3.

minimum capital requirements prescribed by

BANKING LAW the Monetary Board are satisfied

General Banking Law = RA No. 8791 NATURE OF BANKING BUSINESS

- appropriate standard of diligence must be very
Primarily interested in the business of banking: high or highest degree of care
1. government - business of the bank is one affected by public
2. depositors interest therefore the bank must prevent loss
3. investors due to negligence and bad faith
4. creditors
5. borrowers CONSEQUENCES
- subject to heavy and close supervision and/or
JOINT ACCOUNT VS PARTNERSHIP regulation by the BSP
* partnership has a firm name while a joint - required to exercise utmost diligence in the
account has none and is conducted in the name handling of deposits
of the ostensible partner
* while a partnership has a juridical personality * President may also intervene at any time and
and may sue of be sued under its firm name, a assume jurisdiction over labor dispute in orde
joint account has no juridical personality and to settle or terminate the same (strikes and
can sue or be sued only in the name of the lockouts)
ostensible partner
CLASSIFICATION OF BANKS
GENERAL BANKING LAW OF 2000 (RA No. 1. UNIVERSAL BANK – primarily governed by
8791) GBL, can exercise the powers of an investment
Purpose: to promote and maintain a stable and house and invest in non-allied enterprises and
efficient banking and financial system that is have the highest capitalization requirement
globally competitive, dynamic and responsive to
the demands of a developing economy 2. COMMERCIAL BANK – ordinary banks
Scope: primarily governs universal banks and governed by the GBL which have a lower
commercial banks; suppletorily governs thrift capitalization requirement than universal banks
banks, rural banks and other banking and can neither exercise the powers of an
institutions investment house nor invest in non-allied
enterprises
BANKS
- entities engaged in the lending of funds 3. THRIFT BANK – savings and mortgage banks;
obtained in the form of deposits stock savings and loan associations; private
- entities duly authorized by the Monetary development banks which are primarily
Board to engage in the business of regularly governed by the Thrift Banks Act
lending funds obtained regularly from the public
through the receipt of deposits of any kind 4. RURAL BANK – mandated to make needed
credit available and readily accessible in the
QUASI-BANKS rural areas on reasonable terms and which are
- entities engaged in borrowing of funds primarily governed by the Rural Banks Act of
through the issuance, endorsement or 1992
assignment with recourse or acceptance of
deposit substitutes 5. COOPERATIVE BANK – organized whose
majority shares are owned and controlled by
FINANCIAL INTERMEDIARIES cooperatives primarily to provide financial and
- persons or entities whose principal functions credit services to cooperatives
include the lending, investing or placement of
funds on evidences of indebtedness or equity 6. ISLAMIC BANK – subject to the basic
deposited with them, acquired by them or principles and ruling of Islamic Shari’a
otherwise coursed through them, either for
their own account or for the account of others 7. OTHER CLASSIFICATION OF BANKS –
determined the Monetary Board of the Bangko
Requirements: Sentral ng Pilipinas
1. entity is a stock corporation
2. funds are obtained from the public (20 or
more persons)
Allied Enterprises – entities which enhance or DEMAND DEPOSITS SAVINGS ACCOUNT
complement banking Only allowed to Passbook
universal or
Non-Financial Allied Enterprises – pertains to commercial bank
activities that do not involve money matters
(warehousing, safety deposit boxes) * demand, savings, NOW accounts, time
deposits and deposit substitute shall not be
Net Worth – total of the unimpaired paid-in subject to interest ceilings
capital
Deposit Substitute – issuance, endorsement or
BASIC FUNCTIONS OF BANKS acceptance of debt instruments for the
1. Loan Function – before granting a loan, a borrower’s own account, for the purpose of re-
bank must ascertain that the debtor is capable lending or purchasing of receivables and other
of fulfilling his commitments to the bank obligations (guaranteed by certificates and
other instruments)
UNCLASSIFIED LOANS CLASSIFIED LOANS
Do not have a Have extraordinary *fiduciary relationship means that the bank’s
greater-than-normal risk of loss in obligation to observe “high standards of
risk; no loss in collection integrity and performance” is deemed written
ultimate collection is into every deposit agreement
anticipated
OWNERSHIP OF REAL PROPERTY
Single Borrower’s Limit (SBL) Rules General Rule – cannot acquire and own real
- loans extended shall not exceed 20% of the property (not engaged in the business of
net worth of such bank acquiring and possessing real property)
- total amount of loans may be increased by
additional 10% as long as with security BANGKO SENTRAL NG PILIPINAS (BSP)
- state’s central monetary authority
Joint and Solidary Signature Practice (JSS) - granted the power of supervision and
- required as an additional security for a loan examination over bank and non-bank financial
granted to a corporation institutions

DOSRI Accounts (Directors, Officers, Powers:

Stockholders, and Related Interests) 1. issuer of currency
- no DOSRI shall directly or indirectly borrow 2. custodian of reserves
from their banks except if there is a written 3. clearing channel or house
approval of the majority of all the directors of 4. banker of the government
the bank 5. financial advisor of the government
- dealings of a bank with any of its DOSRI shall 6. source of credit
be upon terms not less favourable to the bank 7. supervisor of the banking system
than those offered to others (ARMS LENGTH 8. government agent
RULE)
MONETARY BOARD (MB)
COLLATERALS - body by which the powers and functions of the
- loan shall not exceed 75% of the appraised Bangko Sentral are exercised
value of the real property + 60% of the
appraised value of the Improvements or 75% of Composition:
the appraised value of the chattel; 1. Chairman: Governor of the BSP
2. A member of the cabinet to be designated by
2. Deposit Function the President of the Philippines
Minors can be depositors as long as: 3. Five (5) members who shall come from the
- atleast 7 years of age private sector, all of whom shall serve full-time
- read and write
- not disqualified by any incapacity *degree of diligence = extraordinary diligence
- should only be savings or time deposits
Subsidiary – corporation more than 50% of the
*parents may deposit for their minor children voting stock of which is owned by a bank or
quasi-bank
Affiliate – corporation the voting stock of 4. wilful violation of a cease and desist order
which, to the extent of 50% or less, is owned by that has become final
a bank or quasi-bank or which is related or 5. notification to the BSP or public
linked to such institution or intermediary announcement of a bank holiday
through common stockholders or other factors 6. suspension of payment of deposit liabilities
determined by the Monetary Board continuously for more than 30 days
7. persistence in conducting business in an
Corporate Powers of the BSP: unsafe or unsound manner
1. to adopt, alter and use a corporate seal which
shall be judicially noticed Receiver
2. to enter into contracts Banks = PDIC
3. to lease, own and sell property Quasi-banks = any person recognized
4. to sue and be sued competence in banking or finance
5. to acquire and hold such assets and incur
such liabilities in connection with its operations “CLOSE NOW, HEAR LATER”
or as are essential to the proper conduct of - Central Bank Act does not contemplate prior
operation notice and hearing before a bank is placed
6. to compromise, condone or release any claim under receivership
of or settled liability to the BSP - PURPOSE: protect the depositor, creditors and
7. to do and preform such other necessary general public (Central Bank of the Philippines
powers vs CA)

CONSERVATORSHIP LIQUIDATION
- state of continuing inability or unwillingness to Grounds:
maintain a condition of liquidity deemed 1. condition of the bank is one of insolvency or
adequate to protect the interest of depositors that its continuance would involve probable loss
and creditors to its depositors and creditors
- not to exceed 1 year 2. determination by the MB that the bank
cannot by rehabilitated
Powers:
1. take charge of the assets, liabilities and the Effects of Appointment or Receiver/Liquidation
management 1. suspension of operation
2. reorganize the management 2. assets under receivership or liquidation shall
3. collect all monies and debt due said bank be deemed “in custodial legis” and shall be
4. exercise all powers necessary to restore its exempt from garnishment, levy, attachment or
viability, with the power to overrule or rebuke execution
the actions of the previous management and 3. bank is not liable to pay interest on deposits
board of directors of the bank during the period of suspension of operation
4. corporation retains its legal personality
Termination - when the MB is satisfied that the 5. deposits do not become preferred credits
institution can continue to operate on its own
and conservatorship is no longer necessary LEGAL TENDER
- all noted and coins issued by the Bangko
RECEIVERSHIP Sentral are fully guaranteed by the Republic and
- equivalent to an injunction to restrain the shall be legal tender in the Philippines for all
bank in any way debts, both public and private
- authority of the bank and of its directors and
officers over its property and effects is 1-peso, 5-peso and 10-peso coins = NOT
SUSPENDED EXCEEDING P1,000.00
25-centavo coin or less – NOT EXCEEDING
Grounds: P100.00
1. inability to pay liabilities as they become due
in the ordinary course of business REPLACEMENT
2. insufficiency of realizable assets to meet its 1. NOTES – more than 5 yrs old
liabilities 2. COINS – more than 10 yrs old
3. inability to continue business w/o involving
probable cause losses to its depositors/creditors