or an authorized person
4. Against a party who has been guilty of a fraud in contracting the debt or
incurring the obligation upon which the action is brought, or in the
performance thereof
5. Against a party who has removed or disposed of his property, or is about to do
so, with intent to defraud his creditors
6. Against a party who does not reside and is not found in the Philippines, or on
whom summons may be served by publication. [Sec. 1, Rule 57]
Note: Where the judgment is already final and executory, a motion for execution
is the remedy, and not an application for preliminary attachment [1 Regalado 690,
2010 Ed.]
Attachment of Specific Kinds of Property
Debts and credits, including bank deposits, financial interest, royalties,
commissions and other personal property not capable of manual delivery, by
leaving with the person owing such debts, or having in his possession or under
his control, such credits or other personal property, or with his agent, a copy of
the writ, and notice that the debts owing by him to the party against whom
attachment is issued, and the credits and other personal property in his
possession, or under his control, belonging to said party, are attached in
pursuance of such writ [Sec. 7, Rule 57]
Case # 1: Fernandez v. Aninon, G.R. No. 138967, Apr. 24, 2007
Case # 2: Salvacion v. Central Bank of the Philippines, 278 SCRA 27 (1997), supra
NOTE: These grounds are exclusive [PCIB v. Alejandro, G.R. 175587 (2007); Aboitiz
v. Cotabato Bus Line Co. G.R. No. L-35990 (1981)]
Requisites for Issuance
1. The case must be any of those where preliminary attachment is proper [Sec. 1,
Rule 57]
2. Applicant must file a motion with notice and hearing by the court in which
the action is pending, or by the CA or the SC (but an order of attachment may
be issued ex parte [Sec. 2, Rule 57]
3. Applicant, or some other who personally knows the facts, must file an
affidavit showing required facts (stated below) [Sec. 3, Rule 57]
4. Applicant must post a bond executed to adverse party in the amount fixed by
the court in its order granting the issuance of the writ [Sec. 3-4, Rule 57]
Issuance and Contents of Order of Attachment; Affidavit and Bond
When applied for
1. At the commencement of the action; or
2. At any time before the entry of judgment [Sec. 1, Rule 57]
Who may apply
1. It may be applied for by the plaintiff or any proper party [Sec. 1, Rule 57]
2. Any proper party includes a defendant who filed a counterclaim, cross-claim,
or a third party complaint [Sec. 1, Rule 3]
Methods to procure preliminary attachment
• Writ may be prayed for in the complaint itself providing the allegations
warranting its issuance [1 Regalado 690, 2010 Ed.]
• May be issued pursuant to a separate motion for attachment whenever the writ
is not prayed for in the original complaint [Sec. 2, Rule 57]
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