The New Central Bank Ac

(R.A. No. 7653

STATE POLICIE
The State shall maintain a central monetary authority that shall function and operate as an independent
and accountable body corporate in the discharge of its mandated responsibilities concerning money,
banking and credit. (Sec. 1

SALIENT FEATURE
(1) Assurance of BSP independence by providing for the majority of the members of the Monetary Board
to come from the private sector. (Sec. 6, NCBA
(2) The BSP may now concentrate on monetary policy, and will shed itself of scal agency functions and
its responsibilities in respect of nance companies without quasi-banking functions, which in the past, had
distracted it from its primary function. (Secs. 3, 129, & 130, NCBA
(3) Provides safeguards to ensure that unlike the old Central Bank which sustained huge losses, the BSP
would have a positive net income position by the following provisions
(a) Capitalization of P50B ; (Sec.2, NCBA
(b) Maintenance of positive net foreign asset position; (Sec.71, NCBA
(c) Charging interests on all loans an
(Sec. 85, NCBA
advances to banks
(d) Authority to collect interests on loans and advances to closed nancial institutions; an
(e) BSP can’t acquire shares in banking enterprise, in development banking and nancing (Sec. 128,
NCBA)

CREATION OF THE BANGKO SENTRAL NG PILIPINAS (BSP)

NATURE OF THE BS
(1) A central monetary authority
(2) An independent and accountable body; an
(3) A government-owned corporation but enjoys scal an
administrative autonomy. (Secs. 1 & 2, NCBA
The BSP shall have a capitalization of P50B to be full
subscribed by the Government. (Sec. 2

RESPONSIBILITY AND PRIMARY OBJECTIV

PRIMARY OBJECTIVE
(1) To maintain price stability conducive to a balanced and sustainable growth of the economy
(2) To promote and maintain monetary stability and the convertibility of the peso

OTHER RESPONSIBILITIE
(1) To provide policy directions in the areas of money, banking, and credi
(2) To supervise operations of banks (Sec. 3, NCBA
All powers, duties and functions vested by law in the Central Bank of the Philippines not inconsistent with
the NCBA shall be deemed transferred to the BSP. All references to the Central Bank of the Philippines in
any law or special charters shall be deemed to refer to the BSP. (Sec. 136, NCBA
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 MONETARY BOAR
The body through which the powers and functions of the Bangko Sentral are exercised (Sec 6, NCBA

POWERS AND FUNCTION

(1) Issue rules and regulations it considers necessary for the effective discharge of the responsibilities
and exercise of the powers vested in it
(2) Direct the management, operations, and administration of Bangko Sentral, organize its personnel and
issue such rules and regulations as it may deem necessary or desirable for this purpose
(3) Establish a human resource management system which governs the selection, hiring, appointment,
transfer, promotion, or dismissal of all personnel
(4) Adopt an annual budget for and authorize such expenditures by Bangko Sentral as are in the interest
of the effective administration and operations of Bangko Sentral in accordance with applicable laws and
regulations; an
(5) Indemnify its members and other of cials of Bangko Sentral, including personnel of the departments
performing supervision and examination functions, against all costs and expenses reasonably incurred by
such persons in connection with any civil or criminal action, suit or proceeding, to which any of them may
be made a party by reason of the performance of his functions or duties, unless such members or other
of cials is found to be liable for negligence or misconduct. (Sec. 15, NCBA

COMPOSITION
The MB shall be composed of 7 members appointed by the President with a 6-year term. (Sec. 6, NCBA

MEMBERS
(1) The BSP Governor or his designated alternate (a deputy governor)
(2) A Cabinet member to be designated by the President or his designated alternate (an Undersecretary
in his department); an
(3) 5 members from the private sector (Sec. 6, NCBA
No member of the MB may be reappointed more than once

QUALIFICATIONS
(1) Natural-born citizens of the Philippines
(2) At least 35 years old (the Governor must be at least 4
years old)
(3) Of good moral character
(4) Of unquestionable integrity
(5) Of known probity and patriotism; an
(6) With recognized competence in social and economi
disciplines. (Sec. 8, NCBA

DISQUALIFICATIONS
In addition to the disquali cations under the Code of Conduct and Ethical Standards for Public Of cials
and Employees (RA 6713), a member of the Monetary Board is disquali ed
(1) Direct connection with any multilateral banking or nancial institution; o
(2) Substantial interest in any private bank in the Philippines, within 1 year prior to his appointment (Sec.
9, NCBA

PROHIBITION ON MEMBERS OF THE M

(1) To be a director, of cer, employee, consultant, lawyer, agent or stockholder of any bank, quasi-bank,
or any other institution which is subject to supervision or examination by the BSP
(2) To hold any other public of ce or public employment during their tenure; an
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 (3) To be employed in any multilateral banking or nancial institution within 2 years after the expiration of
his term
Exception: When he serves as an of cial representative of the government to such institution. (Sec. 9,
NCBA

GROUNDS FOR REMOVAL OF ANY MEMBER OF THE M

(1) If the member is subsequently disquali ed under Sec.8
(2) If he is physically or mentally incapacitated that he cannot properly discharge his duties and
responsibilitie
and such incapacity has lasted for more than 6 months
(3) If he is guilty of acts or operations which are of fraudulent or illegal character or which are manifestl
opposed to the aims and interests of the BSP; an
(4) If he no longer possesses the quali cations under Sec. 8. (Sec. 10, NCBA

VACANCIES, HOW FILLE

Cause: death, resignation, or removal of any membe
Effect: a new member will be appointed to complete the unexpired period of the term of the member
concerned. (Sec. 7, NCBA

SALARIE
Fixed by the Phil. President at a sum commensurate to the importance and responsibility attached (Sec.
13, NCBA

MEETING
(1) Held at least once a week
(2) Called by the Governor or by 2 MB members
(3) The complete records of the proceedings and deliberations of the MB including the tapes and
transcripts of stenographic notes are to be maintained and preserved
(4) Four (4) members constitute a quorum; an
(5) All decisions by the MB shall require the concurrence of four (4) of its members unless otherwise
provided by the NCBA (Sec. 11, NCBA)
(a) Deputy governors may attend (Sec. 12, NCBA)
(b) Any member with personal or pecuniary interest in an
matter in the agenda shall disclose his interest and shall retire from the meeting when the matter is taken
up (Sec. 14, NCBA)

CIVIL LIABILITY OF MEMBERS OF THE M

Members of the MB, of cials, examiners, and employees of the BSP are liable when
(1) They will fully violate the provisions of the NCBA
(2) They are guilty of negligence, abuses or acts of malfeasance or misfeasance; o
(3)Fail to exercise extraordinary diligence in the performance of his duties. (Sec. 16, NCBA

HOW THE BSP HANDLES BANKS IN DISTRES

Liquidity – Ability of an asset to be converted into cash. An entity is liquid when it is able to pay its
liabilities when they fall due
Solvency – When current assets are more than current liabilities, providing the ability to pay debts. An
entity is solvent when it is able to meet its long term obligations/liabilities
Insolvency – When the actual market value of assets are insuf cient to pay its liabilities, not considering
capital stock and surplus which are not liabilities for such purpose. An entity is insolvent when it is unable
to meet current and long-term obligations
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 CONSERVATORSHIP - Sec. 67, GBL; Secs. 29 and 30, NCB

Ground
(1) When a bank or a quasi-bank is in a state of continuing inability or unwillingness to maintain a
condition of liquidity deemed adequate to protect the interest of depositors and creditors (Sec. 29
(2) Determination is to be made by the MB on the basis of a report submitted by the appropriate
supervising or examining department (Sec. 29

Period and terminatio

(1) Period: shall not exceed 1 year (Sec. 29
(2) The expenses attendant to the conservatorship shall b
borne by the bank or quasi-bank concerned (Sec. 29
(3) Grounds for termination of conservatorship by MB
(a) When it is satis ed that the institution can continue to operate on its own and the
conservatorship is no longer necessar
(b) When, on the basis of the report of the conservator or of its own ndings, the MB determines
that the continuance in business of the institution would involve probable loss to its depositors or
creditors (the bank or quasi-bank would then be placed under receivership) (Sec. 29

Effects of conservatorshi
(1) Bank/Quasi-bank retains juridical personalit
(2) Not a precondition to the designation of a receiver, and;
(3) Perfected transactions cannot be repudiate

Can the employees be removed or change the structure?

Yes because its within the power of the conservator

Appointment of a conservato
The conservator should be competent and knowledgeable in bank operations and management. (Sec.
29). The appointment of a conservator shall be vested exclusively in the MB. (Sec. 30

Powers and duties of a conservato

(1) To take charge of the assets, liabilities, and the management thereo
(2) To reorganize the managemen
(3) To collect all monies and debts due said institution, an
(4) To exercise all powers necessary to restore its viabilit
(5) To report and be responsible to the M
(6) To overrule or revoke the actions of the previous management and board of directors of the bank or
quasi-bank. (Sec. 29

First Philippine International Bank v. Court of Appeal

252 SCRA 259 (1996)
Producer Bank of the Philippines acquired 6 parcels of land at Laguna. The property used to be owned by BYME Investment and
Development Corporation which had them mortgaged with the bank as collateral for a loan. Demetrio Demetria and Jose O.
Janolo wanted to purchase the property and thus initiated negotiations for that purpose.

In August 1987, Demetria and Janolo met with Mercurio Rivera, Manager of the Property Management Department of the Bank to
discuss their plan to buy the property. Thereafter, they had a series of letters where parties accepted the offer of Demetria and
Janolo. Later in October, the conservator of the bank (which has been placed under conservatorship by the Central Bank since
1984) was replaced; and subsequently the proposal of Demetria and Janolo to buy the properties was under study pursuant to the
new conservator’s mandate. After which, a series of demands ensued.
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 Whether or not a derivative suit may lie involving the bank and its stockholders.
No. An individual stockholder is permitted to institute a derivative suit on behalf of the corporation wherein he hold stock in order to protect or
vindicate corporate rights, whenever the of cials of the corporation refuse to sue, or are the ones, to be sued or hold the control of the corporation.
In such actions, the suing stockholder is regarded as a nominal party with the corporation as the real party in interest. In the face of the damaging
admissions taken from the complaint in the second case, petitioners, quite strangely, sought to deny that the second case was a derivative suit,
reasoning that it was brought not by the minority shareholders, but by Henry Co. etal. who not only hold or control over 80% of the outstanding
capital stock, but also constitute the majority in the board of directors of petitioners bank. That being so, then they really represent the bank, so
whether they sued derivatively or directly, there is undeniably an identity of interest/entity represented. In addition to the many cases, where the
corporate ction has been regarded, we now add the instant case, and declare herewith that the corporate veil cannot be used to shield an
otherwise blatant violation of the prohibition against forum shopping. Shareholders, whether suing as the majority in direct actions or as the minority
in a derivative suit, cannot be allowed to tri e with court processes particularly where, as in this case, the corporation itself has not been remiss in
vigorously prosecuting or defending corporate causes and in using and applying remedies available to it. To rule otherwise would be to encourage
corporate litigants to use their shareholders as fronts to circumvent the stringent rules against forum shopping. From the facts, the of cial bank price,
at any rte, the bank placed its of cial, Rivera is a position of authority to accept offers to buy and negotiate the sale by having the offer of cially
acted upon by the bank. The bank cannot turn around and say, as it now does, that what Rivera states as the bank’s action on the matter is not in
fact so. It is a familiar doctrine, the doctrine of ostensible authority, that if a corporation on knowingly permits one of its of cers, or any other agent, to
do acts within the scope of apparent authority, and thus holds him out to the public as possessing power to do those acts, the corporation will, as
against any one who has in good faith dealt with the corporation through such agent, he estopped from denying his authority

A bank is liable for wrongful acts of its of cers done in the interest of the bank or in he course of dealings of the of cers in their representative
capacity but not for acts outside the scope of their authority. A bank holding out its of cers and agents as worthy of con dence will not be permitted
to pro t by the frauds they my thus be enabled to perpetrate in the apparent scope of their employment; nor will it be permitted to shrink its
responsibility for such fraud even through no bene t may accrue to the bank therefrom. Accordingly, a banking corporation is liable to innocent third
persons where the representation is made in the course of its business by an agent acting within the general scope of its authority even though, in
the particular case, the agent is secretly abusing his authority and attempting to perpetrate fraud upon his principal or some other person, for his
own ultimate bene t

Section 28-A of BP 68 merely gives the conservator power to revoke contracts that are, under existing law, deemed not to be effective – i.e void,
voidable, unenforceable or rescissible. Hence, the conservator merely takes the place of a bank’s board of directors. What the said board cannot do
– such as repudiating a contract validly entered into under the doctrine of implied authority – the conservator cannot do either.

While the Central Bank law gives vast and far reaching powers to the conservator of a bank, such
powers must be related to the preservation of the assets of the bank, the reorganization of the
management and the restoration of viability. Such powers cannot extend to the post-facto repudiation of
perfected transactions, otherwise they would infringe against the non-impairment clause of the
Constitution.

Remuneration
General rule: The conservator shall receive remuneration in an amount not to exceed 2/3 of the salary of
the president of the institution in 1 year, payable in 12 equal monthly payments
Exception: A conservator connected with the BSP, in which case said conservator shall not be entitled to
receive any remuneration or emolument. (Sec. 29, NCBA

2. Voluntary Liquidation – Sec. 68, GB

SECTION 68. Voluntary Liquidation. — In case of the voluntary liquidation of any bank organized under the laws of
the Philippines, or of any branch or of ce in the Philippines of a foreign bank, written notice of such liquidation shall
be sent to the Monetary Board before such liquidation is undertaken, and the Monetary Board shall have the right to
intervene and take such steps as may be necessary to protect the interests of creditors.
3. Receivership and Involuntary Liquidation – Sec. 69, GBL; Sec. 30,
NCB
SECTION 69. Receivership and Involuntary Liquidation. — The grounds and procedures for placing a bank under
receivership or liquidation, as well as the powers and duties of the receiver or liquidator appointed for the bank shall
be governed by the provisions of Sections 30, 31, 32, and 33 of the New Central Bank Act: Provided, That the
petitioner or plaintiff les 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 xed by the court. This Section shall also apply to the extent possible to
the receivership and liquidation proceedings of quasi-banks

SEC. 30. Proceedings in Receivership and Liquidation

Whenever, upon report of the head of the supervising or examining department, the Monetary Board nds that a bank
or quasi-bank
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 (a) is unable to pay its liabilities as they become due in the ordinary course of business (CASHFLOW TEST):
Provided, That this shall not include inability to pay caused by extraordinary demands induced by nancial panic in
the banking community
(b) has insuf cient realizable assets, as determined by the Bangko Sentral, to meet its liabilities; or
c) cannot continue in business without involving probable losses to its depositors or creditors; o
(d) has willfully violated a cease and desist order under Section 37 that has become nal, involving acts or
transactions which amount to fraud or a dissipation of the assets of the institution; in which cases, the Monetary
Board may summarily and without need for prior hearing forbid the institution from doing business in the Philippines
and designate the Philippine Deposit Insurance Corporation as receiver of the banking institution

For a quasi-bank, any person of recognized competence in banking or nance may be designated as receiver. The
receiver shall immediately gather and take charge of all the assets and liabilities of the institution, administer the
same for the bene t of its creditors, and exercise the general powers of a receiver under the Revised Rules of Court
but shall not, with the exception of administrative expenditures, pay or commit any act that will involve the transfer or
disposition of any asset of the institution: Provided, That the receiver may deposit or place the funds of the institution
in non speculative investments. The receiver shall determine as soon as possible, but not later than ninety (90) days
from take-over, whether the institution may be rehabilitated or otherwise placed in such a condition so that it may be
permitted to resume business with safety to its depositors and creditors and the general public: Provided, That any
determination for the resumption of business of the institution shall be subject to prior approval of the Monetary
Board

If the receiver determines that the institution cannot be rehabilitated or permitted to resume business in accordance
with the next preceding paragraph, the Monetary Board shall notify in writing the board of directors of its ndings and
direct the receiver to proceed with the liquidation of the institution. The receiver shall
(1) le ex parte with the proper regional trial court, and without requirement of prior notice or any other action, a
petition for assistance in the liquidation of the institution pursuant to a liquidation plan adopted by the Philippine
Deposit Insurance Corporation for general application to all closed banks. In case of quasi-banks, the liquidation plan
shall be adopted by the Monetary Board. Upon acquiring jurisdiction, the court shall, upon motion by the receiver after
due notice, adjudicate disputed claims against the institution, assist the enforcement of individual liabilities of the
stockholders, directors and of cers, and decide on other issues as may be material to implement the liquidation plan
adopted. The receiver shall pay the cost of the proceedings from the assets of the institution
(2) convert the assets of the institution to money,dispose of the same to creditors and other parties, for the purpose of
paying the debts of such institution in accordance with the rules on concurrence and preference of credit under the
Civil Code of the Philippines and he may, in the name of the institution, and with the assistance of counsel as he may
retain, institute such actions as may be necessary to collect and recover accounts and assets of, or defend any action
against, the institution. The assets of an institution under receivership or liquidation shall be deemed in custodia legis
in the hands of the receiver and shall, from the moment the institution was placed under such receivership or
liquidation, be exempt from any order of garnishment, levy, attachment, or execution

The actions of the Monetary Board taken under this section or under Section 29 of this Act shall be nal and
executory, and may not be restrained or set aside by the court except on petition for certiorari on the ground that the
action taken was in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of
jurisdiction. The petition for certiorari may only be led by the stockholders of record representing the majority of the
capital stock within ten (10) days from receipt by the board of directors of the institution of the order directing
receivership, liquidation or conservatorship. The designation of a conservator under Section 29 of this Act or the
appointment of a receiver under this section shall be vested exclusively with the Monetary Board. Furthermore, the
designation of a conservator is not a precondition to the designation of a receiver

Is conservatorship the same as receivership? Or are they separate

No, they are different and separate given that both have different grounds to proceed although they are
interconnected.

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 In Re: Petition for Assistance in the Liquidation of the Rural Bank of Bokod
(Benguet), Inc., PDIC v. Bureau of Internal Revenu
511 SCRA 123 (2006)
The Bangko Sentral ng Pilipinas, after nding the irregularities in the operation and the insolvent condition of the Rural Bank of Bokod (Benguet),
Inc. (RBBI) ordered its Board of Directors to take substantial measures to rehabilitate the bank but the latter failed to implement said measures.
RBBI remained in insolvent nancial condition and it could no longer safely resume business with the depositors, creditors, and the general public
hence, the Monetary Board ordered the liquidation of the bank. The designated BSP liquidator led with the RTC a Petition for Assistance in the
Liquidation of RBBI. Subsequently, the receivership and liquidation was transferred to the Philippine Deposit Insurance Corporation (PDIC).The
PDIC led a Motion for Approval of Project of Distribution of the assets of RBBI without ling the nal return of RBBI for the year its operations were
stopped. During the hearing, the Bureau of Internal Revenue (BIR) manifested that PDIC should secure a tax clearance certi cate from the BIR. The
RTC ordered the PDIC to rst secure a tax clearance from the appropriate BIR Regional Of ce and held in abeyance the approval of the Project of
Distribution of the assets of the RBBI by virtue thereof.

Whether or not a bank ordered closed and placed under receivership by the Monetary Board
of the BSP still needs to secure tax clearance certi cate from the BIR before the liquidation
court approves the project of distribution of the assets of the bank.
No. The procedure for involuntary dissolution and liquidation of a corporation under the Corporation Code is different from that of the banking
corporation under the New Central Bank Act. A banking corporation is governed and regulated by a special law, which is the New Central Bank Act
which does not require the prior issuance of a tax clearance from the BIR. Even if PDIC failed to le the nal return of RBBI for the year its
operations were stopped, the BIR should have requested from the RTC an order for the PDIC to submit the nal return of RBBI not to secure a tax
clearance
Section 30 of the New Central Bank Act lays down the proceedings for receivership and liquidation of a bank. The Court explained the procedure for
involuntary dissolution and liquidation of a banking corporation. It expounds that the Monetary Board may summarily and without need for prior
hearing, forbid the banking corporation from doing business in the Philippines, for causes enumerated in afore-mentioned section of the New Central
Bank Act; and appoint the PDIC as receiver of the bank. PDIC shall immediately gather and take charge of all the assets and liabilities of the closed
bank and administer the same for the bene t of its creditors. The same provision states that the actions of the Monetary Board under the said
Section or Section 29 shall be nal and executory, and may not be restrained or set aside by the court except on a Petition for Certiorari led by the
stockholders of record of the bank representing a majority of the capital stock. PDIC, as the appointed receiver, shall le ex parte with the proper
RTC, and without requirement of prior notice or any other action, a petition for assistance in the liquidation of the bank. The bank is not given the
option to undertake its own liquidation
An exit clearance is not necessary as a condition for the liquidation of a bank. Both the Tax Code and BIR-SEC Regulations No. 1 refer to a
voluntary dissolution and/or liquidation of a corporation, or an involuntary dissolution of a corporation by order of the SEC. They make no reference
to a situation where the BSP places a banking corporation under receivership and liquidates its assets.

Grounds- Secs. 30 and 36, 2nd par., NCBA; Sec. 53, last par., GB
Whenever the MB nds that a bank or quasi-bank
(1) Is unable to pay its liabilities as they become due in the ordinary course of business: Provided, That this shall not
include inability to pay caused by extraordinary demands induced by nancial panic in the bankin
community
(2) Has insuf cient realizable assets, as determined by the BSP, to meet its liabilities; o
(3) Cannot continue in business without involving probable losses to its depositors or creditors; o
(4) Has willfully violated a cease-and-desist order under Sec. 37 that has become nal, involving acts or transactions
which amount to fraud or a dissipation of the assets of the institutio

SEC. 36. Proceedings Upon Violation of This Act and Other Banking Laws, Rules, Regulations, Orders or
Instructions. _ Whenever a bank or quasi-bank, or whenever any person or entity willfully violates this Act or other
pertinent banking laws being enforced or implemented by the Bangko Sentral or any order, instruction, rule or
regulation issued by the Monetary Board, the person or persons responsible for such violation shall unless otherwise
provided in this Act be punished by a ne of not less than Fifty thousand pesos (P50,000) nor more than Two hundred
thousand pesos (P200,000) or by imprisonment of not less than two (2) years nor more than ten (10) years, or both,
at the discretion of the court
Whenever a bank or quasi-bank persists in carrying on its business in an unlawful or unsafe manner, the Board may,
without prejudice to the penalties provided in the preceding paragraph of this section and the administrative sanctions
provided in Section 37 of this Act, take action under Section 30 of this Act

SECTION 53. Other Banking Services. — In addition to the operations speci cally authorized in this Act, a bank may
perform the following services
53.1. Receive in custody funds, documents and valuable objects
53.2. Act as nancial agent and buy and sell, by order of and for the account of their customers, shares, evidences of
indebtedness and all types of securities
53.3. Make collections and payments for the account of others and perform such other services for their customers as
are not incompatible with banking business
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 53.4. Upon prior approval of the Monetary Board, act as managing agent, adviser, consultant or administrator of
investment management/advisory/consultancy accounts; an
53.5. Rent out safety deposit boxes
The bank shall perform the services permitted under Subsections 53.1, 53.2, 53.3 and 53.4 as depositary or as an
agent. Accordingly, it shall keep the funds, securities and other effects which it receives duly separate from the bank's
own assets and liabilities
The Monetary Board may regulate the operations authorized by this Section in order to ensure that such operations
do not endanger the interests of the depositors and other creditors of the bank
In case a bank or quasi-bank noti es the Bangko Sentral or publicly announces a bank holiday, or in any manner
suspends the payment of its deposit liabilities continuously for more than thirty (30) days, the Monetary Board may
summarily and without need for prior hearing close such banking institution and place it under receivership of the
Philippine Deposit Insurance Corporation. (72a

Banco Filipino Savings and Mortgage Bank v. Monetary Boar

204 SCRA 767(1991)
Top Management Programs Corporation and Pilar Development Corporation are corporations engaged in the business of
developing residential subdivisions.Top Management and Pilar Development obtained several loans from Banco Filipino all
secured by real estate mortgage in their various properties in Cavite. The Monetary Board by Ramon Tiaoqui, Special Assistant to
the Governor and Head, SES Department III submitted a report nding that the bank is insolvent and recommending the
appointment of a receiver.    The Monetary Board, based on the Tiaoqui report, issued a resolution nding Banco Filipino insolvent
and placing it under receivership. Subsequently, the Monetary Board issued another resolution placing the bank under liquidation
and designated a liquidator. By virtue of her authority as liquidator, Valenzuela appointed the law rm of Sycip, Salazar, et al. to
represent Banco Filipino in all litigations. Banco Filipino led the petition for certiorari questioning the validity of the resolutions
issued by the Monetary Board authorizing the receivership and liquidation of Banco Filipino.A temporary restraining order was
issued enjoining the respondents from executing further acts of liquidation of the bank. However, acts and other transactions
pertaining to normal operations of a bank are not enjoined. Subsequently, Top Management and Pilar Development failed to pay
their loans on the due date. Hence, the law rm of Sycip, Salazar, et al. acting as counsel for Banco Filipino under authority of the
liquidator, applied for extra-judicial foreclosure of the mortgage over Top Management and Pilar Development’s properties. Thus,
the Ex-Of cio Sheriff of the Regional Trial Court of Cavite issued a notice of extra-judicial foreclosure sale of the properties. Top
Management and Pilar Development led 2 separate petitions for injunction and prohibition with the respondent appellate court
seeking to enjoin the Regional Trial Court of Cavite, the ex-of cio sheriff of said court and Sycip, Salazar, et al. from proceeding
with foreclosure sale which were subsequently dismissed by the court. Hence this petition

Whether or not the liquidator has the authority to prosecute as well as to defend suits and to
foreclose mortgages for and behalf of the bank while the issue on the validity of the
receivership and liquidation is still pending resolution.
Yes. Pendency of the case did not diminish the powers and authority of the designated liquidator to effectuate and carry on the administration of the
bank. The Court did not prohibit however acts a as receiving collectibles and receivables or paying off credits claims and other transactions
pertaining to normal operate of a bank. There is no doubt that the prosecution of suits collection and the foreclosure of mortgages against debtors
the bank by the liquidator are among the usual and ordinary transactions pertaining to the administration of a bank

Section 29 of the Republic Act No. 265, as amended known as the Central Bank Act, provides that when a bank is forbidden to do business in the
Philippines and placed under receivership, the person designated as receiver shall immediately take charge of the bank’s assets and liabilities, as
expeditiously as possible, collect and gather all the assets and administer the same for the bene t of its creditors, and represent the bank personally
or through counsel as he may retain in all actions or proceedings for or against the institution, exercising all the powers necessary for these
purposes including, but not limited to, bringing and foreclosing mortgages in the name of the bank. If the Monetary Board shall later determine and
con rm that banking institution is insolvent or cannot resume business safety to depositors, creditors and the general public, it shall, public interest
requires, order its liquidation and appoint a liquidator who shall take over and continue the functions of receiver previously appointed by Monetary
Board. The liquid for may, in the name of the bank and with the assistance counsel as he may retain, institute such actions as may necessary in the
appropriate court to collect and recover a counts and assets of such institution or defend any action ft against the institution.

Whether or not the closure of the bank based on the Tiaoqui report is correct.
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 No. Clearly, Tiaoqui based his report on an incomplete examination of petitioner bank and outrightly concluded therein that the
latter’s nancial status was one of insolvency or illiquidity. In the instant case, the basic standards of substantial due process were
not observed. Time and again, We have held in several cases, that the procedure of administrative tribunals must satisfy the
fundamentals of fair play and that their judgment should express a well-supported conclusion. The test of insolvency laid down in
Section 29 of the Central Bank Act is measured by determining whether the realizable assets of a bank are leas than its liabilities.
Hence, a bank is solvent if the fair cash value of all its assets, realizable within a reasonable time by a reasonable prudent
person, would equal or exceed its total liabilities exclusive of stock liability; but if such fair cash value so realizable is not suf cient
to pay such liabilities within a reasonable time, the bank is insolvent.  Examination appraises the soundness of the institution’s
assets, the quality and character of management and determines the institution’s compliance with laws, rules and
regulations. Audit is a detailed inspection of the institution’s books, accounts, vouchers, ledgers, etc. to determine the recording of
all assets and liabilities. Hence, examination concerns itself with review and appraisal, while audit concerns itself with veri cation.
 

Rural Bank of San Miguel, Inc. v. Monetary Board, Bangk

Sentral ng Pilipina
516 SCRA 154 (2007)
Monetary Board (MB), the governing board of respondent Bangko Sentral ng Pilipinas (BSP), issued Resolution No. 105
prohibiting RBSM from doing business in the Philippines, placing it under receivership and designating respondent Philippine
Deposit Insurance Corporation (PDIC) as receiver on the basis of the comptrollership reports of the banks supervising head. To
assist its impaired liquidity and operations, the RBSM was granted emergency loans on different occasions in the aggregate
amount of P375. As early as November 18, 1998, Land Bank of the Philippines (LBP) advised RBSM that it will terminate the
clearing of RBSM’s checks in view of the latter’s frequent clearing losses and continuing failure to replenish its Special Clearing
Demand Deposit with LBP. The BSP interceded with LBP not to terminate the clearing arrangement of RBSM to protect the
interests of RBSM’s depositors and creditors.  On the basis of reports prepared by PDIC stating that RBSM could not resume
business with suf cient assurance of protecting the interest of its depositors, creditors and the general public, the MB passed
Resolution No. 966 directing PDIC to proceed with the liquidation of RBSM under Section 30 of RA 7653.

Whether or not the Monetary Board can unilaterally close a bank without prior hearing
No. It is well-settled that the closure of a bank may be considered as an exercise of police power. The action of the MB on this
matter is nal and executory. Such exercise may nonetheless be subject to judicial inquiry and can be set aside if found to be in
excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction
This case essentially boils down to one core issue: whether Section 30 of RA 7653 (also known as the New Central Bank Act) and
applicable jurisprudence require a current and complete examination of the bank before it can be closed and placed under
receivership. The actions of the Monetary Board taken under this section or under Section 29 of this Act shall be nal and
executory, and may not be restrained or set aside by the court except on petition for certiorari on the ground that the action taken
was in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction. The petition for
certiorari may only be led by the stockholders of record representing the majority of the capital stock within ten (10) days from
receipt by the board of directors of the institution of the order directing receivership, liquidation or conservatorship.

Receiver - Sec. 30, 1st and 2nd pars., NCB

(1) If a banking institution: the PDIC (has interest over the deposits & insures all banks
(2) If a quasi-bank: any person of recognized competence in banking or nanc
The appointment of a receiver shall be vested exclusively in the MB. And the designation of a conservator is not a
precondition to the designation of a receiver

Powers and duties of a receive

(1) Immediately gather and take charge of all the assets and liabilities of the institutio
(2) Administer the assets for the bene t of the creditor
(3) Exercise the general powers of a receiver under the Revised Rules of Cour
(4) Not to pay or commit any act that will involve the transfer or disposition of any asset of the institution, except
(a) Administrative expenditure
(b) Receiver may deposit or place funds in non-speculative investment
(5) Subject to prior approval of the MB, determine, as soon as possible, but not later than 90 days from take-ove
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 Spouses Larrobis, Jr. v. Philippine Veterans Ban

440 SCRA 34 (2004)
Spouses Larrobis contracted a monetary loan with PVB, secured by a REM executed on their lot. PVB then went bankrupt and
was placed under receivership/liquidation by the Central Bank. Sometime after, PVB sent a demand letter for the amount of the
insurance premiums advanced by it over the mortgaged property of petitioners. More than 14 years from the time the loan
became due and demandable, respondent bank moved for the extrajudicial foreclosure of the mortgaged property and was sold to
it as being the lone bidder. Spouses Larrobis moved to declare the foreclosure null and void contending that the respondent bank
being placed under receivership did not interrupt the running of the prescriptive period. RTC ruled in favor of PVB.

Whether or not foreclosure of mortgage is included in the acts prohibited during receivership/
liquidation proceedings
No, While it is true that foreclosure falls within the broad de nition of “doing business,” it should not be considered included,
however, in the acts prohibited whenever banks are “prohibited from doing business” during receivership and liquidation
proceedings. This is consistent with the purpose of receivership proceedings, i.e., to receive collectibles and preserve the assets
of the bank in substitution of its former management, and prevent the dissipation of its assets to the detriment of the creditors of
the bank.

There is also no truth to respondent’s claim that it could not continue doing business from the time it was under receivership. As
correctly pointed out by petitioner, respondent was even able to send petitioners a demand letter, through Francisco Go, for the
insurance premiums advanced by respondent bank over the mortgaged property of petitioners. How it could send a demand letter
on unpaid insurance premiums and not foreclose the mortgage during the time it was “prohibited from doing business” was not
adequately explained by respondent

Whether or not the period within which the respondent bank was placed under receivership
and liquidation proceedings interrupted the running of the prescriptive period in bringing
actions
No, A close scrutiny of the Provident case shows that the Court arrived at said conclusion, which is an exception to the general
rule, due to the peculiar circumstances of Provident Savings Bank at the time. The Superintendent of Banks, which was instructed
to take charge of the assets of the bank in the name of the Monetary Board, had no power to act as a receiver of the bank and
carry out the obligations speci ed in Sec. 29 of the Central Bank Act

In this case, it is not disputed that Philippine Veterans Bank was placed under receivership by the Monetary Board of the Central
Bank pursuant to Section 29 of the Central Bank Act on insolvency of banks. Unlike Provident Savings Bank, there was no legal
prohibition imposed upon herein respondent to deter its receiver and liquidator from performing their obligations under the law.
Thus, the ruling laid down in the Provident case cannot apply in the case at bar.

Close Now-Hear Later Doctrine

Central Bank of the Philippines vs Court of Appeal
GR No. 76118, March 30, 1993
Based on examination reports submitted by the Supervision and Examination Sector of the Central Bank "that the nancial
condition of TSBis one of insolvency and its continuance in business would involve probable loss to its depositors and creditors,"
the Monetary Board issued a RESOLUTION ordering the closure of Triumph Savings Bank, forbidding it from doing business in
the Philippines, placing it under receivership, and appointing Ramon V. Tiaoqui as receiver. One week later, TSB led a complaint
against Central Bank and Ramon V. Tiaoqui challenging in the process the constitutionality of Sec. 29 of R.A. 269, otherwise
known as "The Central Bank Act," as amended, insofar as it authorizes the Central Bank to take over a banking institution even if
it is not charged with violation of any law or regulation, much less found guilty thereof. The RTC granted a TRO against the CB
resolution. Central Bank led a motion to dismiss the complaint before the RTC forfailure to state a cause of action, i.e., it did not
allege ultimate facts showing that the action was plainly arbitrary and made in bad faith, which are the only grounds for the
annulment of Monetary Board resolutions placing a bank under conservatorship, and that TSB was without legal capacity to sue
except through its receiver. These were denied. The denial was elevated to the CA, which upheld the orders of the RTC. Thus,
this petition for (Rule45)certiorari.

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 Whether or not the receiver who has a right of action to question the resolution of the CB, and
not the stockholders of the corporation
NO. Contrary to the notion of private respondent, Sec. 29 does not contemplate prior notice and hearing before a bank may be
directed to stop operations and placed under receivership. When par. 4 provides for the ling of a case within ten (10) days after
the receiver takes charge of the assets of the bank, it is unmistakable that the assailed actions should precede the ling of the
case. Plainly, the legislature could not have intended to authorize "no prior notice and hearing" in the closure of the bank and at
the same time allow a suit to annul it on the basis of absence thereof. A previous hearing is NOT required. It is enough that a
subsequent judicial review be provided. This "close now and hear later" scheme is grounded on practical and legal considerations
to prevent unwarranted dissipation of the bank's assets and as a valid exercise of police power to protect the depositors,
creditors, stockholders and the general public. The mere ling of a case for receivership by the Central Bank can trigger a bank
run and drain its assets in days or even hours leading to insolvency even if the bank be actually solvent. The procedure
prescribed in Sec. 29 is truly designed to protect the interest of all concerned, i.e., the depositors, creditors and stockholders, the
bank itself, and the general public. The absence of notice and hearing is not a valid ground to annul a Monetary Board resolution
placing a bank under receivership. The absence of prior notice and hearing cannot be deemed acts of arbitrariness and badfaith.
As regards the second ground, to rule that only the receiver may bring suit in behalf of the bank is, to echo the respondent
appellate court, "asking for the impossible, for it cannot be expected that the master, the CB, will allow the receiver it has
appointed to question that very appointment. "Consequently, only stockholders of a bank could le an action for annulment of a
Monetary Board resolution placing the bank under receivership and prohibiting it from continuing operations.

Sec. 29 of the Central Bank Act does NOT contemplate prior notice and hearing before a bank may be directed to stop
operations and placed under receivership. It is enough that such action is made subject of a subsequent judicial review.
When the law provides for the ling of a case within 10 days after the receiver takes charge of the assets of the bank, it
is unmistakable that the assailed actions should precede the ling of the case. The legislature could not have intended
to authorize “no prior notice and hearing” in the bank’s closure and at the same time allow a suit to annul it on the basis
of absence thereof

Rural Bank of Buhi v. Court of Appeal

162 SCRA 288 (1988)
The Rural Bank of Buhi (Bank) was placed under receivership and designated respondent Odra as Receiver pursuant to the
provisions of Section 29 of Republic Act No. 265 as amended. Odra implemented and carried out said Monetary Board
Resolution No. 583 by authorizing deputies of the receiver to take control, possession and charge of the Bank, its assets and
liabilities. The Bank led a petition for injunction with Restraining Order against respondent Odra and DRBSLA assailing the
action of herein respondent Odra in recommending the receivership over the Bank as a violation of the provisions of Sections 28
and 29 of Republic Act No. 265 as amended, and Section 10 of Republic Act No. 720 (The Rural Banks Act) and as being ultra
vires and done with grave abuse of discretion and in excess of jurisdiction. Respondents led their motion to dismiss alleging
that the petition did not allege a cause of action and is not su cient in form and substance. Petitioners led an opposition to the
motion to dismiss averring that the petition alleged a valid cause of action and that respondents have violated the due process
clause of the Constitution. Thereafter the Central Bank Monetary Board issued a Resolution ordering the liquidation of the Bank.
The RTC ruled in favor of the Bank and issued a writ of execution. The CA however restrained the enforcement of the execution.

Whether or not the due process was violated

NO. Republic Act No. 265 does not require that a hearing be rst conducted before a banking institution may be placed under
receivership. Rather it provides the conditions prerequisite to the action of the Monetary Board to forbid the institution to do
business in the Philippines and to appoint a receiver to immediately take charge of the bank's assets and liabilities. They are: (a)
an examination made by the examining department of the Central Bank; (b) report by said department to the Monetary Board; and
(c) prima facie showing that the bank is in a condition of insolvency or so situated that its continuance in business would involve
probable loss to its depositors or creditors. The petitioner’s contention that no property shall be taken without due process of law
is guaranteed under the constitution is without merit. It has long been established that the closure and liquidation of a bank may
be considered as an exercise of police power. Such exercise may, however, be subject to judicial inquiry and could be set aside if
found to be capricious, discriminatory, whimsical, arbitrary, unjust or a denial of the due process and equal protection clauses of
the Constitution (Central Bank vs. Court of Appeals, 106 SCRA 155 [1981]). Hence, Appointment of a receiver may be made by
the Monetary Board without notice and hearing but its action is subject to judicial inquiry. Due process does not necessarily
require a prior hearing; a hearing or an opportunity to be heard may be subsequent to the closure. One can
just imagine the dire consequences of a prior hearing: bank runs would be the order of the day, resulting in
panic and hysteria. In the process, fortunes may be wiped out and disillusionment will run the gamut of the
entire banking community. Furthermore, a banking institution's claim that a resolution of the Monetary Board under Section
29 of the Central Bank Act should be set aside as plainly arbitrary and made in bad faith, may be asserted as an af rmative
defense (Sections 1 and 4[b], Rule 6, Rules of Court) or a counterclaim (Section 6, Rule 6; Section 2, Rule 72 of the Rules of
Court) in the proceedings for assistance in liquidation or as a cause of action in a separate and distinct action where the latter was
led ahead of the petition for assistance in liquidation (ibid; Central Bank vs. Court of Appeals, 106 SCRA 143 [1981]).
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 Liquidatio
It is the winding up of a corporation so that assets are distributed to those entitled to receive them. It is the process of reducing
assets to cash, discharging liabilities and dividing surplus or loss

Should the determination be that the institution cannot be rehabilitated or permitted to resume business, the MB shall notify in
writing the board of directors of the institution of its ndings and direct the receiver to proceed with the liquidation of the institution

Liquidation vs Rehabilitation
Philippine Veterans Bank Employees Union-N.U.B.E. v. Hon. Benjamin Veg
360 SCRA 33 (2001)
Liquidation, in corporation law, connotes a winding up or settling with creditors and debtors. It is the winding up of a corporation so
that assets are distributed to those entitled to receive them. It is the process of reducing assets to cash, discharging liabilities and
dividing surplus or loss. On the opposite end of the spectrum is rehabilitation which connotes a reopening or reorganization.
Rehabilitation contemplates a continuance of corporate life and activities in an effort to restore and reinstate the corporation to its
former position of successful operation and solvency. It is crystal clear that the concept of liquidation is diametrically opposed or
contrary to the concept of rehabilitation, such that both cannot be undertaken at the same time. To allow the liquidation
proceedings to continue would seriously hinder the rehabilitation of the subject bank.

Actions to take - Sec. 30, NCB

(1) The receiver shall le ex parte with the proper RTC, and without requirement of prior notice or any other action, a
petition for assistance in the liquidation of the institution pursuant to the liquidation plan adopted by the PDIC (if
quasi-bank, liquidation plan adopted by the MB
(2) Upon acquiring jurisdiction, the court shall, upon motion by the receiver after due notice
(a) Adjudicate disputed claims against the institution
(b) Assist the enforcement of individual liabilities of the stockholders, directors, and of cers, an
(c) Decide on other issues as may be material to implement the liquidation pla
(3) The receiver shall convert the assets of the institutions to money, dispose of the same to creditors and other
parties, for the purpose of paying the debts of such institution in accordance with the rules on concurrence and
preference of credit under the Civil Cod

Note
The assets of the institution under receivership and liquidation shall be deemed in custodia legis and shall be
exempt from any order of garnishment, levy, attachment, or execution

How assets are distributed - Sec. 30, NCB

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