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2K views49 pagesBanking Memory Aid PDF
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© © All Rights Reserved
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/ 49
BANKING LAWS. .
Governing Laws
1. General Banking Laws
a. General.Banking Law 2000 (R.A. No. 8791);
b. New Ceniral Bank’Act (R.A. No. 7653) as
amended by R.A.No. 11244
2: Special Banking Laws
a. New Rural Banks Act (R.A. No. 7953);
'._ Private Development Banks. Act (R.A: No.
4093):
©. Savings and Loan Association Act (R.A. No.
© 3779)rand
i. Thrift Bariks Aét (RA./No. 7908).
3. Other Laws Exprossly Affecting Banks
“a. Secrecy of Bank Deposits Law’ (R.A. No,
1409):
b. Unclaimed Balances Laiw (Act No. 3936);
6. Philippine Deposit insurance Corporation Ae
(RA No. 3681);
4, “Anteoney Laundring Act (RAN,
1034
and
{, Corporation Code of the
Big. 68).
Five Persons Primatiyintefestc i a f
» of Banking: (BIG-CD)
‘Borrowers;
Investors; :
‘Government;
Greditors; and
Depositors.
weopeg
BANKING LAW
AN BEDA LAW CENTRALIZED BA OPERATIONS = MEMORY AD 2019
05)
Civil Code of the Philippines oy No. 200) os
;
8
fh) Purposes;
s 4 and tn pbs tions, (OBL, Sea. 4).
[7 Persons or entiies whose principal functions Inchide
iS
sa
(R.A, NO. 8791)
Scope of Applcation ofthe General Banking Law
Primarily governs universal banks and.
‘commercial banks.
2, Suppletorily" governs thrift banks, rural.banks,
and cooperative banks (RA. No. 8791, as
amended, GeneralBanking Law of 2000, ‘Sec.
71) [herelnatier, GBL].
“GENERAL CONCEPTS:
Banks
Banks are entities enigayed,in the lending of funds
blaine nthe fer of depot rom the pubic (2BL,
Seo. 3.1).
‘An irivestnient company which loans out the money
ofits customers, collects the'interests, and:charges @
‘commission to both lender and borrovier is @ Bank
(Republic. v.. Security .Creait and Acceptance
“L€ormoration,{GR. No. L-20583, January 23, 1967).
Jn the borrowing of funds through
dorsement,. or assignment with
sr déeeptance .of deposit substitutes for
rglending or purchasing of receivables
Financ ries.
ling,. investing,» or placement of funds ‘on
teevidel indebiedness: or equity’'deposited,
““acduired, oF coursed through thém, either for th
‘own account or for the account of others (General
Barking“ Act, Section . 2-D(e); First Planters,
Pawnshép, Inc. * v. Commissioner: of. intemal
Revenue, G.R. No: 174134, July 30, 2008),
EXECUTIVE COMMITTEE
Matt cram c. SUMANQUI
Overall Charperen," ERICA
MAE, C. VISTA: Chatrperson for
Aesdonie, HEN REL
BARBERO Chatrpesn for oe,
Opirtins JEELSEA LOUISE
BIMAANO Vice Chairperson for
Operations: MA. ANGELICA.
DB LEON Vice Chairperson jor
‘Finance, ARRAN OLMAYA” J
BADANGAN Vice Chatrperson
for Aut,]ORDAN N. CHAVEZ,
‘Vie Chairperson for Electronic
Data Processing, HANZ
DARL. TU Vik
(Ginirperson for ogists, DON
ALFRED ES AQUILIZAN Vice
(Chairperson for Membership
Peper, Consumer Provecion
Libs and Law on Insolvency
ADVISERS BANKING LAW
AN BEDA LAW CENTRALIZED BAR OPERATIONS ~ MEMORY AD 2019
Non-stock Savings and Loan Associations Interest rate to depositors while charging the
Nor-stock, non-profit corporations engaged in the highest possible ‘interest rates on their own
business of accumulating the savings of its members. borrowers. .The interest spread or differential
and using such accumulations for loans to members belongs to the bank and not the depositors who
to-service the needs of households by providing long are not beneficiaries of banks (Consolidated
term financing for home: building and development Bank and Trust Corporation v. CA, G:R. No.
and for petsonal finarice (R.A. No. 8367, Sec. 3) 138569, September 11, 2003). 5
Primary. Functions of Banks Banks aré not gratuitous ballees of the funds
1, Deposit Function - deposited with themn ‘by their customers. Banks
‘Tho: deposit function of banks fefers. to those are run for'gain, and they solicit deposits.in order
functions which allow a bank to receive money that they can use the money for that very purpose
from the public with the obligation of réturning an: (San: Carlos Milling Co., Ltd. v. BPI, G.R. No.
‘qual amount of ‘the’ same Kind and quality 37467, December 11, 1933).
(VILLANUEVA-CASTRO, Recap: Commeicial 7
Law Book 1, (2018), p. 160)., hereinafter, ‘The charging of interest foi loaris forms a very
VILLANUEVA-CASTRO, Recap Book 1}... essential “and fundaméntal: element of the
banking business. in fact, it may Be considered to
the vary essence of the banking’s existence or
“being. (Sps. Anestacio-Calina v. DBP, G.R. No.
Yisprasiaui 34, 207)
Fixed, Savings, and arent. depois of mong
Fe and Sinior bette shel by gorehtocy
by the provilons concerning imple” aspen) A
Code, Art. 1980). 5
2 “tndigbiagat lq institution
~a0"*~ whom shall be
records and ledgers evidence Sy OOS independent | directors
the oan with the time, deposit (GBL, Soc, 19).
bank inexplicably failed be ne aio rE
copkes of ese documgit. Clay, ine bac
failed to troat the acéount sf Matcos with 6%
meticulous care (Philppine' Barking CoyBoravon a
v. CA, GR. No, 127469) ep 200455"
eal
8. Regularly Deals with Régistere
Judicial notice is taken of-the, Stantiara
for banks, before. oppiaita A lod ek gend
Tepresentatives to the ‘premises. of She ar
bffored 26 collatoral and ty investigate ee
the real owners thereof: Banks, hele busi
being, impressed wih publ. nl TEN
expected 10 exercise moie carbsaridtp pg
wer selas cua i ve Seale Bree
those involving registered lands: (Devetopment M
Bank of the Philippines v. A, 'G.R. No. 129476,
‘Apri 28; 2000).
9, Employs Reasonable Security Measures
in case of merger or
‘consolidation, the
\ number of directors shall
not exceed 21. (GAL,
}|Sec. 17). .
Must generally be a stock|
[corporation (GBL, Sec.
81).
Seed
Not permitted ‘to issue
res|no-par value shares!
tion, Code,, Sec. | (Corporation Code, Sec. |
6; GBL, Sec. 9).
Pein
Barks may Impose reasonable conditions or." |May” declare dividends | May declare. dividends, |
limitations: to access’ by nonveniployees to its. [provided it -has|in. the absence of the |
premises and records, even absent any imminent |unestrictéd' retained | conditions set fort under|
bractual unlawfubaggression, provided thatsuch . {eamings (Corporation | Sec. 57 under GBL.
imitations are not contrary to the law (UGPB v, | Cade, Seo. 43)
EAN HEE et 20." Re
Seater pa poe
: Jown. shares "for al acduire its own shares or
legitimate -comporate|accept them-as security|
purpose; provided that; it|for a loan,
has unrestricted retained te
. earnings in its books to| Exception: When
. cover the shares to-be|authorized by the
purchesed/ acquired | Monetary Board, and the| |
l ‘bank must sell or disposo|
374 | 2OIS'SAN'BEDA' LAW CENTRALIZED-BAR OPERATIONS BANKING LAW.
[SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019
eed
(Corporation. Code, Séc.| of said shares within six
4n. "months from, the time. of |
ed
eee ee
Requires @ certificate of| Does: not require . a
ax: clearance .a5 ‘prior!certificats of tax
requirement’ for the{clearance: before BSP|
‘approval - of. the|can. approve’ dissolution|
dissolution: by the SEC|(In,“ Rex. Petition For|
WIRG, Sec. 52(¢)) Assistance in. the
Liguidation Of The Rural|
Bank Of. Bokod|
(Benguei), Inc, G.R. No.
198261, December 18,
2006).
Conticate of Authority tp:Engage in,Bankiig of
Quasi- Barking Functions from BSP “
‘person or enty eannotangge Inbanking or au
banking functions without 2 ceteate of autonty
from the BSP (GBL, Sec. 6) j
The SEC shall not register
thereto, unless’ accompanied: by. es
authority issued by the Monetary, B¢
seal (GBL, Soc. 14). nee
Se
Upon issuance of the certificate ei
person or entity may commenca to eligage in banking
‘operations or quasi-banking functiofy-etid
continue todo so unless such author
surrendered, revoked, suspended, or a
‘Sec.,6, par. 2). *
When Certificate of ery Isissued
‘The certificate of authority shall.not be issued-unless.
thie Monetary Board is Satisfied that: (RPC)
1. All Requirements of existing laws and regulations:
16 engage in the business for which the applicant
is proposed to be" incoforated have. been.
comnplieg,
2. The. Public intofest arid: éonorhie conditions,
both, genérat and local justly. the’ authorization;
ard
The: aniount of the Gapital; th: financing,
‘organization, direction and administration, as well
a8 the integrity” and responsibilty, of the
organizers. and- administrators, reasofably
> assure the safely of ‘deposits andthe public
interest (GBL, See. 14)
2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS | 375”
‘4
{a Commercial Banks
Effect of Lack of Authority from the BSP
Persons of entities found to be performing banking or
quasi-banking functions without authority from the
BSP shall be subject to appropriate sanclions under
the NCBA and other applicable laws (GBL, Sec. 6,
par. 4).
‘The ‘determination of whether a. pérson ‘or:entit
Performing. banking or guasi-banking functions
without BSP-authority shail be decided: by the MB
(GBL, Sec. 6, par. 2).
Conditions “for. Corporate Organization of, a
Domestic Bank or Quasi-Bank: (SPC), ”
4. The entity is a Stock corporation;
2: Its funds are obtained from the Public, which shall
“mean 20 or more persone; arid
3: The minimum Capital requiréments prescribed by
the MB are salisfied (GBL,'Sée. 8):
Classification of Banks (GUTRICO)
‘Commercial banks;
Universal banks;
Thrift banks, composed of:
‘Bc Stock savings and loan associations
.” Privaio, development banks (RA. No. 7906)
¢. Savi and morigage banks
‘Rural banks (R.A. No. 7353),
Islam bapa No: 6848):
5: Soope riks (RA. No. 6938); and
‘are banks that have “all the. powers
~tledessatry to engage in. commercial banking, in
‘addition to general corporate powers, such as:
a, Accopt drafts and iesue letters of crecits,
be. Discounting,
Instruments and other evidences of debt;
Accepting or creating demand deposits:
4. Receiving. other: types of . deposits’ and
deposit substitvies:
Buying and selling foreign exchange, gold or
silver bullion; ‘marketable. bonds, and other
debt securities;
f. Extending eveclt (@BL; Sec, 29),
2. Universal Banks,
Banks that have the authority 10' exercise ‘the
powers of a commercial bank and ar investment
house, invest, in -non-allied enterprises. (GBL,
Sec. 23).
‘and. negotiating ° negotiable,
a
a
FS
x
zy
a
a BANKING LAW
SAN GEDA LAW CENTRALIZED BAR OPERATIONS ~ MEMORY ND 2019
Universal Bank v. Commercial Bank
ees Cera
‘As to Powers,
23);
carry oF
invesiment
may ‘be
enterprises,
financial
24); and
5. Power to
non-allied,
See. 23).
‘of. allied,
24).
50% ‘of net wor
‘Sec. 24)
peeee ra
Sec. 24)
Sec. 24)
100% of equity:
1. General Corporate|1. General . Corporate
Powers (GBL, Sec. powers (GBL, Sec.
12. Such powers a8 may}2. Such powers as may|
be necessary tol be necessary to
business. of]. business of!
‘commercial bankinig;|.° . Commercial banking:
(GBL; Sec. 23); (GBL, Sec. 29);
3. All. powers of an|3. Power to invest in|
under “special. laws|’ financial or non-|
(GBL, Sec.
financial (GBL, Sec.
enterprises.
May invest in the equities|
financial or non-financial
tracer fen trae ee
aes (SA es ear Et
ee noe ett cs
50% of net worth (GBL,
As to Equity Investment in any One Enterprise
}25% of net worth (GBL, |25%.of net worth (Allied
‘As to Equity Investment in Financial Allied
29);
A thef carry. on’. the
house.as| the equities of allied!
provided| ~ enterprises; whether
23); financial: (GBL+Se6
5, whether
or ~ non-|
Invest in
(oBi,}}
whether
eat
rth (GBL, [35% of net worth (GBL,
Seé.-30)
pent ea ce
Eine
NIA,
lonly) (GBL, Sec. 30)
Enterprise
100% of equity of a thrit
or sural bank;
tus ees
[A publiclylisted bank] in other financial allied
may own up to 100% of| enterprises. including
the voting stock of only|another commercial
Jone other UBICB (GBI, |bank,” Investment shall
rermain.a minority folding
(GBL, $00.31).
Ta ce
Gatun
fenterprise nor. shall_it
exceed 35% of the voting
stock in thalt enterprise.
“Ff banks are engaged in
NY “Accumulating savings. of depositors and
ing ther:
cf sheen working. capital and
arid long-term financing to
0d in agriculture, services,
rf Rousing:
sid financial and tied
ir chosen markets and
je8! Gspocially small and medium
209 viduals (A. No. 7806,
ay
janed to make needed creat
ify acosnaoley th pe arene
15 (RA. No. 7353, Sec. 2).
jefate, the socio-economic development of
“Ré Autonomous Region of Muslim Mindanao by
performing tanking, financing, and, investment
peiations ‘and to-establish anid: participate’ in
‘agricultural, commercial and industrial ventures
based ‘onthe Islamic concept of banking (RA.
No.'6848, Sec."9):
All business dealings and actives are subject to
the basic principles and rulings of islamié Shar’,
such-as the Al Amanal Islamic Investment Bank
ofthe Philippines which was created by R.A. No.
6848 (R.A. No: 6848, Soc. 3). :
6.” Gooperative Banks
‘Those bianks otganized by cooperatives and the
majority shares of which. are owned . and
controlled by cooperatives, primarily to_provi
financial and oredit services to cooperatives. It
shall include cooperative rural benks (R.A. No.
£6938, Sec. 100).
876 | 20IS-SAN BEDA LAW CENTRALIZED BAR OPERATIONS BANKING LAW
'SA01 BEDA LAW CENTRALIZED BAR OPERATIONS ~ MEMORY AD 2019
7. “Other” Banks
The following banks do not fall under any of the
‘common classifications of banks under Section
3.2 of the:GBL:
2..’Philippine Veterans Bank (R.A. No: 3578,
as amended by R.A. No. 7169) ~ conceived
and created as a: private commercial bank
‘owned by the Fil
WV and deeply imbued ‘and impressed with
public interest.
b, “Land: Bank of the Philippines’ (RA. No.
3844, See. 74) — created to finance the
‘acquisition and distribution of agricultural
estates for division and resale to. small
lafidiords as. well as’ the purchage of the,
landholding by the agricultural lessee.
c. Development Bank’ of the Philippines
(forrnerly Rehabilitation Finance.
Corporation) (E.0. 81, as amended by R.A.
No, 8523, Sec. 2)
Agricultural and. industria enterprises!
Smhasie on small ard. mechan
5 enterprises.
The above banks may be dist
arcinary commercial or univers bar
they are:
a.. Created..by special law fer =
banking purposes: ('?a>.: Any
b. Must be expresely-(suthomzéanby
approval “by the Moet Baia bel
accepting O crating dome depo
that
OWNERSHIP OF B
‘Troasury Stock
General ‘Rule: No bank shall purchase or acquire
shares of its own. capital stock-or accapt ils own:
shares as Security for a loan.
Exception: When authorized by the. MB and the
stock so purchased: or acquired. shall. be ‘sold. or
disposed of at a public or private sale within 6 months’
from:the time of its purchase or aequisition (GBL,
Sec: 10).
Fillpino Stockholding in. Domestic Banks
A Filipino individual, and a, domestic non-bank
‘corporation may each own up to 40% of the voting
stock of a bank (GBL, Sec. 11).
White the: festriétion’ on foreign equity: refers to the
total equity participation, the restriction on Filipinos
‘and domestic non-bank corporations. refer’ to
individual equity participation - (SUNDIANG &
its primary purpose Is to.
provide banking services'principally to cater’
to the medium and long-term. needs. of
AQUINO, Reviewer on Caimmercial Law (2017), p.
342 [hereinafter, SUNDIANG & AQUINO, Reviewer);
Foreign Shareholding in Domestic Banks
General Rule: Foreign. individuals and foreign non-
‘bank corporations may own or control up to. 40% of
the voting stock of a domestic bank. (GBL, Sec. 11).
| Exceptions:
“Thr bank ~at least 40% ofits voting stock shel
be owned by Filipino citizens .
2. Rural bank — No less’ than'40% of-the voting
stocks shall be owned by Filipino. citizens white
Now-Filipino clizens- may own up to 60% of the
voting stocks (RA. NO. 10574, Sec. 4).
._Détermination of Proportional Sharsholding
‘The percentage of foreign-owned voting stocks in a
bank shall be detérmined'by the citizenship of the
3). nlvidual stockholders inthal bank. (BBL, Sec. 11).
i
>, The citizeriship of a corporate shareholder in a bank *
a Stall flow ‘the ctizenship of the. controling
sail the holding corporation, irrespective
e8| Bincofporation (GBL, Sec.'11).
‘
of the voting stock of the corporate
'
dF reputable, and financially sound
foreign banks shall be “allowed entry. in the
pines. Furthermore, the foreign bank applicant
jdely-owned’ and publidly-istod "in its
iY OF ofigin, unless the foreign bank applicant is
‘gwned, and controlled by. the- goverment. of its
country of origin (RA. No. 7721, ‘es amonded by RA
No, 10641, Sec. 2).
Modes of Entry of Foreign banké
‘The MB may authorize foreign banks to operate in the
Prilppines through any of thé following modes of
‘entry:
‘1. By acquiing, purchasing; oF Owing tip to 100%
‘f the voting Stock of an éxisting domestic bank:
By investing in up to 100% of the voting slock of
‘new banking Subsidiary incorporated under. te
aws'of the Philippines; o
‘3. ‘By. establishing branches with full banking
authority (RA. No. 10641, See, 1 amending RA.
No. 7721, Sec. 2)
2.
‘Capital Requirements for Forcign Banics Seeking
to Operate in the Philippines
1.. For locally Incorporated subsidiaries — The
‘inimum capital required for locally incorporated
subsidiaties of foreign banks shall be equal to ~
that prescribed by the MB for domestic banks of
2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS | 377 the game category (R.A. No. 7721, as antended
by RA. No. 10641; Sec. 4):
2. For foreign bank branches ~ Thé. minimum
capital required for foreign: banks authorized to
‘establish branches shall not be less than the
capital required for domestic banks of the same
category (R.A. No, 7721, 2s amended by R.A.
No. 10641, Sec. 3).
Legal Siatué of Authorized Foreign Banks
Foreign banks authorized to. operate «in the
Philippines. shall perform the same funetions, enjoy
the same privileges, and.be subject to the samie
limitations. imposed, upon’ @ Philippine bank. of the
same category (R.A. No. 7721, as amended by RA
No. 10641, Sec.'8). :
Off-shore Banking’ Unit refers. to a - brangh,~—
subsidiary or affiliate of.2 foreign banking seer |
duly authorized by BSP to transact offshor i
Business in the Philippines (P.D. No! 103%,
10) ee
fe
1084, 8
fey er"
ae
Offehore Banking fotors to ix&-gonstel of Sarkina
transaction in foreign culroncies involving the receipt
of funds from external sourcas andgihe utzation of
such banks (P.D. No. 1034, Seat 1(2)).{ -
fom {
Participation in Foreclosufe,Proteedin
Ferelgh bons shal be alow 6
ing
sf
Oe
fm
BANKING LAW
AN BEDA LAW CENTRALIZED OAR OPERATIONS = MEMORY NO 2019
ip —yearelcoun
4, | s3CZ2Not al Majority shacebolder of the institution;
ll a Not @ Relatvg) legftfuato or common-iaw of any
Reason:
management
To maintain the quality of bank
and afford better protection’ to
. depositors and.the public, in general (BL; Sec. 16).
Composition of Board of Directors
‘There shall be ‘at least-5, and a maximum of 15
‘members-of the board of directors of a bank, 2 of
whom ‘shall be independent -directors. in. case’ of
merged or consolidated banks, the maximum number
of directors is 21-(GBL, Sec. 15).
Non-Filipino citizens may become members of the
board of directors of abank to the extent of the foreign
participation in the equity of said bank (GBL; Sec. 18).
Independent Director
A person other than:an-officer: of employee of the
bank; its subsidiaries or.affliates or retated interests
(GBL, Sec. 15). :
Bn ihappeivent director is person who is: (O0M-
RNB) | 3
1. " Not@ Diregto? or officer of the related companies:
othe insthitiop's majority stockholder.
7 Nofrhas nofbeen an Oficer o employee ofthe-
C bankiquaskuankitust entity, ts subsigiaries oF
affiates att (Bd interests during the past 3
from jhe date of his election;
dee bespticero
fockholder holding shares of
foreclosure sales of real i clare” élect one seat in the board of
(RA. No, 7363, a8 amended By RANNO, A | Soe adbanie orfany oF related comparies;
6). i Loe! not acti as a/Nominee or representative of
Kc Lew cg rae mime rian
However, inno event. shall itt Spa Sp,
transferred to stich foreign: bank 7A. gad UD i ify Business’ or-other relatiénship
amended by R.A. No.: 10574, Sec.
DIRECTORS AND OFFICERS.
Fit and Proper Rule :
‘The Monetary Board shall présciite, pass upon, and
review the “qualifications nd disqualification of
individuals elected or appointed as bank directors or
officsts. ard disqualify. those found unfit after due *
Rolie’ (GBL, Seo. 16). .
le determining whether an Individual i fit and proper
to hold tho position of a ditector or officer of a bank,
regard shall: be given; to hig Competence, Integrity,
Training, Exsierience, and, Education (CITEE) (GBL,
Sec. 16).
fution or any of its major stockholders
"7 Walesa realy Peer ws wopment
MASE ar seer mace Saag hme
Scope! of. “Relatives”
Independent Director
“Relatives” refer to spouse, parent, child, brother,
Not. Qh
lified as’
sister," parentin-lavy, - sorvidaughter-inlaw, ‘and
brother ssisterinaw (BSP Circular No: 793,'Series
of 2013)
Meetings, :
Meetings.of the board of directors may be conducted
through modern technologies such as, but not limited
4o,. teleconferencing: and: video-conférencing: (6BL,
‘Sec: 18).
Prohibition on-Publié Officials
General. Rule:.No appointive or élective’ official,
whether fulHtime or parttime, shall, at the same time,
serve'as'an officer of any private-bank (@BL, Sec.
19).
378-| 2019. SAN BEDA LAW CENTRALIZED BAR OPERATIONS: Exceptions:
1. AS olhemwise provided under Sec. 5 of the Rural
Bank Act of 1992;
2. Where such service is incidental to financial
assistance provided by ‘the government or a
government-owned or -controlad corporation to
the bank; and
3. As othemise provided under existing laws (BL,
Sec. 19):
Note: Accordingly, banking comoration is liable to.
innocent third persons where the representation is
‘made in the course of ils businése by an agent acting
within the general scope of his authority (Philppine
Banking Corporation v. CA,” G.R.No. 127468,
sanuary 15, 2004) 7
DEPOSIT FUNCTION
OF BANKS
Deposit- Function
The. deposit function of banks refers” to those
functions which allow'a bank to receive money frém
thé public with’ the obligation:of returning: an equal
amount of the same kind and quality {VILLANUEVA-
‘CASTRO, Recap Book 1, p. 160).
Deposits
The. unpaid balance’ of mgéy’ or “me
received by a bank in the’ usual céuise-of business:
and for which tt has given, or is obliged t6 dive credit
to a commercial, checking, savings,-timie; \or thrift
account or Issued in accordance with BSP hules-and
Fegulations and other laws (SUNDIANG#/AQU!
Reviewer, supra-at 328). ve
Characteristics of Bank Deposits “<5
1, Not Regular Deposit Contracts
Bank deposits are. in the: nature. of regular
sits. They. are really loans bécause they.
Gam interest (Serrano v. Central Bank; G.R. No.
130811, February 14; 1980).
» Note: fhe’ relation ‘existing. betiveery a bank
Gopositor and a bak is not that of a.depositor
and a depositary under the Title Xl, Bok IV of
the Civil Code. (DIZON, Banking Laws and
urtsprudence, (2008), p. 2) (hereinafter, DIZON,
Banking Laws}.
2. Loans Made to the'Bank
All kinds of bank deposits; ‘whether fied,
‘savings, or current are to be treated as loans ond
are to be.covered by the laww'on loans. (Serrano
\, Gontral Bank, G.R. No.130511, February 14,
1980).
BANKING LAW
SA BEDA LAW CENTRALIZED GAR OPERATIONS ~ MEMORY AIO 2019
3. Fo i part of
‘The contract between the bank ahd its depositor
‘is govermed by the provisions ofthe Civil Code on
simple loan (Consolidated Bank and. Trust
Corporation v. CA, G.R. No. 138569, September
11, 2003).
There‘is a debtor-creditor retatioriship between
the bank and its depositor. The banks the debtor
‘while the depositot is the creditor. The depositor
lends money to the bank and the bank agrees to
pay the depositor on demand. The savings.
deposit agreement between the bank and the
depositor is thé contract ‘thiat determines: the
Fights ‘ahd . obligations . of the parties
(Consolidated Bank and Trust Corporation v. CA,
GR. No. 138569, September 17, 2003).
‘The bank Hasthe right to-compensation and can
set-off the, deposit-accounts ins hands for the
payment of any outstanding indebtedness of the
epositorto itthat are due and demandable irom
the laiter (Gullas v. PNB, GR. No. 1-43191,
November 13, 1938).
4267}. 0F the Civil Code, which prohibits
Comipenszalion when one of the debts arises from
a depostilin, does riot apply to bank: deposits
(Gulasy. re G.R.No,L-43191, November 13,
Generic Funds of Bank
Arperson whd'feéeives a loan of money or any
other‘fungible“acquires the~ownership thereof,
and fe bound'to pay to the credior an equal
amount of the same kind and quality (Civil Code,
A125)
“The ‘ownership. of the: amount deposited’ was
‘rarismitted to the Bank upon the perfection of the
contract and it ean. make, usé of the amount
deposited for its banking operations, such 8s t0
pay interests on deposits and to pay withdrawals.
While:the Bank has the obligation to return the.
amount deposited it has, however, no Sbligation
to return of, deliver. the same money that was
deposited (Guingona, Jriv. ‘The Cy Fiscal of
Manila, G:F. No. L-60033, April 4, 1984),
Fallure'to Pay Amount Deposited Not Breach of
Duty: : '
The. failufe: of thé Bank t6 ‘fetufn’ the. amount
Geposited will’ not constitute’ estafa through
misappropriation punishable under Article 315, par.
4(b) of the Revised Penal Code, but it will oniy'give
fise to ‘civ lability for breach of contract (Guingona,
rv. The Gity Fiscal of Manila, G.R. No. 1.-60033,
April 4, 1984).
Reason: The bank gains ownership, of the’ money
given tot by the bank. depositor. It does hot receive
2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS | 379.
F
8
2
F
z
Es BANKING LAW
SAW BEDA LAW CENTRALIZED OAR OPERATIONS = MEMORY AD 2019
the money under an obligation to make delivery of, oF Requisites to Accept NOW Accounts:
toretum, the'same, {The applicant must have complied with
the minimum capital required: and
Mandamus Does Not Lie to Compel Payment of ii, It has neither unpald assessment due
‘Amount Deposited nor past due obligations with the POIC.
The relationship «"being- contractual in nature, (MORB, Sec. X23),
~ mandamus is therefore not an available remedy since Note:. Universal/Commercial Banks may
mandemus does not lie to enforce the performance * offer NOW accounts without prior authority of
of contractual obligations. (Maclaring Lucan v. the Monetary Board. Thrift Bank/Rural Bank
Alimatar Malawi, G:R, No, 159794, December 19, - . Cooperative Bank . may accept NOW
2006). ‘accounts upon prior approval of the Monetary
Board (MORB, Sec. X223)
‘Types of Deposit Accouints d
1. As to Purpose 2. “As to Demandability
2. Current Deposit Account a
Deposit accounts that are meant to facilitate.”
‘business and accom*nodete a higher rate or banks which are denominated in Philippine
frequency -. of transactions. . between
‘and are subject to. payment in logat
businesses by Imposing,no restrictions. on.
tender Upon demand by the presentation of
withdrawal amounts. or « frequency?" iy “Ssseghecks \. No. 7653, or the New Central
exchange, no interest is paid” orfysuich | 3) N) Ba '@8 amended by RA 11211, Sec.
‘accounts. PEL ‘5b, [hereinafter NCBA).
Je aa
b, Savings Deposit Acco, fe hi at Rule: Only universal and
W's the rmoat conv asses Fy cries) Gents ‘ey actopt er reste
tensouragon ine pUBIS 8 opt Ax. xs naidepocite without prior authority from
by offering small interest “f “money je BSR (GB, ‘Sec. 33).
deposited in such accounts. It is a-primeryj ay
‘component of publio-fingnco ee | oR” Reception “Giler banks may accept or
presently unneede, (savings) foe _ ‘ gate dérand deposits upon prior approval
depositors to persopswillidg ' 3 slibject io such conditions and rules
te en fay pares by the MB (GBL, Seo.
‘The requirement vet
« passbooks fs ustaly cluded in Fixeditimerform Depos
and. conditions printed in the pss mobs Whose bills of the BSP and of eter
bank Is ngaigent Walls the itis iss ent of which cannot be legally
> witout requring ther =e ie ‘such spestied number of
February 29, 2000). ‘==lletro Investment Corporation, G.R. - No:
182990, May:21, 2004)
passbook. (BP!.v. CA, G.R- Me iA M i (BP! Family Savings Bank, Inc: v. First
c. Thustaccount -
Ils a savings account established. under a. Fixed or Timo Deposits offer higher interest
trust agreement, cofitaining funds, rates on the amount deposited in exchange
administered by thé bank for the benefit of for the’ fixed tenure of deposit where the.
‘the trustor or another personis. depositor undertakes not to withdraw the
‘amount deposited. The longer the term, the
A trust account shall refer to an aécount higher the interest, In some cases, a bank
‘where transactions arising from,trusteeship. may allow.an early withdrawal although.a
‘are. kept and. recorded (BSP Menual penalty is imposed.
Regulations | for Banks, Sec. . X403)° ~
hereinafter MORB}. 3. /As to Account Ownership
2." Individual or Single Account; or
d.- Negotiable." Order ° of. Withdrawal - 5. Joint Account
Accounts (NOW-Accounts) i. tAnd” account
interest-bearing . deposit accounts that The depositors are joint creditors of the
‘combine the payable on demand feature of +. sbank and the signatures ofall depositors
‘checks. (akin: to. current accounts) and’ the ‘re’necessary to allow withdrawal (BSP,
Investment feature of savings accounts Banking Laws of the Philippines, Vol.
(MORB, Sec. X23).
380 | 2019'SAN BEDA'LAW CENTRALIZED BAR OPERATIONS:
\ BANKING LAW
SAW BEDA LAW CENTRALIZED BAR OPERATIONS ~ MEMORY 10 2019
p. 39° hereinafter, BSP, GBL 2 final judgment (Salvacion v. Central Bank, G.R.
Annotated); No. 94723, August 24, 1997).
“andlor” account Note: This case is a pro hac vice exception, tho
Whenever two or more persons open ‘an. SC only ruled as such due to the special
account, in which any: of them, acting circumstances of the said-case.
separately, can.,,make deposits _or
wihitrawala at aiy tine (BSP, GBL Other Features of FCDs:
‘Annotated, p40): 0F : ‘Authorized banks “may adopt. a’ numbered
ii, Survivorship agreement account system for recording and. servicing
‘An aleatory contract supported by law'a deposits (R.A. No. 6426, Sec. 3(1)). i
lawiul - consideration — the, mulval’ 2. FGDs are exempt from faxes including interests,
agreement: of the. joint’ depositors income or earings of déposit (R.A. No: 6426, as
permitting either'of thém-to withdraw the’ amended by P.D. No. 1246; Sec. 6):
‘whole deposit during their lifetime, and 3. In the event a few law or regulation issued
. transfering the balance to the survivor decreasing the rights previously granted, it shel
upon the death of one of them (Rivera v. riot apply to FC's already made or existing at
Poople's Bank:and Trist Co,, . the time of the fosuance of such new regulation
L-47757, Api 7, 1942) or enactment (P.D. No. 1246, Sec 12-A);
“ There is.no restriction on the withdrawal by the
4. As to Gurreney Denomination 22)” depositor of his deposit oF on tha transferability of
4. Paso Denominated Deposits; pL5O\. he same abroad.
». Foreign Currericy Deposits Li Exception: Those arising ‘rom the contract
lve between the depasior and the bank (RA: No,
Foreign Gurrency Deposits 6426, See, 8).
Any person, natural or juridical, may epost ith Brent
Sch Phitpping banks'n good Standing, ae'fay-upor” |; Anonymous Accounts Generally Prohibited
application, be: designated by. the: BSP. for thé") Anonymous aifcounts or those under fictitious names
Purpose, foreign-currencies which are. aecéptanlg.as | are prohibKedi(R.A. No. 9460 as amended by RA-
part of the international reserve, except those’which | No. 9194; BSR Circular No. 251, July 21, 2000).
fe required byte BSP 18 Be 9 surfender ered (RA. No; Fag eid Currency Deposits
16426, Soc. 2). hon-bank financial. institutions
‘Authority.of Banks:to acée} Forel *Guirency |} orotert paste gt tlent ee ‘6426, See. 8).
Deposits
The banks designated by the BSI hall 5 fe fo Spepial Rice on Depositors
authority (ACID): "1 Miners = they can open bank accounts in theif
1 To Accept deposits “and. to. Sept foi oun proviced that
curreneies in trust: ae + a. They aie’atleast seven years of age;
2. To accept said: deposits 28 gonatardyOh loans, bo They are ablé to read and. write and have’
subject to sich rules and regulations as may be aufcient diseretion;,
promulgated bythe BSP from time to time; «Thay are not otherwise dequalied by any
3: To fseue certificates to-evidenoe such deposits; otherincapacity; and
4..-To. pay Interest Jn foreign, currency on such ‘4. It should only Be savings or time deposits
deposit; and (PD. No. 734, See. 1).
8.- To Discount said corticates (R.A. 6426, Sec. 3). j
Parents may nevertheless . deposit for. their
Exemption from Attachment or Gamishment minor children and guardians for their ward’
General Rule: Foreigh currency deposits are exempt (P.D. No. 734, Sec: 1).
{fort attachment, garnishment, and other codrt order. ~
‘and processes (R.A. No. 6426, as amended by F-D. With respect to thrftbanks, ifsiny guardian shall”
No. 1246, Sec. 8). give notice in’ writing to any thrift. bank’ not to.
es make‘ payments of. deposits, dividends, .or
Excoptionés interest to the minor of whom he is.the guardian,
‘Probable cause has been established that the then such payment shall: be made only'to the
deposits involved afe in any way related to.“ . guardian (R.A. No. 7906, Sec. 22).
money laundering (AMLA, Sec. 17); and
2. To ensure satisfaction of a judgment. It was:not Note! For children younger than Seven years old,
the intention of-the lawmakers to, place bank their parents can open an -In-Trust-For. (ITF)
deposits beyond the reach of execution to salisty account.
2019 SAN BEDA'LAW CENTRALIZED BAR OPERATIONS | 384 2, Married Women — allowed to open bank accounts.
without thé assistance of their husbands (R.A. No.
7192, Sec. 8).
Corporations not Required to Open Deposit
Accounts Prior to Incorporation
Consistent with the objectives of Republic Act -No.
9485 (otherwise known as the Anti-Red Tape Act of
2007), the SEC has. dispensed with the requirement
of a Certificate of Bank Deposit for the-registration of
the Afticles of Incorporation of new corporations
(SEC'Memorandum Circular No. 11 s. 2016).
Note: The requiromént effectively: required the
‘opening of: a -cofporate bank account as a pre=
requisite to incorporation. This requirement has been
further rendered naught with the enactment of the
Revised “Corporation. Code which removed the
requirement shat 25%, of the subscribed. capital be
paid-up prior to incorporation. 7
Suspension of Payment on its Deposit Ciafties |,
in case’a bank of quasi-bank notiiésthe, ESP. or
publicly announcas a bank holiday; or in'ani.miariner
Suspends. the payment of is, boat lepine
continuously for more than 6 angst eB may x
ieajing a
summarily and without nee
‘such * banking institution iss place |i
fecelvershin of the “PhilppihesOspook Eure
Corporation (GBL, Sec. a |
Deposit Substitutes
Arvalternative-form of obtainin
Se essaeme
\s We
endorsement, or accepiance'lof debi pec ae ee
cther than deposi,
‘the borrower's own account, for the oteaCaten
lending or purchasing. of reeeables “en wel etree
obligations (NOBA, Sec: 85)
*Pubife" shall moan. borfowing: trom trey
more lenders at anyone time ad
ete: Rather tran opening an individual account with
each depositor, a bank may instead Issue, endorse,
of accept a short-term debt instrument (Such as a
promissory note or banker's acceptance) in favor of
at least 20 lenders. These insirumerits, being loans
from the’“public’ ‘paftakein’ the. nature of bank
deposits but are not treated as ordinary deposit
‘accounts because the debtinstruments can be traded
invthe secondary financial markets.
Safety Deposit Box:
‘The contract forthe rent of a safety deposit box snot
an ordinary cofitract of lease because full possession
‘of the box is not giveri (6'the renters. Nor is itpurely
‘8 contract of ‘deposit because the -parties: may
establish such. stipulations, clauses, terms, and ..
conditions ‘as they may.deen convenient, provided
they dre nat contrary to law, morals, good customs,
public order or public policy. The coniract is a special
BANKING LAW
‘SN BEDA LAW CENTRALIZED GAR OPERATIONS ~ MEMORY AO 2019
SN AeA CRASSA
es SY
Pine oe ait 6D end compliance with such
kind of deposit (CA-Agro Industrial Dev't Corp. v. CA,
GR. No, 90027, March 3, 1993).
‘The relation between a bank renting out safé-deposit
boxes and its customer with respect to the contents.
Of the box is that of a bail or and bailee, the bailment
being for hire and mutual benefit (CA-Agro Industrial
Dev't Gorp. v. CA, G.R- No. 90027, March 3, 1993).
Net Worth =
“The:total of the .unimpaired paid-in capital including
paid-in surplus, retained earnings, and, undivided
Profit, “net of valuation ‘reserves and _other
jusiments as may be required by the BSP (GBL,
i Capital
i ppeberive the minum Fat which the
eae ou ‘bear.to its total risk assets
epegingen ‘Becounts (GBL, Sec.
wer REceBealy for a maximum petiod of
[such ratio shall bo. applied
‘same Category (GBL, Sec.
I<) :
“one
iniformnly an sp
ay
oy fos ance with the Priscrtbed
Railo of Czpital to Ris
Sense Sa Yay.
‘the distribution of net profits.and
ij datorallottheret movie esses
fe capital accounts ofthe bank until the
requirement has.been-met: or
trict or prohibit the acquisition of rigjor assets)
and, making: of new investments:by the bank
~ “except purchases of reddlly marketable evidence
of indebtedness of obligations, the servicing. and
repayment, of which. are. guaranteed. by the
Government, until the minimum required capita
rae bai restore (9A Son. 29,
Note? 1h case of a bank merger or consoldation,
‘or when’ bank is under rehabilitation, under.
program approved. by BSP, the “MB” may
Temporarily relieve», the surviving - bank,
‘consolidated “bank,” or. constituent bank or
‘corporations . under... rshabilitalion from. full
‘complianice with the required capital ratio (GEL.
‘Sec. 34).
382 | 2019 SAN'BEDA LAW CENTRALIZED BAR OPERATIONS: INVESTMENTS OF BANKS
Allied Enterprises
AAlied enterprises may either be a) financial‘or (b)
non-fiiancial (GBL, Sec. 24).
4. Financial Allied Enterprises,
a. Leasing companies including leasing of stalls
‘and spaces. in @. commercial establishment
provided that bank investment inJacquisition
of shares of such leasing company.shall be
linited/applicable only in-cases.of conversion
(of outstanding loan obligations into. equity;
Banks;
Investment Houses:
Financing Gompanies;
Credit Card Companies;
Financial instituttons catering ‘to smailand
medium scalp industries including venture,
capital. corporation; ad
Securities dealershiprorokerage; and.» /
Ae ape
following as financial allied conan
a... Insurance’companies; and |. i¢
Bb. Holding company (MOR®, See! X377)
gor
2. Non-Financial Allied Ents Fresh!
‘Activites that do not involve money aatlerauch
AL
vy
or
Warehousing Companies eae
Storage Companies; >.
Safety Deposit Box Companies
Management corporations engated or 6/58:
: ‘engaged -in. an. activity sifflor pe ‘the
‘management of mutual funds;
.- Computer Services;
Ineuanca agence brokers!
Home Building and home: development:
Drying andlor miting faites for agricultural
erOps
Service bureaus;
Philippine >. Cigaring: House. Corporation
(PCHC), Philippine Central. Depository, inc.
‘anid fixed Income exchange; and
k. Other similar, dctiviies “a3 the MB” may
“declare (MORB, Sec. X380).
Bp epe
Non-Allied Enterprises :
4. -Agticuture, mining, . quarrying, rianufacturing,
Pubiic utilities, construction, wholesale trade and.
‘community. and. social services, following. the
+ industrial groupings. ini the Philippine Standard
Industrial Classificatior
2. Industrial park projects’ and/or industrial estate
developments;
BANKING LAW
S40 BEDA [AW CENTRALIZED BAR OPERATIONS ~ MEMORY AO 2019
3. Financial and commercial complex. projects
arising from or in connection » with the
Government's privatization program: and,
4. Such other categories as the MB may declare as
appropriate (MORB, Sec. 1387:1).
Ceiling on investments in Real Esta
1 Any bank may. acquire real estate as. shall be
necessary for lis own use in the conduct of its
business (GBL, See. 51).
2. The. total investment in. such regi estate and
improvements thereof; «including "= bank
quipnient, shall not exceed. 50% of combined
capital accounts (GBL, Soc. 61):
3.,The ‘equity investment ‘of @ bank ‘n."another
corporation engaged primary in real estate sal
be considered. as part of the’ -bank’s . total
investment: in. real estate, Unless otherwise
‘provided by the Monetary.Board (GBL, Soo. 57).
“Warehousing agreement” to circumvent GBL Is
\, Hot allowed
‘An.agreement whereby one entity holds in trust the.
ae ‘@-bank, which is in excess of the
raoroniestmentson realestate ot 60% of be
ot valid. This’ agreement Is
‘28 a-"warehousing agreement"
GR. No. 130088, April 7, 2009).
4 The Supry - i ruled that Banco Filipino’s suit for.
pe] reoonveyencat cant, prosper benause, tho, tust
ba porcement vas sa" to-cicumwent the general
Parking Wate Berk and Tala ae ln por Ste:
[Lites oats cot shoud be, gion io one
3
strain le sul gg oe
ev
LOAN FUNCTION OF BANKS
Classifications.of Loans.
1. Unclassified Loans’ *
» Those that do not have-a greatér-than-niormal
isk.and the borrower: has apparent ‘ability. to
satisfy itn full and'no loss In ulimaté collection
is.anticipated (Circular No. 247, Series. of 2000,
» Se0'2(4)).,
2." Classified Loans
‘Those: that have extraordinary risk of Joss in
collection due to some defects suci’as bad debts
or those under iligation. They afe divided into:
a. Loans especially mentioned: =
b., Substandard; .
© Doubtful; and.
d.- Loss (Circular'No. 247; Sériés-of 2000, Seo.
208).
2018 SAN BEDA LAW CENTRALIZED BAR OPERATIONS | 383 Conditions for Grant of Loans by Bank (ABC-TP)
4. A--bank shall grant loans and other credit
accommodations only in Amounts and for the
periods “of time essential for the -offective
Eompletion of the operations to be financed
(GBL, Sec. 39);
2, It. shall be consistent with safe and sound
“Banking practices (GBL, Sec. 39);
3. Before granting” a loan: of other credit
accommodation, a bank must ascertain that the
debtor is Gapabie of fufiing his commitments to
the bank (GBL, Sec."40).
Note: A:batik may, démand roms applicants a
statement of thelr assets and lables: and of
‘their income » and expenditures and ther
information to enable"the bank to evaluate: the
~ credit application (GBL, Soc. 40).
4. Should such statements prove to’ be. false or
correct, the’ bank may Terminate any. loa
‘granted on'the basis of sald statements and'Shalhy
hhave the right to. demand immedi ae
oF liquidation of obligation (GBI,
De-Or0-EPCI, nc. v. JAPRE
G.R. NO, 179901, April 14,
5. Bayments ~ Amortization:
and’ olher ‘credit ~accoy
adapted to the nature fee ve
financed (GEL,.Sec. 44)
Note: In case. of Idat
accommodations with dec ot
years, provisions: must ‘beijad
amortization payments,
tbe made at least annual
fogs Toay
ferg tee
Pre-payments by the Bor
A borrower may at any’ time
BANKING LAW
{6 BEDA LAW CENTRALIZED BAR OPERATIONS ~ MEMORY AO 2079
UN
mL ea
ea
Exception: if the MB prescribes otherwise (GBL,
‘Seo. 37 & 38).
‘Special Rules on Foreclosure of a Roal Estate,
Mortgage by a Mortgagee-bank
1. Right of Redemption *
a. Judicial Foreclosures
‘As a general rule, no right of redemption in
Judicial foreclosures is recognized under
Rible 68 of the Rules of Court,
‘Asan exception, a right of redemption is
Tecognized when mortgagee is & bank (GBL,
Sec. 47). 7
‘The period of Redemption: One (1) year from
date of registration of sale
Extrajudidial Foreclosure
General Rule: One (1) -year from
-, realstration of certicate-of sale
Ngo a! Exception: There is aright “of
SS tion when thé, “following
~~ ik
2
8 conct:
forage ji! prcon
The migrtgages is a bank; and
ss ihefight to enter upon and take
.085)6n of thy/property immediately after the
iné conffination ofthe auction.sale and to
tye same’ in accordance with law
‘accommodation, subject to. such reat ns x
sna condiians a tes Bd sorbed open etme ine VL Spe. Bond
bank and the borrower (GBL, Sec:-45).
Rules.on Amount of Loahs'Secured by Mortgage,
Type of Set
Real Estate [Shall hot exceed 75% off
the appraised vakio of the|
“ [reat estate’ security, plus
~ |80% . of. the . appraised] »
value of the insured}
improvements (GBL; Sec.
sare 37).
[Chatiéis and intangitie| Shall hot exceed 76% of|
properties (such .as| the appraised value of the|
patents, . trademarks, | security (GBL, Sec. 38).
trade." names, and! :
copyrights)
xa Any pebtich. in court to. enjoin or .resivein the
conduct of foreclosure” proceedings shall be
giver due course only upon filing by the petitioner
of & bond in’ an ‘amount fixed by the. court
conditioned that -he will pay all the damages
= which.the bank ‘may suffer by. the enjoining or
~ “restraint of the foreclosure proceedings (GEL,
Sec. 47)
4. Redemption Price
2. Amount due under the morgage deed: and
b.” Interestand
‘©. “All the costs and expenses Incurred by the
baink or institution from the sale and custody
‘of the property ess. the” derived: income
‘therefrom (GBL, Sec. 47; Union Bank v..CA,
GR. No. 134068, Juno 25, 2001).
984 |: 2019-SAN BEDA LAW CENTRALIZED BAR OPERATIONS Tender of Redemption:Price Essential
‘The’ general. rule is that the. statement of intention
ust be accompanied by an actual and simultaneous
tender of payment. This constitutes the ‘exercise of
the right to repurchase. Otherwise, the offer to
‘redeem is. ineffectual (BP! Family Savings Bank,
Inc. v. Spouses Veloso, 6:R. No. 141974.. August 9,
2004).
Bona fide tender of the redemption’ price within the
period of redemption is only necessary to. preserve
the Tight “of Tedemption iia future. action. of
enforcament beyond: the period .of redemption
(Tolentino v. CA, G.R: No» 171364, March 7; 2007).
‘The fling of judicial action: within-the 1-year period,
even without tender of the redemption price, wil
Preserve the right to redeem only when there is
disagreement over the redemption price-and such
Action was fied for the sole purpose of determining:
the same. (Tolenting v-CA, G:R. No. 174354, March,
7, 2007). ; sf ste
be
‘Abank may be bound by sh agreement providing oF
a longer redemption period;.thus, converting” i\te
oniventional redemption or "by "estoppat
it the
‘extension was unilaterally made (edn Bank v-
CAG. No, 122017, Docomber 17,1999),
Noto: When the mongages is a balk wi saint
redemption price is governed’ By. Sec.”
and net Sec. 8 of Act 3135. P=
Basic Rutes on interests and’
1 ressly
‘stipulated in writing (CIVIL Conti 56)
2. Interest rates. found 13, be «iat
‘ngonseionabie’ are, void, tor beingtepriiary to
morals. (Medel v. GA”. GR. Mo.” 131622,
‘November 27, 1998), and thus deemed unwritten
(Wow. Sampaguta Builders. Construction
Corporation v. Philippnie National Bank, G.R. No,
148753, July 30, 2004)...
3. Ifinterest, imposed as pend, is iniquitous or
Unconscionable, the: court miay equitably reduce
je Same When the principal obligation has been
panty or krogulry complied wit by tho debtor
(GML CODE, art 1229)
4. The’ legal: interest rates’ for “loan ‘and’ credit
agreements inthe “absence: of -an express.
ontraict'as to such rate of interest shall be 6%
er annum (BSP Circular 799, Series of 2013).
Escalation Clause 2
Parties may stipulate that thé rate of interest agreed
upon may'-be increased inthe event that the
BANKING LAW
SA REDA LAW CENTRALIZED BAR OPERATIONS ~ MEMORY IO 2019
applicable maximum rate interest is increased by the
MB (MORB, Sec. X305.2).
Unilateral increase of interest Fates is not allowed in
this jurisdiction. Otherwise, it would be a violation of
the principle of mutuality of contracts ordained. in
Article 1308. of the Civil. Code (New Sampaguita
Builders “Construction ‘Corporation. Philippine
National Bank, G.R. No, 148753, July 30, 2004).
Counter-Stipulations to
Escalation Clause Valid
1. Prior Consent Clause
‘The consent of the borrower shall be obtained for
each-and every increase, o decreasé, in the rate
(of interest (Sps. Ses v. Philippine National Bank,
GR. No. 181045, duly 2, 2014)
2, ‘De-escalation clause
‘A Counter-stipulation that the rate of interest
agreed upon shall be reduced in the event that
the applicable maximum rate of" interest is
‘eaueod by law or By tho Morelary Board (Banco
Make
jent. shall take‘effect on or'after
the effdcifitiot the increase or decrease in the
tmaniplumbtats of intorost (MORB, Sec. X305.3)
| ota
bd An irevota initment of a bank binding itself to
ppay'a sum of money in the event of non-performanc.
of a.contract by'a thd party (MORB, as amended by
$ Gkley No. 425, Sec. X903.1).
Limit ‘on Loans, Credit Accommodations, and
Guarantees (Si-JODI) (GAL, Sec. 3k
‘The following are the limitations in grantiig Loans,
edit Accommodations and Guarantees:
4." Single Borrower's Limit (SBL) (GBL, Sec:'36):
2 Joint arid: Solidery’ Signature (JSS), Practice
(Security Bank end Trust Company, Inc. v.
Rodolfo- Cuenca, G.R. No, 138644, October 3;
12000); and?
3. Restrictions. on Bank Exposure’ to Directors,
Officers, : Stockholders, ‘and .Retated: Interests
‘(DOSRI) Accounts (GBL, Séc.36).
Single Borrower's Limit (SBL)
1. Purpose:
a. To prevent the’ bank trom making excessive
loans and other credit accommodations to a
‘single borrower or corporate group including
‘guarantees for the account of stich borrower
or group:
b. It safeguards the'bank from too large:a risk
‘exposure to'a single client; and
c. Its a dantage control rechanism of sorts.
2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS | 385)
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a Single Borrower's Limit Threshold,
The total ‘amount’. of loans, - credit
‘accommodations and guarantees extended by a
bank to any person, partnership, association,
corporation of other entity shall-at no time exceed
25% of the net worth of such bank to ensure that
there are no excessive exposiyres to’ borrower
oragroup. (GBL, Sec. 35.1, as increased by BSP
Gireular No. 425, Series of 2004).
Exceptions:
a. As the MB may other
feasons of national interest:
b.. Deposits jof, rural banks with .government-
‘owned of controlted finaricial institutions like.
“the: BP, DBP and PNB (R.A-No, 7353; Sec.
17; BSP Circular 425, Series-of 2004); and
¢. In municipalities and cities where there are
no, government banks, . the deposits.
RBs/Coop Banks in private ban}
areas shall: not be: subject tot
Borrower's. Limit (BSP ee em
Series.of 2004).
5
The. total amount ie on 5
accommodations and ere y Pr ci
prescribe for
coor Sn eek bs ah
additional 10% of the |
provided the additional
are, adequately. sei
shipping .documents,
othor similar document ‘rome
‘ile covering ready maigelob ieee
goods which must be fullj.co
(GBL, Soc. 36.2): \
Ssinogh-ot sgh bat
Monetary Board (GBL, Sec. Sar or
of MAS
Senses" dvaliment which resulted in the excess with a
Inclusions to thé SBL
‘The prescribed ceilings shail include:
a. The liability of:
i. The maker. or acceptor..of a paper
discounted with 6r sold to such bank; and
le A.general.indorser, drawer, or guarantor
who obtains .a- loan or other credit
accémmodation...from or. discounts
Papers with orsells papets to such bank;
be In the. case of an individual. who owns. oF
controls. majority Interest in a corporation,
perinership, association, of any other entity,
the liabilities of said entities to'such bank;
©. In the case of:a comoration, all libilties to
Such, bank of all’ subsidiaries in which such:
Corporation owns. or controls -@ ‘majority
interestand
4. In the case of a partnership, association’ or
other entity, the liabilities .of the. members
thereof to such bank (GBL, Sec. 35.3).
hes ec ote er =)
BANKING LAW
SAN BEDA LAW CENTRALIZED BAR OPERATIONS = MEMORY 410 2019
Exclusions from SBL (Non-risk Loans):
a.
b.
it
Loans: and other credit accommodations
‘secured by “obligations of the BSP’ or the
Philippine Government;
Loans and other credit accomrnodations fully
guaranteed by the government as tothe
payment of principal and interest;
Loans and other credit: accommodations
covered by assignment. of _ deposits
‘maintained in the lending bank and held in
the Philippines;
Loaris, . credit accommodations,” and
* accepiance under ‘letters of credit to. the
‘extent covered by margin deposits; and
‘Other loan or credit accommodations which
the MB may specity as non-isk items (GBL,
See. 38.6),
Compliance with SBL
for determining compliance with the
1¢-totak- credit commitment of the bank to,
(GL, Sec. 35.1).
=Total es tment
Bored tetore ere
‘guarantet
‘other ered accommodations,
it lags margin deposts and
=. Ekg 4 eect provided, taal
Efe Se veckonod on ct foe
rays jorigistent with existing regulations
425, Subsection X303.1, par. #, Series
to
Ire h
Excobdiig SaL:
say Fenatiey
“TO,gs 1% of ihe excess. over the
1g but not to excoed.P30,000 a day for
7oftensé =; Reprimand . fi. the
Sctors/oficers wo approved the ‘credit
waming: that. subsequent violations. will be
subject to.more severe sanctions.
Subsequent offenses —
1. Fine'of P1,000 for directorsfoticers wino
approved. the credit ,avaiiment. which
resulted in the excoss;
il ‘Suspension “of the bank's branching
privilege and’ access’. to BSP.
rediscouriting facilities until the excess is
‘eliminated:
ii, Other-penaities.as the MB may impose
dépending of the gravity.of the offense
* (Circuar'No. 425, Subsection X303.5,
Series of 2004).
Joint and Solidary Signature (JSS) Fracti
‘Acommon banking practice requires as an addi
‘s@cuily for. loan granted to corporation, the:
ional
Joint
and sdlidary signature of a major stockholder or
386 } 2019-SAN-BEDALAW-CENTRALIZED BAR GPERATIONS, corporate officer of the borrowing corporation
(Security Bank v. Cuenca, G:R. No, 138544, October
3: 2000).
Purpose of JSS Practice
1. In case of default, creditor bank's recourse is not
limited to. corporate properties. but extends to
personal assets of the surety; and
2. Surety would.be compelled to ensure that the
loan would’be used for. the. purpose intended
(Security Bank y, Cuarica, G.R. -No- 138544,
October 3, 2000).
DOSRIERESTRICTIONS
Bleinent:
4. ‘The borower is ‘a: Director; Officer, or any
Stockholder of ‘bank, or a Related Interest”
(osrh;
2. The borrower, contrasts al loan or any toe
financial accommodation;
4. The loan or financial accommodationis, fey
a. His bank; or om
5B! Abank tat i a Subsidiary ofa nk holding
‘company of which both
lending bank aie subsidiaries! of
6. A bank in wich a contain po
Shares is owned by tN@"same, interest tet,
Sasa crag aba pero
bank (GBL, Sec. 36);
4g Talamanca sori Give 608,
Shgly or with that of his related intotést? sin
excets of 59% of the capital en @urplus of the
lending bank “or in the. miaxiétir amount: é:
permitted by law; Whichever. is: ower,
Girculer No. 170, August 8, 19988NC
26):
‘Who are Covered by DOSR! Restrictions on Bank.
Expobure
Directors ~ Directors of the lending bank;
2. Ofcors”- her dened inthe by law or ard
generally known as stich; -
3. Stockholders any stockholder of record. in the
books of the bank, acting personally, of through
fan attomey-in-fact, or: any other-person..duly
‘authorized by him. ‘t'shall also refer to a juridical
person such as corporation, association or finn
(BSP Gireular No. 423, Series of 2004).
‘Note: ‘Substantial “Stockholder shall mean 2 ~
‘perso!, or group of persons’ whether natural or
juridicai, owning such number.of shares that will
allow such person or group to elect at least 1
member ofthe board of directorsof a bank or who
{is directly or indirectly the registered or beneficial
‘owner of mote than’ 10% of any class of Its equity
security (BSP Circular No. 423, Series of 2004)
4, Related Interest
BANKING LAW
0 BED LAW CENTRALIZED BAR OPERATIONS ~ MEMORY A10 2019
NN
nie and the;
Related Interest
Under Sec. X326.1, as amended by BSP Circular No.
423 s, 2004; “related interests” shall refer to any of
the following:
1. Spouse, relatives "within fist degree’ * of
consanguinity or- affinity, or relative. by. legal
adoption of @ DOS;
2. Partnerships: in. which a DOS, ora person
desoribed under (a), isd general partner;
3. Aco-owner with the DOS or a person described
under (a), of the -property,, interest .or -right
mortgaged, pledged, or. assigned to secure the
loans or other. credit-atcommédations,, except
when the mortgage, pledge ar assignment covers
only said co-owners undivided interest:
4, Corporation, association, or frm of which a D0 or
his spouse Is also a directot or officer, exept:
‘8. Whore the securities of euch corporation are
+ listed--and: traded: inthe :big® board or
5 commertial and industial board of doniestic
stock exchariges and.less than 50%. of the
voting. stock-is owned: by.one.person.or by
persons related to. each other within-the first
Tent” degrée of consanguinity or afinity,
| == BESWheté the DOS sits.as a-representative of
“the®bank-in the board of directors of such
cation; or
‘ex Where the, corporation is at least ninetyénini
Dgfocht Neat owned by a, nonstock
ISR (BSP Circular’ No, 965);
in, association, or:firm=
iGkapy’ or a. group of DOS of the
“Tana BO onal Se Dut tpoucee or
relatives within. the first. degree of
-<--y- “eonsanguinity or affinity or relative by legal
sdgption, hold ‘or own at Ieast-20% of the
“subscribed capital of such corporation, or of
the equity of such association or frm;
b. Wholly-or majority-owned. or controlled by
any related: entity: ofa group’ of. related
entities in toms (2), (4), and (5)(@)
Which owns or controis directly of indirectly
whether singly or ag partof a group of related
interest at least twenty percent {20%) of the
* subscribed: - capitat.. of . a, substantial
stockholder “of.the. lending bank or which
controls majorly interest of the bank; dnd.
4... In which the lending bank andlor its parent oF
‘subsidiary holds. ‘or owns: at least twenty
percent (20%). of.the subscribed capital of
Such corporation, or inthe equity of stich,
association or. firm, or. has. an existing
‘management contract with the lending. bank
‘or its parentisubsidiary.
‘Transactions Covered by DOSRI Restrictions
Exposure includes loan or ény security arrangement
fike guaranty, suretyship, and the’ like. Ibrefers to
transactions. which involve the. grant, renewal or
extension oF increase of shy loan; discount, credit, or
2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS ‘|. 387.
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a advance in any form whatsoever (BSP Circular No.
423, Series of 2004):
Transactions Not Covered
1. Advances against accrued compensation, or for
the purpose-of providing payment of authorized
expenses or other transactions forthe account of
the bank;
2. The Increase in the amount of outstanding credit
accommodations as @ result of additional
charges or advarices rade by the bank te protect
its:interests;
'8; - The discount of bills of exchange drawn in good:
faith against actually existing values, .and the
discount -of “corhmercial or business paper
actually ‘owned by tiie person negotiating the
same; and
4, Transdctions with foreign bank which’ has
steckholdings in local bank where the foreian-—
bank acts.as guarantor through the issuari
lottors of eredit or assignrivent of ay
currency eligible as part of the- f - F
41. Approval Requirement “<~
ccopt with th
all the directors of the
Girocos eontemed, NOEs cored
‘bank shal: e Dn
a. Directly or ware wi gout cs
representative or agspt of
‘form such bank
b. Not. shall he become 2 haratg
‘or surety for loans from si
36):
| Note: There can still be a charge for. DOSRI
violation even where the accused bank officer did
not secure @ loan In his own name, but used the
ame of another ‘person in order to indirectly
Sequre’a loan from the bank. The DOSRI Rule
under Section 36. is: broad enough to tover
vatious, modes of borrowing, whether direct or
indirect borrowing (Soriano v, People, G.R. No. ~
162336, February 1, 2010).
Exception: The written approvalis not required
‘or loans, credit accommodations, and advances
granted to officers under a fringe benefit-plan
approved by the BSP (GBL, Sec. 36).
2. Waiver of Secrecy of Bank Deposits
‘A DOSRI who contracts a loan or any form of
financial accommodation. with their bank or
BANKING LAW
SAN BEDA LAW CENTRALIZED BAR OPERATIONS ~ MEMORY AID 2019
fepobit in al
lego. i dh
related bank are required to execute a written
waiver of secrecy of deposits (NCBA, Sec. 26).
‘The DOSRI's deposit accounts are subject to
examination. However, any informiation obtained
from ‘an. examination of is deposits is strictly
confidential and may be used by examiners only
in “connection with the supervisory and
‘examination. responsibility or by the BSP.in an
appropriate-legal acticn it has initiated involving
said account (NCBA, Sec. 26).
3). Amm’s:Longth Rule.
Dealings ofa bank with poy ofits DOSRI shel be
upon terms not less favorable to:the bank than
those offered to’ the general public (GBL, Sec.
36).
Note: ‘The BSP ‘recognizes. that transactions
__between related parties “create financial,
Ty b
