bsp - banking law

1. Banking Laws
New Central Bank Act R.A. 7653

2. PRIMARY OBJECTIVES OF BSP:
a) To maintain price stability conducive to a balanced
and sustainable growth of the economy.
b) promote and maintain the monetary stability and
the convertibility of the peso
c) To provide policy directions in the areas of money,
banking, and credit, with supervision over the
operations of banks and with regulatory powers
over the operations of finance companies and non-
bank financial institutions performing quasi-
banking functions. (Sec 3)

3. ROLES OF BSP
• Designation as Banker of Government
• Representation with International Monetary
Board
• Representation with Other Financial
Institutions
• Fiscal Operations

4. PRIVILEGES AND PROHIBITIONS
• Tax Exemption
• Exemption from Customs Duties
• Prohibitions
• Phase-out of Fiscal Agency Functions
• Phase-out of Regulatory Powers Over the
Operations of Finance Corporations and Other
Institutions

5. MONETARY BOARD
Monetary Board- composed of seven (7) members appointed by
the President of the Philippines for a term of six (6) years:
(a) The Governor, as Chairman;
(b) A member of the Cabinet designated by the
President of the Philippines;
(c) Five (5) members who shall come from the private
sector, all of whom shall serve full time.
 No member of the Board may be reappointed more than
once.

6. The BSP Monetary Board
Chairman Amando M. Tetangco, Jr.
Members Cesar V. Purisima
Juanita D. Amatong
Nelly Favis-Villafuerte
Alfredo C. Antonio
Ignacio R. Bunye
Peter B. Favilla

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

8. Powers & Functions of Governor
• He shall be head of a department and his
appointment shall be subject to confirmation by the
Commission on Appointments;
• He shall be BSP Chief Executive Officer;
• He shall be the principal representative of the
Monetary Board and of the BSP.

9. Powers and Functions of Governor
The Governor of Bangko Sentral is vested the responsibility of
executing and administering the policies and measures approved
by the board and empowered to:
 represent the Monetary Board and the BSP in all dealings;
 sign contracts entered into by the BSP, notes and securities issued by
the BSP all reports and statements, and other reports of the BSP;
 represents the BSP either personally or through counsel, as may be
authorized by the Monetary Board; and
 delegate his power to represent the BSP, to other officers upon his own
responsibility.

10. Monetary Board- policy-making body of
Bangko Sentral
The Monetary Board weekly meeting shall:
- endeavor to control any expansion or contraction in
monetary aggregates which is prejudicial to the attainment or
maintenance of price stability;
- preserve the international value of peso;
- maintain international reserves adequate to meet any
unforeseeable net demands on BSP for foreign currencies;
-determines the exchange rate policy of the country;
-providing liquidity of the banking system in times of
need.

11. DOSRI
Any director, officer or stockholder who, together with his
related interest, contracts a loan or any form of financial
accommodation from:
(a) His banks or
(b) From a bank
(a) which is a subsidiary of a bank holding company of which both his
bank and the lending bank are subsidiaries; or
(b) in which a controlling proportion of the shares is owned by the
same interest that owns a controlling proportion of the shares of his bank, in
excess of five percent (5%) of the capital and surplus of the bank, or in the
maximum amount permitted by law, whichever is lower, shall be required by
the lending bank to waive the secrecy of his deposits of whatever nature in
all banks in the Philippines.

12. Prohibitions on Bank Officers, Directors,
Lawyers, Agents
BSP Personnel are prohibited from:
(a) being an officer, director, lawyer or agent, employee, consultant
or stockholder, directly or indirectly, of any institution subject to supervision
or examination;
(b) directly or indirectly requesting or receiving any gift, present or
pecuniary or material benefit for himself or another, from any institution
subject to supervision or examination by the Bangko Sentral;
(c) revealing in any manner, except under orders of the court, the
Congress or any government office or agency authorized by law, or under
such conditions as may be prescribed by the Monetary Board, information
relating to the condition or business of any institution; and
(d) borrowing from any institution subject to supervision or
examination by the Bangko Sentral shall be prohibited unless said borrowings
are adequately secured, fully disclosed to the Monetary Board.

13. Three Levels of Rehabilitation
RA 7653 Sections 29 - 33
CONSERVATORSHIP RECEIVERSHIP LIQUIDATION

14. CONSERVATORSHIP
Whenever a bank or quasi-bank is in:
• A state of continuing inability
• Unwillingness to maintain a condition of liquidity
Appointment of a Conservator
The Monetary Board may:
• Appoint a conservator to take charge of assets and
liabilities
• Reorganize the management
• Collect all monies and debts
• Exercise powers necessary to restore viability

15. CONSERVATORSHIP
How long should the conservatorship last?
• shall NOT exceed one (1) year
When can the Monetary Board terminate the conservatorship?
•Institution can operate on its own
•Institution would involve probable loss to its
depositors and creditors

16. Three Levels of Rehabilitation
RA 7653 Sections 29 - 33
CONSERVATORSHIP RECEIVERSHIP LIQUIDATION

17. RECEIVERSHIP
Whenever a bank or quasi-bank is:
• Unable to pay its liabilities
• Has insufficient realizable assets
• Cannot continue business without involving
probable losses to its depositors or creditors
• Has willfully violated a cease and desist
order

18. RECEIVERSHIP
Philippine Deposit Insurance Corporation (PDIC)
Functions and Obligations:
•Gather and take charge of all assets and
liabilities of the institution
•Exercise the general powers
•Determine in not later than ninety (90) days
from take over whether the institution should
be rehabilitated or may resume business with
safety

19. Three Levels of Rehabilitation
RA 7653 Sections 29 - 33
CONSERVATORSHIP RECEIVERSHIP LIQUIDATION

20. LIQUIDATION
• Institution CANNOT be rehabilitated or
permitted to resume business
Receiver/Liquidator shall:
• File ex-parte with Regional Trial Court and a
petition for assistance in the liquidation of the
institution
•Assist the enforcement of individual liabilities
of stockholders, directors & officers

21. LIQUIDATION
Receiver/Liquidator shall:
• Convert the assets of the institutions to
money and dispose to creditors and other
parties
•Institute actions to collect and recover
accounts and assets of the institution which
shall be deemed in custodia legis in the hands
of the receiver

22. Disposition of Banking Franchise
-may award the banking franchise of a bank under liquidation
where said bank or its branches were previously operating
(Sec. 33)
Rulings on Bank Liquidation
-All claims against bank be pursued in the liquidation
proceedings
-Actions of the Monetary Board are declared by law to be
FINAL and EXECUTORY

23. PESO
•Unit of monetary value in
the Philippines
The Peso, Currency, Legal Tender, and
Bank Deposit Accounts
CURRENCY
•All Philippine notes and
coins issued or circulating

24. The Peso, Currency, Legal Tender, and
Bank Deposit Accounts
• Exclusive Issue Power
• Liability for Notes and Coins
• Legal Tender Power
• 25 c and above – not exceeding P 50.00
• 10 c and below – not exceeding P 20.00
• Replacement for Currency unfit for
Circulation

25. SECTION 57. Retirement of Old Notes and CoinsSECTION 57. Retirement of Old Notes and Coins
• Notes five (5) years old or moreNotes five (5) years old or more
• Coins ten (10) years old or moreCoins ten (10) years old or more
• remain legal tender for a period of one (1) year from the dateremain legal tender for a period of one (1) year from the date
of callof call
• may be exchanged at par and without charge in the BSP andmay be exchanged at par and without charge in the BSP and
their duly authorized agents.their duly authorized agents.

26. B. DEMAND DEPOSITSB. DEMAND DEPOSITS
SECTION 58. DefinitionSECTION 58. Definition
 all those liabilities of the Bangko Sentral and of other banksall those liabilities of the Bangko Sentral and of other banks
which are denominated in Philippine currency and are subject towhich are denominated in Philippine currency and are subject to
payment in legal tender upon demand by the presentation ofpayment in legal tender upon demand by the presentation of
checks.checks.

27. SECTION 59. Issue of Demand DepositSECTION 59. Issue of Demand Deposit
Only banks duly authorized to issue demand deposit may acceptOnly banks duly authorized to issue demand deposit may accept
funds or create liabilities payable in pesos upon demand by thefunds or create liabilities payable in pesos upon demand by the
presentation of checks. (universal banks or commercial banks)presentation of checks. (universal banks or commercial banks)
• It shall be subject to the control of the Monetary Board inIt shall be subject to the control of the Monetary Board in
accordance with the powers granted it with respect theretoaccordance with the powers granted it with respect thereto
under this Act.under this Act.
• Banks, other than a universal bank or commercial bank, cannotBanks, other than a universal bank or commercial bank, cannot
accept demand deposits except upon prior approval of theaccept demand deposits except upon prior approval of the
Monetary Board.Monetary Board.

28. SECTION 60. Legal Character of ChecksSECTION 60. Legal Character of Checks
do not have legal tender powerdo not have legal tender power
acceptance of checks as payment of debts, both public andacceptance of checks as payment of debts, both public and
private, is at the option of the creditorprivate, is at the option of the creditor
check which has been cleared and credited to the account of thecheck which has been cleared and credited to the account of the
creditor shall be equivalent to a delivery to the creditor of cashcreditor shall be equivalent to a delivery to the creditor of cash
in an amount equal to the amount credited to his accountin an amount equal to the amount credited to his account

29. Role of Banks
To provide 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
Role of the State
To 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
The General Banking Law of 2000

30. Banks
entities engaged in the lending of funds obtained in the form of
deposits
Classification of Banks
Universal banks;
Commercial banks;
Thrift banks:
Savings and mortgage banks;
Stock savings and loan associations; and
Private development banks
The General Banking Law of 2000

31. The General Banking Law of 2000
Classification of Banks
Rural banks;
Cooperative banks;
Islamic banks; and
Other classifications of banks as determined by the Monetary
Board of the Bangko Sentral ng Pilipinas

32. The General Banking Law of 2000
AUTHORITY OF THE BANGKO SENTRAL
Supervisory Power
Policy Direction
Authority to Engage in Banking and Quasi-Banking Functions
Examination by the Bangko Sentral

33. The General Banking Law of 2000
ORGANIZATION, MANAGEMENT AND ADMINISTRATION OF
BANKS, QUASI-BANKS AND TRUST ENTITIES
Organization
• stock corporation
• funds are obtained from the public
• minimum capital requirements of the Monetary Board is
satisfied
banks shall issue par value stocks only
bank shall not purchase or acquire shares of its own capital
stock or accept its own shares as a security for a loan
forty percent (40%) of the voting stock of a domestic bank may
be owned by foreign individuals and non-bank corporations

34. The General Banking Law of 2000
ORGANIZATION, MANAGEMENT AND ADMINISTRATION OF BANKS, QUASI-
BANKS AND TRUST ENTITIES
Stockholdings of Family Groups of Related
Corporate Stockholdings
Certificate of Authority to Register
Board of Directors
• at least five (5), and a maximum of fifteen (15) members
• two (2) of whom shall be independent directors
Directors of Merged or Consolidated Banks

35. The General Banking Law of 2000
ORGANIZATION, MANAGEMENT AND ADMINISTRATION OF
BANKS, QUASI-BANKS AND TRUST ENTITIES
Banking Days and Hours
• all working days for at least six (6) hours a day
• may open for business on Saturdays, Sundays or holidays for at least
three (3) hours a day
• working days shall mean Mondays to Fridays
Strikes and Lockouts
• unsettled after seven (7) calendar days shall be reported by the Bangko
Sentral to the Secretary of Labor
• President of the Philippines may at any time intervene and assume
jurisdiction over such labor dispute

36. The General Banking Law of 2000
CESSATION OF BANKING BUSINESS
Voluntary Liquidation
Receivership and Involuntary Liquidation

37. Time and again, we have stressed that banking business
is so impressed with public interest where the trust and
confidence of the public in general is of paramount
importance such that the appropriate standard of
diligence must be very high, if not he highest, degree of
diligence. A bank’s liability as obligor is not merely
vicarious but primary; the defense of exercise of due
diligence in the selection and supervision of its
employees is of no moment.
PCI Bank vs. Court of Appeals

38. Banks handle daily transactions involving millions of
pesos. By the very nature of their work the degree of
responsibility, care and trustworthiness expected of
their employees and officials is far greater than those of
ordinary clerks and employees. Banks are expected to
exercise the highest degree of diligence in the selection
and supervision of their employees.

39. When a bank dishonors the check of its client when it
turned out that there was sufficient funds, even if malice
or bad faith was not sufficiently proved, the fact remains
that the bank has committed a serious mistake, and the
bank’s negligence was a result of lack of due care and
caution required of managers and employees of a firm
engaged in so sensitive and demanding business as
banking, and entities recovery of moral damages against
the bank.
Prudential Bank vs. Court of Appeals
328 SCRA 264 (2000)

40. 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.
Bank of the Philippine Islands vs. Court of
Appeals
GR No. 112392
February 29, 2000

41. Therefore, the requirement of presentation of
the passbook when withdrawing cannot be
given mere lip service even though the person
making the withdrawal was authorized by the
depositor, and the unlawful withdrawal that
resulted shall be borne by the bank.

42. Philippine Bank of Commerce v. CA
80 SCAD 616, 269 SCRA 695 (1997)
In case of banks, the degree of diligence required
is more than that of a good father of a family.
Considering the fiduciary nature of their relationship
with their depositors, banks are bound to treat the
accounts of their clients with the highest degree of
care.

43. Degree of Diligence required to Banks toDegree of Diligence required to Banks to
be Mortgagees in Good Faithbe Mortgagees in Good Faith
The Supreme Court had consistently taken judicial notice of
standard practice for banks to send representative to the
premises of the land offered as collateral and to investigate who
are the real owners thereof.
If the bank fails to follow this procedure, they can’t be
considered as mortgagee in good faith.
If the bank accepted a mortgage that was executed by
impostors, they are considered mortgagee in bad faith.

44. Development Bank Vs. The Court of Appeals
125 SCAD 727, 331 SCRA 267 (2000)
While an innocent mortgagee is not expected to conduct
an exhaustive investigation on the history of the mortgagor’s
title, in the case of a banking institution, it must exercise due
diligence before entering into said contract, and cannot rely
upon what is or is not annotated on the title. Judicial notice is
taken of the standards, before approving a loan, to send
representatives to the premises of the land offered as collateral
and to investigate who are the real owners thereof.

45. Canlas v. The Court of Appeals 121 SCAD 752,
326 SCRA 415 (2000)
The degree of diligence required of banks is more than
that of a good father of a family; in keeping with their
responsibility to exercise the necessary care and prudence in
dealing even on a registered or titled property. Failure by a bank
to exercise such diligence, as in checking previous claims on the
subject property, does not qualify them to be mortgagee in good
faith .

46. Ibaan v. The Court of Appeals 321 SCRA 88
(2000)
Banks, being generally affected with publict interest, are
expected to exercise a degree of diligence in the handling of its
affairs higher than expected of an ordinary business firm.
Consequently, when the certificate of sale issued
provides a redemption period of two (2) years, instead of only
one year, the bank is estopped from objecting to the
enforceability of the two-year redemption period.

47. BANKING LAW
Zaldy Quizon, Jennifer Masicat, Dianne Elaine Ozaeta,
Sherwin Lyn Dela Pena, Michelle Azagra