BANKING LAW

The New Central Bank Act (R.A. No. 7653, as amended by R.A. No. 11211)

REPUBLIC ACT 7653, as amended by RA 11211

[STATE POLICIES]

Section 1. Declaration of Policy. - 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. In
line with this policy, and considering its unique functions and responsibilities, the central
monetary authority established under this Act, while being a government-owned corporation,
shall enjoy fiscal and administrative autonomy.
Section 2. Creation of the Bangko Sentral. - There is hereby established an
independent central monetary authority, which shall be a body corporate known as the
Bangko Sentral ng Pilipinas, hereafter referred to as the Bangko Sentral.
The capital of the Bangko Sentral shall be Fifty billion pesos (P50,000,000,000), to be
fully subscribed by the Government of the Republic, hereafter referred to as the Government,
Ten billion pesos (P10,000,000,000) of which shall be fully paid for by the Government upon
the effectivity of this Act and the balance to be paid for within a period of two (2) years from
the effectivity of this Act in such manner and form as the Government, through the Secretary
of Finance and the Secretary of Budget and Management, may thereafter determine.
Section 3. Responsibility and Primary Objective. - The Bangko Sentral shall provide
policy directions in the areas of money, banking, and credit. It shall have supervision over
the operations of banks and exercise such regulatory powers as provided in this Act and
other pertinent laws over the operations of finance companies and non-bank financial
institutions performing quasi-banking functions, hereafter referred to as quasi-banks, and
institutions performing similar functions.
The primary objective of the Bangko Sentral is to maintain price stability conducive to
a balanced and sustainable growth of the economy. It shall also promote and maintain
monetary stability and the convertibility of the peso.
Section 4. Place of Business. - The Bangko Sentral shall have its principal place of
business in Metro Manila, but may maintain branches, agencies and correspondents in such
other places as the proper conduct of its business may require.
Section 5. Corporate Powers. - The Bangko Sentral is hereby authorized to adopt,
alter, and use a corporate seal which shall be judicially noticed; to enter into contracts; to
lease or own real and personal property, and to sell or otherwise dispose of the same; to sue
and be sued; and otherwise to do and perform any and all things that may be necessary or
proper to carry out the purposes of this Act.
The Bangko Sentral may acquire and hold such assets and incur such liabilities in
connection with its operations authorized by the provisions of this Act, or as are essential to
the proper conduct of such operations.
The Bangko Sentral may compromise, condone or release, in whole or in part, any
claim of or settled liability to the Bangko Sentral, regardless of the amount involved, under
such terms and conditions as may be prescribed by the Monetary Board to protect the
interests of the Bangko Sentral.

[MONETARY BOARD, FUNCTIONS, AND ITS POWERS]

ARTICLE II
THE MONETARY BOARD
 Section 6. Composition of the Monetary Board. - The powers and functions of the
Bangko Sentral shall be exercised by the Bangko Sentral Monetary Board, hereafter referred
to as the Monetary Board, composed of seven (7) members appointed by the President of the
Philippines for a term of six (6) years.
The seven (7) members are:

(a) the Governor of the Bangko Sentral, who shall be the Chairman of the Monetary Board.
The Governor of the Bangko Sentral shall be head of a department and his appointment shall
be subject to confirmation by the Commission on Appointments. Whenever the Governor is
unable to attend a meeting of the Board, he shall designate a Deputy Governor to act as his
alternate: Provided, That in such event, the Monetary Board shall designate one of its
members as acting Chairman;

(b) a member of the Cabinet to be designated by the President of the Philippines. Whenever
the designated Cabinet Member is unable to attend a meeting of the Board, he shall
designate an Undersecretary in his Department to attend as his alternate; and

(c) five (5) members who shall come from the private sector, all of whom shall serve full-time:
Provided, however, That of the members first appointed under the provisions of this
subsection, three (3) shall have a term of six (6) years, and the other two (2), three (3) years.

No member of the Monetary Board may be reappointed more than once.

Section 7. Vacancies. - Any vacancy in the Monetary Board created by the death,
resignation, or removal of any member shall be filled by the appointment of a new member to
complete the unexpired period of the term of the member concerned.
Section 8. Qualifications. - The members of the Monetary Board must be natural-born
citizens of the Philippines, at least thirty-five (35) years of age, with the exception of the
Governor who should at least be forty (40) years of age, of good moral character, of
unquestionable integrity, of known probity and patriotism, and with recognized competence
in social and economic disciplines.
Section 9. Disqualifications. - In addition to the disqualifications imposed by Republic
Act No. 6713, a member of the Monetary Board is disqualified from being a director, officer,
employee, consultant, lawyer, agent or stockholder of any bank, quasi-bank or any other
institution which is subject to supervision or examination by the Bangko Sentral, in which
case such member shall resign from, and divest himself of any and all interests in such
institution before assumption of office as member of the Monetary Board.
The members of the Monetary Board coming from the private sector shall not hold any
other public office or public employment during their tenure.
No person shall be a member of the Monetary Board if he has been connected directly
with any multilateral banking or financial institution or has a substantial interest in any
private bank in the Philippines, within one (1) year prior to his appointment; likewise, no
member of the Monetary Board shall be employed in any such institution within two (2) years
after the expiration of his term except when he serves as an official representative of the
Philippine Government to such institution.
Section 10. Removal. - The President may remove any member of the Monetary Board
for any of the following reasons:

(a) If the member is subsequently disqualified under the provisions of Section 8 of this Act;
or

(b) If he is physically or mentally incapacitated that he cannot properly discharge his duties
and responsibilities and such incapacity has lasted for more than six (6) months; or
(c) If the member is guilty of acts or operations which are of fraudulent or illegal character or
which are manifestly opposed to the aims and interests of the Bangko Sentral; or

(d) If the member no longer possesses the qualifications specified in Section 8 of this Act.

Section 11. Meetings. - The Monetary Board shall meet at least once a week. The
Board may be called to a meeting by the Governor of the Bangko Sentral or by two (2) other
members of the Board.
The presence of four (4) members shall constitute a quorum: Provided, That in all
cases the Governor or his duly designated alternate shall be among the four (4).
Unless otherwise provided in this Act, all decisions of the Monetary Board shall
require the concurrence of at least four (4) members.
The Bangko Sentral shall maintain and preserve a complete record of the proceedings
and deliberations of the Monetary Board, including the tapes and transcripts of the
stenographic notes, either in their original form or in microfilm.
Section 12. Attendance of the Deputy Governors. - The Deputy Governors may attend
the meetings of the Monetary Board with the right to be heard.
Section 13. Salary. - The salary of the Governor and the members of the Monetary
Board from the private sector shall be fixed by the President of the Philippines at a sum
commensurate to the importance and responsibility attached to the position.
Section 14. Withdrawal of Persons Having a Personal Interest. - In addition to the
requirements of Republic Act No. 6713, any member of the Monetary Board with personal or
pecuniary interest in any matter in the agenda of the Monetary Board shall disclose his
interest to the Board and shall retire from the meeting when the matter is taken up. The
decision taken on the matter shall be made public. The minutes shall reflect the disclosure
made and the retirement of the member concerned from the meeting.
Section 15. Exercise of Authority. - In the exercise of its authority, the Monetary Board
shall:

(a) issue rules and regulations it considers necessary for the effective discharge of the
responsibilities and exercise of the powers vested upon the Monetary Board and the Bangko
Sentral. The rules and regulations issued shall be reported to the President and the Congress
within fifteen (15) days from the date of their issuance;

(b) direct the management, operations, and administration of the Bangko Sentral, reorganize
its personnel, and issue such rules and regulations as it may deem necessary or convenient
for this purpose. The legal units of the Bangko Sentral shall be under the exclusive
supervision and control of the Monetary Board;

(c) establish a human resource management system which shall govern the selection, hiring,
appointment, transfer, promotion, or dismissal of all personnel. Such system shall aim to
establish professionalism and excellence at all levels of the Bangko Sentral in accordance
with sound principles of management.

A compensation structure, based on job evaluation studies and wage surveys and
subject to the Board's approval, shall be instituted as an integral component of the Bangko
Sentral's human resource development program: Provided, That the Monetary Board shall
make its own system conform as closely as possible with the principles provided for under
Republic Act No. 6758: Provided, however, That compensation and wage structure of
employees whose positions fall under salary grade 19 and below shall be in accordance with
the rates prescribed under Republic Act No. 6758.
On the recommendation of the Governor, appoint, fix the remunerations and other
emoluments, and remove personnel of the Bangko Sentral, subject to pertinent civil service
laws: Provided, That the Monetary Board shall have exclusive and final authority to promote,
transfer, assign, or reassign personnel of the Bangko Sentral and these personnel actions
are deemed made in the interest of the service and not disciplinary: Provided, further, That
the Monetary Board may delegate such authority to the Governor under such guidelines as it
may determine.

(d) adopt an annual budget for and authorize such expenditures by the Bangko Sentral as are
in the interest of the effective administration and operations of the Bangko Sentral in
accordance with applicable laws and regulations; and

(e) indemnify its members and other officials of the 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 proceedings to which he may be, or is, made a party by reason of the
performance of his functions or duties, unless he is finally adjudged in such action or
proceeding to be liable for negligence or misconduct.

In the event of a settlement or compromise, indemnification shall be provided only in

connection with such matters covered by the settlement as to which the Bangko Sentral is
advised by external counsel that the person to be indemnified did not commit any negligence
or misconduct.
The costs and expenses incurred in defending the aforementioned action, suit or
proceeding may be paid by the Bangko Sentral in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf of the member,
officer, or employee to repay the amount advanced should it ultimately be determined by the
Monetary Board that he is not entitled to be indemnified as provided in this subsection.
Section 16. Responsibility. - Members of the Monetary Board, officials, examiners, and
employees of the Bangko Sentral who willfully violate this Act or who are guilty of
negligence, abuses or acts of malfeasance or misfeasance or fail to exercise extraordinary
diligence in the performance of his duties shall be held liable for any loss or injury suffered
by the Bangko Sentral or other banking institutions as a result of such violation, negligence,
abuse, malfeasance, misfeasance or failure to exercise extraordinary diligence.
Similar responsibility shall apply to members, officers, and employees of the Bangko
Sentral for: (1) the disclosure of any information of a confidential nature, or any information
on the discussions or resolutions of the Monetary Board, or about the confidential operations
of the Bangko Sentral, unless the disclosure is in connection with the performance of official
functions with the Bangko Sentral, or is with prior authorization of the Monetary Board or the
Governor; or (2) the use of such information for personal gain or to the detriment of the
Government, the Bangko Sentral or third parties: Provided, however, That any data or
information required to be submitted to the President and/or the Congress, or to be published
under the provisions of this Act shall not be considered confidential.
ARTICLE III
THE GOVERNOR AND DEPUTY GOVERNORS OF THE BANGKO SENTRAL
Section 17. Powers and Duties of the Governor. - The Governor shall be the chief
executive officer of the Bangko Sentral. His powers and duties shall be to:

(a) prepare the agenda for the meetings of the Monetary Board and to submit for the
consideration of the Board the policies and measures which he believes to be necessary to
carry out the purposes and provisions of this Act;

(b) execute and administer the policies and measures approved by the Monetary Board;

(c) direct and supervise the operations and internal administration of the Bangko Sentral. The
Governor may delegate certain of his administrative responsibilities to other officers or may
assign specific tasks or responsibilities to any full-time member of the Monetary Board
without additional remuneration or allowance whenever he may deem fit or subject to such
rules and regulations as the Monetary Board may prescribe;

(d) appoint and fix the remunerations and other emoluments of personnel below the rank of a
department head in accordance with the position and compensation plans approved by the
Monetary Board, as well as to impose disciplinary measures upon personnel of the Bangko
Sentral, subject to the provisions of Section 15(c) of this Act: Provided, That removal of
personnel shall be with the approval of the Monetary Board;

(e) render opinions, decisions, or rulings, which shall be final and executory until reversed or
modified by the Monetary Board, on matters regarding application or enforcement of laws
pertaining to institutions supervised by the Bangko Sentral and laws pertaining to quasi-
banks, as well as regulations, policies or instructions issued by the Monetary Board, and the
implementation thereof; and

(f) exercise such other powers as may be vested in him by the Monetary Board.

Section 18. Representation of the Monetary Board and the Bangko Sentral. - The
Governor of the Bangko Sentral shall be the principal representative of the Monetary Board
and of the Bangko Sentral and, in such capacity and in accordance with the instructions of
the Monetary Board, he shall be empowered to:

(a) represent the Monetary Board and the Bangko Sentral in all dealings with other offices,
agencies and instrumentalities of the Government and all other persons or entities, public or
private, whether domestic, foreign or international;

(b) sign contracts entered into by the Bangko Sentral, notes and securities issued by the
Bangko Sentral, all reports, balance sheets, profit and loss statements, correspondence and
other documents of the Bangko Sentral.

The signature of the Governor may be in facsimile whenever appropriate;

(c) represent the Bangko Sentral, either personally or through counsel, including private
counsel, as may be authorized by the Monetary Board, in any legal proceedings, action or
specialized legal studies; and

(d) delegate his power to represent the Bangko Sentral, as provided in subsections (a), (b)
and (c) of this section, to other officers upon his own responsibility: Provided, however, That
in order to preserve the integrity and the prestige of his office, the Governor of the Bangko
Sentral may choose not to participate in preliminary discussions with any multilateral
banking or financial institution on any negotiations for the Government within or outside the
Philippines. During the negotiations, he may instead be represented by a permanent
negotiator.

Section 19. Authority of the Governor in Emergencies. - In case of emergencies where

time is sufficient to call a meeting of the Monetary Board, the Governor of the Bangko
Sentral, with the concurrence of two (2) other members of the Monetary Board, may decide
any matter or take any action within the authority of the Board.
The Governor shall submit a report to the President and Congress within seventy-two
(72) hours after the action has been taken.
At the soonest possible time, the Governor shall call a meeting of the Monetary Board
to submit his action for ratification.
Section 20. Outside Interests of the Governor and the Full-time Members of the Board.
- The Governor of the Bangko Sentral and the full-time members of the Board shall limit their
professional activities to those pertaining directly to their positions with the Bangko Sentral.
Accordingly, they may not accept any other employment, whether public or private,
remunerated or ad honorem, with the exception of positions in eleemosynary, civic, cultural
or religious organizations or whenever, by designation of the President, the Governor or the
full-time member is tasked to represent the interest of the Government or other government
agencies in matters connected with or affecting the economy or the financial system of the
country.
Section 21. Deputy Governors. - The Governor of the Bangko Sentral, with the
approval of the Monetary Board, shall appoint not more than three (3) Deputy Governors who
shall perform duties as may be assigned to them by the Governor and the Board.
In the absence of the Governor, a Deputy Governor designated by the Governor shall
act as chief executive of the Bangko Sentral and shall exercise the powers and perform the
duties of the Governor. Whenever the Government is unable to attend meetings of
government boards or councils in which he is an ex officio member pursuant to provisions of
special laws, a Deputy Governor as may be designated by the Governor shall be vested with
authority to participate and exercise the right to vote in such meetings.

[BSP & Banks in Distress: Sec. 29 & 30]

[Remedy for Closed Banks]

Section 29. Appointment of Conservator. - Whenever, on the basis of a report submitted by

the appropriate supervising or examining department, the Monetary Board finds that 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, the Monetary
Board may appoint a conservator with such powers as the Monetary Board shall deem
necessary to take charge of the assets, liabilities, and the management thereof, reorganize
the management, collect all monies and debts due said institution, and exercise all powers
necessary to restore its viability. The conservator shall report and be responsible to the
Monetary Board and shall have the power to overrule or revoke the actions of the previous
management and board of directors of the bank or quasi-bank.
The conservator should be competent and knowledgeable in bank operations and
management. The conservatorship shall not exceed one (1) year.
The conservator shall receive remuneration to be fixed by the Monetary Board in an
amount not to exceed two-thirds (2/3) of the salary of the president of the institution in one
(1) year, payable in twelve (12) equal monthly payments: Provided, That, if at any time within
one-year period, the conservatorship is terminated on the ground that the institution can
operate on its own, the conservator shall receive the balance of the remuneration which he
would have received up to the end of the year; but if the conservatorship is terminated on
other grounds, the conservator shall not be entitled to such remaining balance. The Monetary
Board may appoint a conservator connected with the Bangko Sentral, in which case he shall
not be entitled to receive any remuneration or emolument from the Bangko Sentral during the
conservatorship. The expenses attendant to the conservatorship shall be borne by the bank
or quasi-bank concerned.
The Monetary Board shall terminate the conservatorship when it is satisfied that the
institution can continue to operate on its own and the conservatorship is no longer
necessary. The conservatorship shall likewise be terminated should the Monetary Board, on
the basis of the report of the conservator or of its own findings, determine that the
continuance in business of the institution would involve probable loss to its depositors or
creditors, in which case the provisions of Section 30 shall apply.
Sec. 30. Proceedings in Receivership and Liquidation. - Whenever, upon report of the
head of the supervising or examining department, the Monetary Board finds that a bank or
quasi-bank:
"(a) has notified the Bangko Sentral or publicly announced a unilateral closure, or has been
dormant for at least sixty (60) days or in any manner has suspended the payment of its
deposit/deposit substitute liabilities, or 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 financial panic in the banking community;
"(b) has insufficient 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; or
"(d) has willfully violated a cease and desist order under Section 37 of this Act that has
become final, 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 (PDIC) as receiver in the case of
banks and direct the PDIC to proceed with the liquidation of the closed bank pursuant to this
section and the relevant provisions of Republic Act No. 3591, as amended. The Monetary
Board shall notify in writing, through the receiver, the board of directors of the closed bank
of its decision.
"The actions of the Monetary Board taken under this section or under Section 29 of this Act
shall be final 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 filed 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.
"The authority of the Monetary Board to summarily and without need for prior hearing forbid
the bank or quasi-bank from doing business in the Philippines as provided above may also
be exercised over non-stock savings and loan associations, based on the same applicable
grounds. For quasi-banks and non-stock savings and loan associations, any person of
recognized competence in banking, credit or finance may be designated by the Bangko
Sentral as a receiver.

Secrecy of Bank Deposits (R.A. No. 1405 and R.A. No. 6426, as amended)

REPUBLIC ACT No. 1405

AN ACT PROHIBITING DISCLOSURE OF OR INQUIRY INTO, DEPOSITS WITH ANY BANKING
INSTITUTION AND PROVIDING PENALTY THEREFOR.
Section 1. It is hereby declared to be the policy of the Government to give encouragement to
the people to deposit their money in banking institutions and to discourage private hoarding
so that the same may be properly utilized by banks in authorized loans to assist in the
economic development of the country.
Section 2. 1 All deposits of whatever nature with banks or banking institutions in the
Philippines including investments in bonds issued by the Government of the Philippines, its
political subdivisions and its instrumentalities, are hereby considered as of an absolutely
confidential nature and may not be examined, inquired or looked into by any person,
government official, bureau or office, except upon written permission of the depositor, or in
cases of impeachment, or upon order of a competent court in cases of bribery or dereliction
of duty of public officials, or in cases where the money deposited or invested is the subject
matter of the litigation.
Section 3. It shall be unlawful for any official or employee of a banking institution to disclose
to any person other than those mentioned in Section two hereof any information concerning
said deposits.
Section 4. All Acts or parts of Acts, Special Charters, Executive Orders, Rules and
Regulations which are inconsistent with the provisions of this Act are hereby repealed.
Section 5. Any violation of this law will subject offender upon conviction, to an imprisonment
of not more than five years or a fine of not more than twenty thousand pesos or both, in the
discretion of the court.
Section 6. This Act shall take effect upon its approval.
REPUBLIC ACT No. 6426
AN ACT INSTITUTING A FOREIGN CURRENCY DEPOSIT SYSTEM IN THE PHILIPPINES, AND
FOR OTHER PURPOSES.
Section 1. Title.– This act shall be known as the "Foreign Currency Deposit Act of the
Philippines."
Section 2. Authority to deposit foreign currencies. – Any person, natural or juridical, may, in
accordance with the provisions of this Act, deposit with such Philippine banks in good
standing, as may, upon application, be designated by the Central Bank for the purpose,
foreign currencies which are acceptable as part of the international reserve, except those
which are required by the Central Bank to be surrendered in accordance with the provisions
of Republic Act Numbered two hundred sixty-five (Now Rep. Act No. 7653).
Section 3. Authority of banks to accept foreign currency deposits. – The banks designated by
the Central Bank under Section two hereof shall have the authority:

(1) To accept deposits and to accept foreign currencies in trust Provided, That numbered
accounts for recording and servicing of said deposits shall be allowed;

(2) To issue certificates to evidence such deposits;

(3) To discount said certificates;

(4) To accept said deposits as collateral for loans subject to such rules and regulations as
may be promulgated by the Central Bank from time to time; and

(5) To pay interest in foreign currency on such deposits.

Section 4. Foreign currency cover requirements. – Except as the Monetary Board may
otherwise prescribe or allow, the depository banks shall maintain at all times a one hundred
percent foreign currency cover for their liabilities, of which cover at least fifteen percent shall
be in the form of foreign currency deposit with the Central Bank, and the balance in the form
of foreign currency loans or securities, which loans or securities shall be of short term
maturities and readily marketable. Such foreign currency loans may include loans to
domestic enterprises which are export-oriented or registered with the Board of Investments,
subject to the limitations to be prescribed by the Monetary Board on such loans. Except as
the Monetary Board may otherwise prescribe or allow, the foreign currency cover shall be in
the same currency as that of the corresponding foreign currency deposit liability. The Central
Bank may pay interest on the foreign currency deposit, and if requested shall exchange the
foreign currency notes and coins into foreign currency instruments drawn on its depository
banks. (As amended by PD No. 1453, June 11, 1978.)
Depository banks which, on account of networth, resources, past performance, or other
pertinent criteria, have been qualified by the Monetary Board to function under an expanded
foreign currency deposit system, shall be exempt from the requirements in the preceding
paragraph of maintaining fifteen percent (15%) of the cover in the form of foreign currency
deposit with the Central Bank. Subject to prior Central Bank approval when required by
Central Bank regulations, said depository banks may extend foreign currency loans to any
domestic enterprise, without the limitations prescribed in the preceding paragraph regarding
maturity and marketability, and such loans shall be eligible for purposes of the 100% foreign
currency cover prescribed in the preceding paragraph. (As added by PD No. 1035.)

Section 5. Withdrawability and transferability of deposits. – There shall be no restriction on

the withdrawal by the depositor of his deposit or on the transferability of the same abroad
except those arising from the contract between the depositor and the bank.

Section 6. Tax exemption. – All foreign currency deposits made under this Act, as amended
by PD No. 1035, as well as foreign currency deposits authorized under PD No. 1034, including
interest and all other income or earnings of such deposits, are hereby exempted from any
and all taxes whatsoever irrespective of whether or not these deposits are made by residents
or nonresidents so long as the deposits are eligible or allowed under aforementioned laws
and, in the case of nonresidents, irrespective of whether or not they are engaged in trade or
business in the Philippines. (As amended by PD No. 1246, prom. Nov. 21, 1977.)

Section 7. Rules and regulations. – The Monetary Board of the Central Bank shall promulgate
such rules and regulations as may be necessary to carry out the provisions of this Act which
shall take effect after the publications in the Official Gazette and in a newspaper of national
circulation for at least once a week for three consecutive weeks. In case the Central Bank
promulgates new rules and regulations decreasing the rights of depositors, rules and
regulations at the time the deposit was made shall govern.

Section 8. Secrecy of foreign currency deposits. – All foreign currency deposits authorized
under this Act, as amended by PD No. 1035, as well as foreign currency deposits authorized
under PD No. 1034, are hereby declared as and considered of an absolutely confidential
nature and, except upon the written permission of the depositor, in no instance shall foreign
currency deposits be examined, inquired or looked into by any person, government official,
bureau or office whether judicial or administrative or legislative, or any other entity whether
public or private; Provided, however, That said foreign currency deposits shall be exempt
from attachment, garnishment, or any other order or process of any court, legislative body,
government agency or any administrative body whatsoever. (As amended by PD No. 1035,
and further amended by PD No. 1246, prom. Nov. 21, 1977.)

Section 9. Deposit insurance coverage. – The deposits under this Act shall be insured under
the provisions of Republic Act No. 3591, as amended (Philippine Deposit Insurance
Corporation), as well as its implementing rules and regulations: Provided, That insurance
payment shall be in the same currency in which the insured deposits are denominated.

Section 10. Penal provisions. – Any willful violation of this Act or any regulation duly
promulgated by the Monetary Board pursuant hereto shall subject the offender upon
conviction to an imprisonment of not less than one year nor more than five years or a fine of
not less than five thousand pesos nor more than twenty-five thousand pesos, or both such
fine and imprisonment at the discretion of the court.

Section 11. Separability clause. – The provisions of this Act are hereby declared to be
separable and in the event one or more of such provisions are held unconstitutional, the
validity of other provisions shall not be affected thereby.

Section 12. Repealing clause. – All acts, executive orders, rules and regulations, or parts
thereof, which are inconsistent with any provisions of this Act are hereby repealed, amended
or modified accordingly, without prejudice, however, to deposits made thereunder.
Section 12-A. Amendatory enactments and regulations. – In the event a new enactment or
regulation is issued decreasing the rights hereunder granted, such new enactment or
regulation shall not apply to foreign currency deposits already made or existing at the time of
issuance of such new enactment or regulation, but such new enactment or regulation shall
apply only to foreign currency deposits made after its issuance. (As added by PD No. 1246,
prom. Nov. 21, 1977.)

Section 13. Effectivity. – This Act shall take effect upon its approval.

General Banking Law (R.A. No. 8791)

Section 3. Definition and Classification of Banks. -

3.1. "Banks" shall refer to entities engaged in the lending of funds obtained in the form of
deposits. (2a)
3.2. Banks shall be classified into:

(a) Universal banks;

(b) Commercial banks;

(c) Thrift banks, composed of: (i) Savings and mortgage banks, (ii) Stock savings and loan
associations, and (iii) Private development banks, as defined in the Republic Act No. 7906
(hereafter the "Thrift Banks Act");

(d) Rural banks, as defined in Republic Act No. 73S3 (hereafter the "Rural Banks Act");

(e) Cooperative banks, as defined in Republic Act No 6938 (hereafter the "Cooperative
Code");

(f) Islamic banks as defined in Republic Act No. 6848, otherwise known as the "Charter of Al
Amanah Islamic Investment Bank of the Philippines"; and

(g) Other classifications of banks as determined by the Monetary Board of the Bangko
Sentral ng Pilipinas. (6-Aa)

CHAPTER II
AUTHORITY OF THE BANGKO SENTRAL
Section 4. Supervisory Powers. The operations and activities of banks shall be subject to
supervision of the Bangko Sentral. "Supervision" shall include the following:
4.1. The issuance of rules of, conduct or the establishment standards of operation for
uniform application to all institutions or functions covered, taking into consideration the
distinctive character of the operations of institutions and the substantive similarities of
specific functions to which such rules, modes or standards are to be applied;
4.2 The conduct of examination to determine compliance with laws and regulations if the
circumstances so warrant as determined by the Monetary Board;
4.3 Overseeing to ascertain that laws and regulations are complied with;
4.4 Regular investigation which shall not be oftener than once a year from the last date of
examination to determine whether an institution is conducting its business on a safe or
sound basis: Provided, That the deficiencies/irregularities found by or discovered by an audit
shall be immediately addressed;
4.5 Inquiring into the solvency and liquidity of the institution (2-D); or
4.6 Enforcing prompt corrective action. (n)
The Bangko Sentral shall also have supervision over the operations of and exercise
regulatory powers over quasi-banks, trust entities and other financial institutions which
under special laws are subject to Bangko Sentral supervision. (2-Ca)
For the purposes of this Act, "quasi-banks" shall refer to entities engaged in the borrowing of
funds through the issuance, endorsement or assignment with recourse or acceptance of
deposit substitutes as defined in Section 95 of Republic Act No. 7653 (hereafter the "New
Central Bank Act") for purposes of re-lending or purchasing of receivables and other
obligations. (2-Da)
Section 5. Policy Direction; Ratios, Ceilings and Limitations. - The Bangko Sentral shall
provide policy direction in the areas of money, banking and credit. (n)
For this purpose, the Monetary Board may prescribe ratios, ceilings, limitations, or other
forms of regulation on the different types of accounts and practices of banks and quasi-
banks which shall, to the extent feasible, conform to internationally accepted standards,
including of the Bank for International Settlements (BIS). The Monetary Board may exempt
particular categories of transactions from such ratios, ceilings. and limitations, but not
limited to exceptional cases or to enable a bank or quasi-bank under rehabilitation or during
a merger or consolidation to continue in business, with safety to its creditors, depositors and
the general public. (2-Ca)
Section 6. Authority to Engage in Banking and Quasi-Banking Functions. - No person or
entity shall engage in banking operations or quasi-banking functions without authority from
the Bangko Sentral: .Provided, however, That an entity authorized by the Bangko Sentral to
perform universal or commercial banking functions shall likewise have the authority to
engage in quasi-banking functions.
The determination of whether a person or entity is performing banking or quasi-banking
functions without Bangko Sentral authority shall be decided by the Monetary Board. To
resolve such issue, the Monetary Board may; through the appropriate supervising and
examining department of the Bangko Sentral, examine, inspect or investigate the books and
records of such person or entity. Upon issuance of this authority, such person or entity may
commence to engage in banking operations or quasi-banking function and shall continue to
do so unless such authority is sooner surrendered, revoked, suspended or annulled by the
Bangko Sentral in accordance with this Act or other special laws.
The department head and the examiners of the appropriate supervising and examining
department are hereby authorized to administer oaths to any such person, employee, officer,
or director of any such entity and to compel the presentation or production of such books,
documents, papers or records that are reasonably necessary to ascertain the facts relative to
the true functions and operations of such person or entity. Failure or refusal to comply with
the required presentation or production of such books, documents, papers or records within
a reasonable time shall subject the persons responsible therefore to the penal sanctions
provided under the New Central Bank Act.
Persons or entities found to be performing banking or quasi-banking functions without
authority from the Bangko Sentral shall be subject to appropriate sanctions under the New
Central Bank Act and other applicable laws. (4a)
Section 7. Examination by the Bangko Sentral. - The Bangko Sentral shall, when examining a
bank, have the authority to examine an enterprise which is wholly or majority-owned or
controlled by the bank. (2-Ba)
CHAPTER III
ORGANIZATION, MANAGEMENT AND ADMINISTRATION OF BANKS. QUASI-BANKS AND
TRUST ENTITIES
Section 8. Organization. - The Monetary Board may authorize the organization of a bank or
quasi-bank subject to the following conditions:
8.1 That the entity is a stock corporation (7);
8.2 That its funds are obtained from the public, which shall mean twenty (20) or more persons
(2-Da); and
8.3 That the minimum capital requirements prescribed by the Monetary Board for each
category of banks are satisfied. (n)
No new commercial bank shall be established within three (3) years from the effectivity of
this Act. In the exercise of the authority granted herein, the Monetary Board shall take into
consideration their capability in terms of their financial resources and technical expertise and
integrity. The bank licensing process shall incorporate an assessment of the bank's
ownership structure, directors and senior management, its operating plan and internal
controls as well as its projected financial condition and capital base.
Section 9. Issuance of Stocks. - The Monetary Board may prescribe rules and regulations on
the types of stock a bank may issue, including the terms thereof and rights appurtenant
thereto to determine compliance with laws and regulations governing capital and equity
structure of banks; Provided, That banks shall issue par value stocks only.
Section 10. Treasury Stocks. - No bank shall purchase or acquire shares of its own capital
stock or accept its own shares as a security for a loan, except when authorized by the
Monetary Board: Provided, That in every case the stock so purchased or acquired shall,
within six (6) months from the time of its purchase or acquisition, be sold or disposed of at a
public or private sale. (24a)
Section 11. Foreign Stockholdings. - Foreign individuals and non-bank corporations may own
or control up to forty percent (40%) of the voting stock of a domestic bank. This rule shall
apply to Filipinos and domestic non-bank corporations. (12a; 12-Aa) The percentage of
foreign-owned voting stocks in a bank shall be determined by the citizenship of the individual
stockholders in that bank. The citizenship of the corporation which is a stockholder in a bank
shall follow the citizenship of the controlling stockholders of the corporation, irrespective of
the place of incorporation. (n)
Section 12. Stockholdings of Family Groups of Related Interests. - Stockholdings of
individuals related to each other within the fourth degree of consanguinity or affinity,
legitimate or common-law, shall be considered family groups or related interests and must be
fully disclosed in all transactions by such corporations or related groups of persons with the
bank. (12-Ba)
Section 13. Corporate Stockholdings. - Two or more corporations owned or controlled by the
same family group or same group of persons shall be considered related interests and must
be fully disclosed in all transactions by such corporations or related group of persons with
the bank. (12-Ba)
Section 14. Certificate of Authority to Register. - The Securities and Exchange Commission
shall no register the articles of incorporation of any bank, or any amendment thereto, unless
accompanied by a certificate of authority issued by the Monetary Board, under it seal. Such
certificate shall not be issued unless the Monetary Board is satisfied from the evidence
submitted to it:
14.1 That all requirements of existing laws and regulations to engage in the business for
which the applicant is proposed to be incorporated have been complied with;
14.2 That the public interest and economic conditions, both general and local, justify the
authorization; and
14.3 That the amount of capital, the financing, organization, direction and administration, as
well as the integrity and responsibility of the organizers and administrators reasonably
assure the safety of deposits and the public interest. (9)
The Securities and Exchange Commission shall not register the by-laws of any bank, or any
amendment thereto, unless accompanied by a certificate of authority from the Bangko
Sentral. (10)
Section 15. Board of Directors. - The provisions of the Corporation Code to the contrary
notwithstanding, there shall be at least five (5), and a maximum of fifteen (15) members of the
board or directors of a bank, two (2) of whom shall be independent directors. An
"independent director" shall mean a person other than an officer or employee of the bank, its
subsidiaries or affiliates or related interests. (n) Non-Filipino citizens may become members
of the board of directors of a bank to the extent of the foreign participation in the equity of
said bank. (Sec. 7, RA 7721) The meetings of the board of directors may be conducted
through modern technologies such as, but not limited to, teleconferencing and video-
conferencing. (n)
Section 16. Fit and Proper Rule. - To maintain the quality of bank management and afford
better protection to depositors and the public in general the Monetary Board shall prescribe,
pass upon and review the qualifications and disqualifications of individuals elected or
appointed bank directors or officers and disqualify those found unfit. After due notice to the
board of directors of the bank, the Monetary Board may disqualify, suspend or remove any
bank director or officer who commits or omits an act which render him unfit for the position.
In determining whether an individual is fit and proper to hold the position of a director or
officer of a bank, regard shall be given to his integrity, experience, education, training, and
competence. (9-Aa)
Section 17. Directors of Merged or Consolidated Banks. - In the case of a bank merger or
consolidation, the number of directors shall not exceed twenty-one (21). (l3a)
Section 18. Compensation and Other Benefits of Directors and Officers. To protect the finds
of depositors and creditors the Monetary Board may regulate the payment by the bark to its
directors and officers of compensation, allowance, fees, bonuses, stock options, profit
sharing and fringe benefits only in exceptional cases and when the circumstances warrant,
such as but not limited to the following:
18.1. When a bank is under comptrollership or conservatorship; or
18.2. When a bank is found by the Monetary Board to be conducting business in an unsafe or
unsound manner; or
18.3. When a bank is found by the Monetary Board to be in an unsatisfactory financial
condition. (n)
Section 19. Prohibition on Public Officials. - Except as otherwise provided in the Rural Banks
Act, no appointive or elective public official whether full-time or part-time shall at the same
time serve as officer of any private bank, save in cases where such service is incident to
financial assistance provided by the government or a government owned or controlled
corporation to the bank or unless otherwise provided under existing laws. (13)
Section 20. Bank Branches. - Universal or commercial banks may open branches or other
offices within or outside the Philippines upon prior approval of the Bangko Sentral.
Branching by all other banks shall be governed by pertinent laws.
A bank may, subject to prior approval of the Monetary Board, use any or all of its branches as
outlets for the presentation and/or sale of the financial products of its allied undertaking or of
its investment house units. A bank authorized to establish branches or other offices shall be
responsible for all business conducted in such branches and offices to the same extent and
in the same manner as though such business had all been conducted in the head office. A
bank and its branches and offices shall be treated as one unit. (6-B; 27)
Section 21. Banking Days and Hours. - Unless otherwise authorized by the Bangko Sentral in
the interest of the banking public, all banks including their branches and offices shall
transact business on all working days for at least six (6) hours a day. In addition, banks or
any of their branches or offices may open for business on Saturdays, Sundays or holidays
for at least three (3) hours a day: Provided, That banks which opt to open on days other than
working days shall report to the Bangko Sentral the additional days during which they or
their branches or offices shall transact business. For purposes of this Section, working days
shall mean Mondays to Fridays, except if such days are holidays. (6-Ca)
Section 22. Strikes and Lockouts. - The banking industry is hereby declared as indispensable
to the national interest and, notwithstanding the provisions of any law to the contrary, any
strike or lockout involving banks, if unsettled after seven (7) calendar days shall be reported
by the Bangko Sentral to the secretary of Labor who may assume jurisdiction over the
dispute or decide it or certify the sane to the National Labor Relations Commission for
compulsory arbitration. However, the President of the Philippines may at any time intervene
and assume jurisdiction over such labor dispute in order to settle or terminate the same. (6-
E)
CHAPTER IV
DEPOSITS. LOANS AND OTHER OPERATIONS
Article I
Operations Of Universal Banks
Section 23. Powers of a Universal Bank - A universal bank shall have the authority to
exercise, in addition to the powers authorized for a commercial bank in Section 29, the
powers of an investment house as provided in existing laws and the power to invest in non-
allied enterprises as provided in this Act. (21-B)
Section 24. Equity Investments of a Universal Bank. - A universal bank may, subject to the
conditions stated in the succeeding paragraph, invest in the equities of allied and non-allied
enterprises as may be determined by the Monetary Board. Allied enterprises may either be
financial or non-financial. Except as the Monetary Board may otherwise prescribe:
24.1. The total investment in equities of allied and non-allied enterprises shall not exceed fifty
percent (50%) of the net worth of the bank; and
24.2. The equity investment in any one enterprise, whether allied or non-allied, shall not
exceed twenty-five percent (25%) of the net worth of the bank.
As used in this Act, "net worth" shall mean the total of the unimpaired paid-in capital
including paid-in surplus, retained earnings and undivided profit, net of valuation reserves
and other adjustments as may be required by the Bangko Sentral.
The acquisition of such equity or equities is subject to the prior approval of the Monetary
Board which shall promulgate appropriate guidelines to govern such investments. (21-Ba)
Section 25. Equity Investments of a Universal Bank in Financial Allied Enterprises. - A
universal bank can own up to one hundred percent (100%) of the equity in a thrift bank, a
rural bank or a financial allied enterprise. A publicly-listed universal or commercial bank may
own up to one hundred percent (100%) of the voting stock of only one other universal or
commercial bank. (21-B; 21-Ca)
Section 26. Equity Investments of a Universal Bank in Non-Financial Allied Enterprises. - A
universal bank may own up to one hundred percent (100%) of the equity in a non-financial
allied enterprise. (21-Ba)
Section 27. Equity Investments of a Universal Bank in Non-Allied Enterprises. - The equity
investment of a universal bank, or of its wholly or majority-owned subsidiaries, in a single
non-allied enterprise shall not exceed thirty-five percent (35%) of the total equity in that
enterprise nor shall it exceed thirty-five percent (35%) of the voting stock in that enterprise.
(21-B)
Section 28. Equity Investments in Quasi-Banks. - To promote competitive conditions in
financial markets, the Monetary Board may further limit to forty percent (40%) equity
investments of universal banks in quasi-banks. This rule shall also apply in the case of
commercial banks. (12-E) Article II. Operations Of Commercial Banks
Section 29. Powers of a Commercial Bank. - A commercial bank shall have, in addition to the
general powers incident to corporations, all such powers as may be necessary to carry on
the business of commercial banking such as accepting drafts and issuing letters of credit;
discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences
of debt; accepting or creating demand deposits; receiving other types of deposits and
deposit substitutes; buying and selling foreign exchange and gold or silver bullion; acquiring
marketable bonds and other debt securities; and extending credit, subject to such rules as
the Monetary Board may promulgate. These rules may include the determination of bonds
and other debt securities eligible for investment, the maturities and aggregate amount of
such investment.
Section 30. Equity Investments of a Commercial Bank. - A commercial bank may, subject to
the conditions stated in the succeeding paragraphs, invest only in the equities of allied
enterprises as may be determined by the Monetary Board. Allied enterprises may either be
financial or non-financial. Except as the Monetary Board may otherwise prescribe:
30.1. The total investment in equities of allied enterprises shall not exceed thirty-five percent
(35%) of the net worth of the bark; and
30.2. The equity investment in any one enterprise shall not exceed twenty-five percent (25%)
of tile net worth of the bank. The acquisition of such equity or equities is subject to the prior
approval of the Monetary Board which shall promulgate appropriate guidelines to govern
such investment.(2lA-a; 21-Ca)
Section 31. Equity Investments of a Commercial Bank in Financial Allied Enterprises. - A
commercial bank may own up to one hundred percent (100%) of the equity of a thrift bank or
a rural bank. Where the equity investment of a commercial bank is in other financial allied
enterprises, including another commercial bank, such investment shall remain a minority
holding in that enterprise. (21-Aa; 21-Ca)
Section 32. Equity Investments of a Commercial Bank in Non-Financial Allied Enterprises. A
commercial bank may own up to one hundred percent (100%) of the equity in a non-financial
allied enterprise. (21-Aa) Article III. Provisions Applicable To All Banks, Quasi-Banks, And
Trust Entities
Section 33. Acceptance of Demand Deposits. - A bank other than a universal or commercial
bank cannot accept or create demand deposits except upon prior approval of, and subject to
such conditions and rules as may be prescribed by the Monetary Board. (72-Aa)
Section 34. Risk-Based Capital. - The Monetary Board shall prescribe the minimum ratio
which the net worth of a bank must bear to its total risk assets which may include contingent
accounts. For purposes of this Section, the Monetary Board may require such ratio be
determined on the basis of the net worth and risk assets of a bank and its subsidiaries,
financial or otherwise, as well as prescribe the composition and the manner of determining
the net worth and total risk assets of banks and their subsidiaries: Provided, That in the
exercise of this authority, the Monetary Board shall, to the extent feasible conform to
internationally accepted standards, including those of the Bank for International
Settlements(BIS), relating to risk-based capital requirements: Provided further, That it may
alter or suspend compliance with such ratio whenever necessary for a maximum period of
one (1) year: Provided, finally, That such ratio shall be applied uniformly to banks of the same
category. In case a bank does not comply with the prescribed minimum ratio, the Monetary
Board may limit or prohibit the distribution of net profits by such bank and may require that
part or all of the net profits be used to increase the capital accounts of the bank until the
minimum requirement has been met The Monetary Board may, furthermore, restrict or
prohibit the acquisition of major assets and the making of new investments by the bank, with
the exception of purchases of readily marketable evidences of indebtedness of the Republic
of the Philippines and of the Bangko Sentral and any other evidences of indebtedness or
obligations the servicing and repayment of which are fully guaranteed by the Republic of the
Philippines, until the minimum required capital ratio has been restored. In case of a bank
merger or consolidation, or when a bank is under rehabilitation under a program approved by
the Bangko Sentral, Monetary Board may temporarily relieve the surviving bank,
consolidated bank, or constituent bank or corporations under rehabilitation from full
compliance with the required capital ratio under such conditions as it may prescribe. Before
the effectivity of rules which the Monetary Board is authorized to prescribe under this
provision, Section 22 of the General Banking Act, as amended, Section 9 of the Thrift Banks
Act, and all pertinent rules issued pursuant thereto, shall continue to be in force. (22a)
Section 35. Limit on Loans, Credit Accommodations and Guarantees
35.1 Except as the Monetary Board may otherwise prescribe for reasons of national interest,
the total amount of loans, credit accommodations and guarantees as may be defined by the
Monetary Board that may be extended by a bank to any person, partnership, association,
corporation or other entity shall at no time exceed twenty percent (20%) of the net worth of
such bank. The basis for determining compliance with single borrower limit is the total credit
commitment of the bank to the borrower.
35.2. Unless the Monetary Board prescribes otherwise, the total amount of loans, credit
accommodations and guarantees prescribed in the preceding paragraph may be increased
by an additional ten percent (10%) of the net worth of such bank provided the additional
liabilities of any borrower are adequately secured by trust receipts, shipping documents,
warehouse receipts or other similar documents transferring or securing title covering readily
marketable, non-perishable goods which must be fully covered by insurance.
35.3 The above prescribed ceilings shall include (a) the direct liability of the maker or
acceptor of paper discounted with or sold to such bank and the liability of a general
endorser, drawer or guarantor who obtains a loan or other credit accommodation from or
discounts paper with or sells papers to such bank; (b) in the case of an individual who owns
or controls a majority interest in a corporation, partnership, association or any other entity,
the liabilities of said entities to such bank; (c) in the case of a corporation, all liabilities to
such bank of all subsidiaries in which such corporation owns or controls a majority interest;
and (d) in the case of a partnership, association or other entity, the liabilities of the members
thereof to such bank.
35.4. Even if a parent corporation, partnership, association, entity or an individual who owns
or controls a majority interest in such entities has no liability to the bank, the Monetary Board
may prescribe the combination of the liabilities of subsidiary corporations or members of the
partnership, association, entity or such individual under certain circumstances, including but
not limited to any of the following situations: (a) the parent corporation, partnership,
association, entity or individual guarantees the repayment of the liabilities; (b) the liabilities
were incurred for the accommodation of the parent corporation or another subsidiary or of
the partnership or association or entity or such individual; or (c) the subsidiaries though
separate entities operate merely as departments or divisions of a single entity.
35.5. For purposes of this Section, loans, other credit accommodations and guarantees shall
exclude: (a) loans and other credit accommodations secured by obligations of the Bangko
Sentral or of the Philippine Government: (b) loans and other credit accommodations fully
guaranteed by the government as to the payment of principal and interest; (c) loans and
other credit accommodations covered by assignment of deposits maintained in the lending
bank and held in the Philippines; (d) loans, credit accommodations and acceptances under
letters of credit to the extent covered by margin deposits; and (e) other loans or credit
accommodations which the Monetary Board may from time to time, specify as non-risk items.
35.6. Loans and other credit accommodations, deposits maintained with, and usual
guarantees by a bank to any other bank or non-bank entity, whether locally or abroad, shall
be subject to the limits as herein prescribed.
35.7. Certain types of contingent accounts of borrowers may be included among those
subject to these prescribed limits as may be determined by the Monetary Board.(23a)
Section 36. Restriction on Bank Exposure to Directors, Officers, Stockholders and Their
Related Interests. - No director or officer of any bank shall, directly or indirectly, for himself
or as the representative or agent of others, borrow from such bank nor shall he become a
guarantor, endorser or surety for loans from such bank to others, or in any manner be an
obligor or incur any contractual liability to the bank except with the written approval of the
majority of all the directors of the bank, excluding the director concerned: Provided, That
such written approval shall not be required for loans, other credit accommodations and
advances granted to officers under a fringe benefit plan approved by the Bangko Sentral. The
required approval shall be entered upon the records of the bank and a copy of such entry
shall be transmitted forthwith to the appropriate supervising and examining department of
the Bangko Sentral. Dealings of a bank with any of its directors, officers or stockholders and
their related interests shall be upon terms not less favorable to the bank than those offered to
others. After due notice to the board of directors of the bank, the office of any bank director
or officer who violates the provisions of this Section may be declared vacant and the director
or officer shall be subject to the penal provisions of the New Central Bank Act. The Monetary
Board may regulate the amount of loans, credit accommodations and guarantees that may be
extended, directly or indirectly, by a bank to its directors, officers, stockholders and their
related interests, as well as investments of such bank in enterprises owned or controlled by
said directors, officers, stockholders and their related interests. However, the outstanding
loans, credit accommodations and guarantees which a bank may extend to each of its
stockholders, directors, or officers and their related interests, shall be limited to an amount
equivalent to their respective unencumbered deposits and book value of their paid-in capital
contribution in the bank: Provided, however, That loans, credit accommodations and
guarantees secured by assets considered as non-risk by the Monetary Board shall be
excluded from such limit: Provided, further, That loans, credit accommodations and
advances to officers in the form of fringe benefits granted in accordance with rules as may be
prescribed by the Monetary Board shall not be subject to the individual limit. The Monetary
Board shall define the term "related interests." The limit on loans, credit accommodations
and guarantees prescribed herein shall not apply to loans, credit accommodations and
guarantees extended by a cooperative bank to its cooperative shareholders. (83a)
Section 37. Loans and Other Credit Accommodations Against Real Estate. - Except as the
Monetary Board may otherwise prescribe, loans and other credit accommodations against
real estate shall not exceed seventy-five percent (75%) of the appraised value of the
respective real estate security, plus sixty percent (60%) of the appraised value of the insured
improvements, and such loans may be made to the owner of the real estate or to his
assignees. (78a)
Section 38. Loans And Other Credit Accommodations on Security of Chattels and Intangible
Properties. - Except as the Monetary Board may otherwise prescribe, loans and other credit
accommodations on security of chattels and intangible properties such as, but not limited to,
patents, trademarks, trade names, and copyrights shall not exceed seventy-five percent
(75%) of the appraised value of the security, an such loans and other credit accommodation
may be made to the title-holder of the chattels and intangible properties or his assignees.
(78a)
Section 39. Grant and Purpose of Loans and Other Credit Accommodations. - A bank shall
grant loans and other credit accommodations only in amounts and for the periods of time
essential for the effective completion of the operations to be financed. Such grant of loans
and other credit accommodations shall be consistent with safe and sound banking practices.
(75a) The purpose of all loans and other credit accommodations shall be stated in the
application and in the contract between the bank and the borrower. If the bank finds that the
proceeds of the loan or other credit accommodation have been employed, without its
approval, for purposes other than those agreed upon with the bank, it shall have the right to
terminate the loan or other credit accommodation and demand immediate repayment of the
obligation. (77)
Section 40. Requirement for Grant Of Loans or 0ther Credit Accommodations. - Before
granting a loan or other credit accommodation, a bank must ascertain that the debtor is
capable of fulfilling his commitments to the bank. Toward this end, a bank may demand from
its credit applicants a statement of their assets and liabilities and of their income and
expenditures and such information as may be prescribed by law or by rules and regulations
of the Monetary Board to enable the bank to properly evaluate the credit application which
includes the corresponding financial statements submitted for taxation purposes to the
Bureau of Internal Revenue. Should such statements prove to be false or incorrect in any
material detail, the bank may terminate any loan or other credit accommodation granted on
the basis of said statements and shall have the right to demand immediate repayment or
liquidation of the obligation. In formulating rules and regulations under this Section, the
Monetary Board shall recognize the peculiar characteristics of micro financing, such as cash
flow-based lending to the basic sectors that are not covered by traditional collateral. (76a)
Section 41. Unsecured Loans or Other Credit Accommodations. - The Monetary Board is
hereby authorized to issue such regulations as it may deem necessary with respect to
unsecured loans or other credit accommodations that may be granted by banks. (n)
Section 42. Other Security Requirements for Bank Credits. - The Monetary Board may, by
regulation, prescribe further security requirements to which the various types of bank credits
shall be subject, and, in accordance with the authority granted to it in Section 106 of the New
Central Bank Act, the Board may by regulation, reduce the maximum ratios established in
Sections 36 and 37 of this Act, or, in special cases, increase the maximum ratios established
therein. (78)
Section 43. Authority to Prescribe Terms and Conditions of Loans and Other Credit
Accommodations. - The Monetary Board, may, similarly in accordance with the authority
granted to it in Section 106 of the New Central Bank Act, and taking into account the
requirements of the economy for the effective utilization of long-term funds, prescribe the
maturities, as well as related terms and conditions for various types of bank loans and other
credit accommodations. Any change by the Board in the maximum maturities, as well as
related terms and conditions for various types of bank loans and other credit
accommodations. Any change by the Board in the maximum maturities shall apply only to
loans and other credit accommodations made after the date of such action. The Monetary
Board shall regulate the interest imposed on micro finance borrowers by lending investors
and similar lenders such as, but not limited to, the unconscionable rates of interest collected
on salary loans and similar credit accommodations. (78a)
Section 44. Amortization on Loans and Other Credit Accommodations. - The amortization
schedule of bank loans and other credit accommodations shall be adapted to the nature of
the operations to be financed. In case of loans and other credit accommodations with
maturities of more than five (5) years, provisions must be made for periodic amortization
payments, but such payments must be made at least annually: Provided, however, That when
the borrowed funds are to be used for purposes which do not initially produce revenues
adequate for regular amortization payments therefrom, the bank may permit the initial
amortization payment to be deferred until such time as said revenues are sufficient for such
purpose, but in no case shall the initial amortization date be later than five (5) years from the
date on which the loan or other credit accommodation is granted. (79a) In case of loans and
other credit accommodations to micro finance sectors, the schedule of loan amortization
shall take into consideration the projected cash flow of the borrower and adopt this into the
terms and conditions formulated by banks. (n)
Section 45. Prepayment of Loans and Other Credit Accommodations. - A borrower may at any
time prior to the agreed maturity date prepay, in whole or in part, the unpaid balance of any
bank loan and other credit accommodation, subject to such reasonable terms and conditions
as may be agreed upon between the bank and its borrower. (80a)
Section 46. Development Assistance Incentives. - The Bangko Sentral shall provide
incentives to banks which, without government guarantee, extend loans to finance
educational institutions cooperatives, hospitals and other medical services, socialized or
low-cost housing, local government units and other activities with social content. (n)
Section 47. Foreclosure of Real Estate Mortgage. - In the event of foreclosure, whether
judicially or extra-judicially, of any mortgage on real estate which is security for any loan or
other credit accommodation granted, the mortgagor or debtor whose real property has been
sold for the full or partial payment of his obligation shall have the right within one year after
the sale of the real estate, to redeem the property by paying the amount due under the
mortgage deed, with interest thereon at rate specified in the mortgage, and all the costs and
expenses incurred by the bank or institution from the sale and custody of said property less
the income derived therefrom. However, the purchaser at the auction sale concerned whether
in a judicial or extra-judicial foreclosure shall have the right to enter upon and take
possession of such property immediately after the date of the confirmation of the auction
sale and administer the same in accordance with law. Any petition in court to enjoin or
restrain the conduct of foreclosure proceedings instituted pursuant to this provision shall be
given due course only upon the filing by the petitioner of a 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 the restraint of the foreclosure proceeding. Notwithstanding Act 3135, juridical persons
whose property is being sold pursuant to an extrajudicial foreclosure, shall have the right to
redeem the property in accordance with this provision until, but not after, the registration of
the certificate of foreclosure sale with the applicable Register of Deeds which in no case shall
be more than three (3) months after foreclosure, whichever is earlier. Owners of property that
has been sold in a foreclosure sale prior to the effectivity of this Act shall retain their
redemption rights until their expiration. (78a)
Section 48. Renewal or Extension of Loans and Other Credit Accommodations. - The
Monetary Board may, by regulation, prescribe the conditions and limitations under which a
bank may grant extensions or renewals of its loans and other credit accommodations. (81)
Section 49. Provisions for Losses and Write-Offs. - All debts due to any bank on which
interest is past due and unpaid for such period as may be determined by the Monetary Board,
unless the same are welt-secured and in the process of collection shall be considered bad
debts within the meaning of this Section. The Monetary Board may fix, by regulation or by
order in a specific case, the amount of reserves for bad debts or doubtful accounts or other
contingencies. Writing off of loans, other credit accommodations, advances and other assets
shall be subject to regulations issued by the Monetary Board. (84a)
Section 50. Major Investments. - For the purpose or enhancing bank supervision, the
Monetary Board shall establish criteria for reviewing major acquisitions of investments by a
bank including corporate affiliations or structures that may expose the bank to undue risks
or in any way hinder effective supervision.
Section 51. Ceiling on Investments in Certain Assets. - Any bank may acquire real estate as
shall be necessary for its own use in the conduct of its business: Provided, however, That
the total investment in such real estate and improvements thereof including bank equipment,
shall not exceed fifty percent (50%) of combined capital accounts: Provided, further, That the
equity investment of a bank in another corporation engaged primarily in real estate shall be
considered as part of the bank's total investment in real estate, unless otherwise provided by
the Monetary Board. (25a)
Section 52. Acquisition of Real Estate by Way of Satisfaction of Claims. - Notwithstanding the
limitations of the preceding Section, a bank may acquire, hold or convey real property under
the following circumstances:
52.1. Such as shall be mortgaged to it in good faith by way of security for debts;
52.2. Such as shall be conveyed to it in satisfaction of debts previously contracted in the
course of its dealings, or
52.3. Such as it shall purchase at sales under judgments, decrees, mortgages, or trust deeds
held by it and such as it shall purchase to secure debts due it.
Any real property acquired or held under the circumstances enumerated in the above
paragraph shall be disposed of by the bank within a period of five (5) years or as may be
prescribed by the Monetary Board: Provided, however, That the bank may, after said period,
continue to hold the property for its own use, subject to the limitations of the preceding
Section. (25a)
Section 53. Other Banking Services. - In addition to the operations specifically 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 financial 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;
53.4 Upon prior approval of the Monetary Board, act as managing agent, adviser, consultant
or administrator of investment management/advisory/consultancy accounts; and
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-bark notifies 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)
Section 54. Prohibition to Act as Insurer. - A bank shall not directly engage in insurance
business as the insurer. (73)
Section 55. Prohibited Transactions.
55.1. No director, officer, employee, or agent of any bank shall -

(a) Make false entries in any bank report or statement or participate in any fraudulent
transaction, thereby affecting the financial interest of, or causing damage to, the bank or any
person;

(b) Without order of a court of competent jurisdiction, disclose to any unauthorized person
any information relative to the funds or properties in the custody of the bank belonging to
private individuals, corporations, or any other entity: Provided, That with respect to bank
deposits, the provisions of existing laws shall prevail;

(c) Accept gifts, fees, or commissions or any other form of remuneration in connection with
the approval of a loan or other credit accommodation from said bank;

(d) Overvalue or aid in overvaluing any security for the purpose of influencing in any way the
actions of the bank or any bank; or

(e) Outsource inherent banking functions.

55.2. No borrower of a bank shall -

(a) Fraudulently overvalue property offered as security for a loan or other credit
accommodation from the bank;

(b) Furnish false or make misrepresentation or suppression of material facts for the purpose
of obtaining, renewing, or increasing a loan or other credit accommodation or extending the
period thereof;

(c) Attempt to defraud the said bank in the event of a court action to recover a loan or other
credit accommodation; or

(d) Offer any director, officer, employee or agent of a bank any gift, fee, commission, or any
other form of compensation in order to influence such persons into approving a loan or other
credit accommodation application.

55.3 No examiner, officer or employee of the Bangko Sentral or of any department, bureau,
office, branch or agency of the Government that is assigned to supervise, examine, assist or
render technical assistance to any bank shall commit any of the acts enumerated in this
Section or aid in the commission of the same. (87-Aa)
The making of false reports or misrepresentation or suppression of material facts by
personnel of the Bangko Sental ng Pilipinas shall be subject to the administrative and
criminal sanctions provided under the New Central Bank Act.
55.4. Consistent with the provisions of Republic Act No. 1405, otherwise known as the Banks
Secrecy Law, no bank shall employ casual or non regular personnel or too lengthy
probationary personnel in the conduct of its business involving bank deposits.
Section 56. Conducting Business in an Unsafe or Unsound Manner - In determining whether a
particular act or omission, which is not otherwise prohibited by any law, rule or regulation
affecting banks, quasi-banks or trust entities, may be deemed as conducting business in an
unsafe or unsound manner for purposes of this Section, the Monetary Board shall consider
any of the following circumstances:
56.1 The act or omission has resulted or may result in material loss or damage, or abnormal
risk or danger to the safety, stability, liquidity or solvency of the institution;
56.2 The act or omission has resulted or may result in material loss or damage or abnormal
risk to the institution's depositors, creditors, investors, stockholders or to the Bangko
Sentral or to the public in general;
56.3 The act or omission has caused any undue injury, or has given any unwarranted
benefits, advantage or preference to the bank or any party in the discharge by the director or
officer of his duties and responsibilities through manifest partiality, evident bad faith or
gross inexcusable negligence; or
56.4 The act or omission involves entering into any contract or transaction manifestly and
grossly disadvantageous to the bank, quasi-bank or trust entity, whether or not the director
or officer profited or will profit thereby.
Whenever a bank, quasi-bank or trust entity persists in conducting its business in an unsafe
or unsound manner, the Monetary Board may, without prejudice to the administrative
sanctions provided in Section 37 of the New Central Bank Act, take action under Section 30
of the same Act and/or immediately exclude the erring bank from clearing, the provisions of
law to the contrary notwithstanding. (n)
Section 57. Prohibition on Dividend Declaration. - No bank or quasi-bank shall declare
dividends, if at the time of declaration:
57.1 Its clearing account with the Bangko Sentral is overdrawn; or
57.2 It is deficient in the required liquidity floor for government deposits for five (5) or more
consecutive days, or
57.3 It does not comply with the liquidity standards/ratios prescribed by the Bangko Sentral
for purposes of determining funds available for dividend declaration; or
57.4 It has committed a major violation as may be determined by the Bangko Sentral (84a)
Section 58. Independent Auditor. - The Monetary Board may require a bank, quasi-bank or
trust entity to engage the services of an independent auditor to be chosen by the bank,
quasi-bank or trust entity concerned from a list of certified public accountants acceptable to
the Monetary Board. The term of the engagement shall be as prescribed by the Monetary
Board which may either be on a continuing basis where the auditor shall act as resident
examiner, or on the basis of special engagements; but in any case, the independent auditor
shall be responsible to the bank's, quasi-bank's or trust entity's board of directors. A copy of
the report shall be furnished to the Monetary Board. The Monetary Board may also direct the
board of directors of a bank, quasi-bank, trusty entity and/or the individual members thereof;
to conduct, either personally or by a committee created by the board, an annual balance
sheet audit of the bank, quasi-bank or trust entity to review the internal audit and control
system of the bank, quasi-bank or trust entity and to submit a report of such audit. (6-Da)
Section 59. Authority to Regulate Electronic Transactions. - The Bangko Sentral shall have
full authority to regulate the use of electronic devices, such as computers, and processes for
recording, storing and transmitting information or data in connection with the operations of a
bank; quasi-bank or trust entity, including the delivery of services and products to customers
by such entity. (n)
Section 60. Financial Statements. - Every bank, quasi-bank or trust entity shall submit to the
appropriate supervising and examining department of the Bangko Sentral financial
statements in such form and frequency as may be prescribed by the Bangko Sentral. Such
statements, which shall be as of a specific date designated by the Bangko Sentral, shall show
thee actual financial condition of the institution submitting the statement, and of its
branches, offices, subsidiaries and affiliates, including the results of its operations, and shall
contain such information as may be required in Bangko Sentral regulations. (n)
Section 61. Publication of Financial Statements. - Every bank, quasi-bank or trust entity, shall
publish a statement of its financial condition, including those of its subsidiaries and
affiliates, in such terms understandable to the layman and in such frequency as may be
prescribed Bangko Sentral, in English or Filipino, at least once every quarter in a newspaper
of general circulation in the city or province where the principal office, in the case of a
domestic institution or the principal branch or office in the case of a foreign bank, is located,
but if no newspaper is published in the same province, then in a newspaper published in
Metro Manila or in the nearest city or province. The Bangko Sentral may by regulation
prescribe the newspaper where the statements prescribed herein shall be published. The
Monetary Board may allow the posting of the financial statements of a bank, quasi-bank or
trust entity in public places it may determine, lieu of the publication required in the preceding
paragraph, when warranted by the circumstances. Additionally, banks shall make available to
the public in such form and manner as the Bangko Sentral may prescribe the complete set of
its audited financial statements as well as such other relevant information including those on
enterprises majority-owned or controlled by the bank, that will inform the public of the true
financial condition of a bank as of any given time. In periods of national and/or local
emergency or of imminent panic which directly threaten monetary and banking stability, the
Monetary Board, by a vote of at least five (5) of its members, in special cases and upon
application of the bank, quasi-bank or trust entity, may allow such bank, quasi-bank or trust
entity to defer for a stated period of time the publication of the statement of financial
condition required herein. (n)
Section 62. Publication of Capital Stock. - A bank, quasi-bank or trust entity incorporated
under the laws of the Philippines shall not publish the amount of its authorized or subscribed
capital stock without indicating at the same time and with equal prominence, the amount of
its capital actually paid up. No branch of any foreign bank doing business in the Philippines
shall in any way announce the amount of the capital and surplus of its head office, or of the
bank in its entirety without indicating at the same time and with equal prominence the
amount of the capital, if any, definitely assigned to such branch, such fact shall be stated in,
and shall form part of the publication. (82)
Section 63. Settlement of Disputes. - The provisions of any law to the contrary
notwithstanding, the Bangko Sentral shall be consulted by other government agencies or
instrumentalities in actions or proceedings initiated by or brought before them involving
controversies in banks, quasi-banks or trust entities arising out of and involving relations
between and among their directors, officers or stockholders, as well as disputes between any
or all of them and the bank, quasi-bank or trust entity of which they are directors, officers or
stockholders. (n)
Section 64. Unauthorized Advertisement or Business Representation. - No person,
association, or corporation unless duly authorized to engage in the business of a bank,
quasi-bank, trust entity, or savings and loan association as defined in this Act, or other
banking laws, shall advertise or hold itself out as being engaged in the business of such
bank, quasi-bank, trust entity, or association, or use in connection with its business title, the
word or words "bank", "banking", "banker", "quasi-bank", "quasi-banking", "quasi-banker",
"savings and loan association", "trust corporation", "trust company" or words of similar
import or transact in any manner the business of any such bank, corporation or association.
(6)
Section 65. Service Fees. - The Bangko Sentral may charge equitable rates, commissions or
fees, as may be prescribed by the Monetary Board for supervision, examination and other
services which it renders under this Act. (n)
Section 66. Penalty for Violation of this Act. - Unless otherwise herein provided, the violation
of any of the provisions of this Act shall be subject to Sections 34, 35, 36 and 37 of the New
Central Bank Act. If the offender is a director or officer of a bank, quasi-bank or trust entity,
the Monetary Board may also suspend or remove such director or officer. If the violation is
committed by a corporation, such corporation may be dissolved by quo warranto
proceedings instituted by the Solicitor General. (87)
CHAPTER V
PLACEMENT UNDER CONSERVATORSHIP
Section 67. Conservatorship. - The grounds and procedures for placing a bank under
conservatorship, as well as, the powers and duties of the conservator appointed for the bank
shall be governed by the provisions of Section 29 and the last two paragraphs of Section 30
of the New Central Bank Act: Provided, That this Section shall also apply to conservatorship
proceedings of quasi-banks. (n)
CHAPTER VI
CESSATION OF BANKING BUSINESS
Section 68. Voluntary Liquidation. - In case of voluntary liquidation of any bank organized
under the laws of the Philippines, or of any branch or office in the Philippines of a foreign
bank, written notice of such liquidation shall be sent to the Monetary Board before 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. (86)
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 files
with the clerk or judge of the court in which the action is pending a bond, executed in favor of
the Bangko Sentral, in an amount to be fixed by the court. This Section shall also apply to the
extent possible to the receivership and liquidation proceedings of quasi-banks. (n)
Section 70. Penalty for Transactions After a Bank Becomes Insolvent. - Any director or officer
of any bank declared insolvent or placed under receivership by the Monetary Board who
refuses to turn over the bank's records and assets to the designated receivers, or who
tampers with banks records, or who appropriates for himself for another party or destroys or
causes the misappropriation and destruction of the bank's assets, or who receives or permits
or causes to be received in said bank any deposit, collection of loans and/or receivables, or
who pays out or permits or causes to be transferred any securities or property of said bank
shall be subject to the penal provisions of the New Central Bank Act. (85a)
CHAPTER VII
LAWS GOVERNING OTHER TYPES OF BANKS
Section 71. Other Banking Laws. - The organization, the ownership and capital requirements,
powers, supervision and general conduct of business of thrift banks, rural banks and
cooperative banks shall be governed by the provisions of the Thrift Banks Act, the Rural
Banks Act, and the Cooperative Code, respectively. The organization, ownership and capital
requirements, powers, supervision and general conduct of business of Islamic banks shall be
governed by special laws. The provisions of this Act, however, insofar as they are not in
conflict with the provisions of the Thrift Banks Act, the Rural Banks Act, and the Cooperative
Code shall likewise apply to thrift banks, rural banks, and cooperative banks, respectively.
However, for purposes of prescribing the minimum ratio which the net worth of a thrift bank
must bear to its total risk assets, the provisions of Section 33 of this Act shall govern. (n)
CHAPTER VIII
FOREIGN BANKS
Section 72. Transacting Business in the Philippines. - The entry of foreign banks in the
Philippines through the establishment of branches shall be governed by the provisions of the
Foreign Banks Liberalization Act. The conduct of offshore banking business in the
Philippines shall be governed by the provisions of the Presidential Decree No. 1034,
otherwise known as the "Offshore Banking System Decree." (14a)
Section 73. Acquisition of Voting Stock in a Domestic Bank. - Within seven (7) years from the
effectivity of this act and subject to guidelines issued pursuant to the Foreign Banks
Liberalization Act, the Monetary Board may authorize a foreign bank to acquire up to one
hundred percent (100%) of the voting stock of only one (1) bank organized under the laws of
the Republic of the Philippines. Within the same period, the Monetary Board may authorize
any foreign bank, which prior to the effectivity of this Act availed itself of the privilege to
acquire up to sixty percent (60%) of the voting stock of a bank under the Foreign Banks
Liberalization Act and the Thrift Banks Act, to further acquire voting shares such bank to the
extent necessary for it to own one hundred percent (100%) of the voting stock thereof. In the
exercise of the authority, the Monetary Board shall adopt measures as may be necessary to
ensure that at all times the control of seventy percent (70%) of the resources or assets of the
entire banking system is held by banks which are at least majority-owned by Filipinos. Any
right, privilege or incentive granted to a foreign bank under this Section shall be equally
enjoyed by and extended under the same conditions to banks organized under the laws of
the Republic of the Philippines. (Secs. 2 and 3, RA 7721
Section 74. Local Branches of Foreign Banks. - In the case of a foreign bank which has more
than one (1) branch in the Philippines, all such branches shall be treated as one (1) unit for
the purpose of this Act, and all references to the Philippine branches of foreign banks shall
be held to refer to such units. (68)
Section 75. Head Office Guarantee. - In order to provide effective protection of the interests of
the depositors and other creditors of Philippine branches of a foreign bank, the head office of
such branches shall fully guarantee the prompt payment of all liabilities of its Philippine
branch. (69) Residents and citizens of the Philippines who are creditors of a branch in the
Philippines of a foreign bank shall have preferential rights to the assets of such branch in
accordance with the existing laws. (19)
Section 76. Summons and Legal Process. - Summons and legal process served upon the
Philippine agent or head of any foreign bank designated to accept service thereof shall give
jurisdiction to the courts over such bank, and service of notices on such agent or head shall
be as binding upon the bank which he represents as if made upon the bank itself. Should the
authority of such agent or head to accept service of summons and legal processes for the
bank or notice to it be revoked, or should such agent or head become mentally incompetent
or otherwise unable to accept service while exercising such authority, it shall be the duty of
the bank to name and designate promptly another agent or head upon whom service of
summons and processes in legal proceedings against the bank and of notices affecting the
bank may be made, and to file with the Securities and Exchange Commission a duly
authenticated nomination of such agent. In the absence of the agent or head or should there
be no person authorized by the bank upon whom service of summons, processes and all
legal notices may be made, service of summons, processes and legal notices may be made
upon the Bangko Sentral Deputy Governor In-Charge of the supervising and examining
departments and such service shall be as effective as if made upon the bank or its duly
authorized agent or head. In case of service for the bank upon the Bangko Sentral Deputy
Governor In-charge of the supervising and examining departments, the said deputy Governor
shill register and transmit by mail to the president or the secretary of the bank at its head or
principal office a copy, duly certified by him, of the summons, process, or notice. The
sending of such copy of the summons, process, or notice shall be a necessary part of the
services and shall complete the service. The registry receipt of mailing shall be prima facie
evidence of the transmission of the summons, process or notice. All costs necessarily
incurred by the said Deputy Governor for the making and mailing and sending of a copy of
the summons, process, or notice to the president or the secretary of the bank at its head or
principal office shall be paid in advance by the party at whose instance the service is made.
(17)
Section 77. Laws Applicable. - In all matters not specifically covered by special provisions
applicable only to a foreign bank or its branches and other offices in the Philippines any
foreign bank licensed to do business in the Philippines shall be bound by the provisions of
this Act, all other laws, rules and regulations applicable to banks organized under the laws of
the Philippines of the same class, except those that provide for the creation, formation,
organization or dissolution of corporations or for the fixing of the relations, liabilities,
responsibilities, or duties of stockholders, members, directors or officers of corporations to
each other or to the corporation. (18)
Section 78. Revocation of License of a Foreign Bank - The Monetary Board may revoke the
license to transact business in the Philippines of, any foreign bank, if it finds that the foreign
bank is insolvent or in imminent danger thereof or that its continuance in business will
involve probable loss to those transacting business with it. After the revocation of its license,
it shall be unlawful for any such foreign banks to transact business in the Philippines unless
its license is renewed or reissued. After the revocation of such license, the Bangko Sentral
shall take the necessary action to protect the creditors of such foreign bank and the public.
The provisions of the New Central Bank Act on sanctions and penalties shall likewise be
applicable. (16)
CHAPTER IX
TRUST OPERATIONS
Section 79. Authority to Engage in Trust Business. - Only a stock corporation or a person
duly authorized by the Monetary Board to engage in trust business shall act as a trustee or
administer any trust or hold property in trust or on deposit for the use, benefit, or behoof of
others. For purposes of this Act, such a corporation shall be referred to as a trust entity.
(56a; 57a)
Section 80. Conduct of Trust Business. - A trust entity shall administer the funds or property
under its custody with the diligence that a prudent man would exercise in the conduct of an
enterprise of a like character and with similar aims. No trust entity shall, for the account of
the trustor or the beneficiary of the trust, purchase or acquire property from, or sell, transfer,
assign, or lend money or property to, or purchase debt instruments of, any of the
departments, directors, officers, stockholders, or employees of the trust entity, relatives
within the first degree of consanguinity or affinity, or the related interests, of such directors,
officers and stockholders, unless the transaction is specifically authorized by the trustor and
the relationship of the trustee and the other party involved in the transaction is fully
disclosed to the trustor of beneficiary of the trust prior to the transaction. The Monetary
Board shall promulgate such rules and regulations as may be necessary to prevent
circumvention of this prohibition or the evasion of the responsibility herein imposed on a
trust entity. (56)
Section 81. Registration of Articles of Incorporation and By-Laws of a Trust Entity. - The
Securities and Exchange Commission shall not register the articles of incorporation and by-
laws or any amendment thereto, of any trust entity, unless accompanied by a certificate of
authority issued by the Bangko Sentral. (n)
Section 82. Minimum Capitalization. - A trust entity, before it can engage in trust or other
fiduciary business, shall comply with the minimum paid-in capital requirement which will be
determined by the Monetary Board. (n)
Section 83. Powers of a Trust Entity. - A trust entity, in addition to the general powers
incident to corporations, shall have the power to:
83.1 Act as trustee on any mortgage or bond issued by any municipality, corporation, or any
body politic and to accept and execute any trust consistent with law;
83.2 Act under the order or appointment of any court as guardian, receiver, trustee, or
depositary of the estate of any minor or other incompetent person, and as receiver and
depositary of any moneys paid into court by parties to any legal proceedings and of property
of any kind which may be brought under the jurisdiction of the court;
83.3. Act as the executor of any will when it is named the executor thereof;
83.4 Act as administrator of the estate of any deceased person, with the will annexed, or as
administrator of the estate of any deceased person when there is no will;
83.5. Accept and execute any trust for the holding, management, and administration of any
estate, real or personal, and the rents, issues and profits thereof; and
83.6. Establish and manage common trust funds, subject to such rules and regulations as
may be prescribed by the Monetary Board.
Section 84. Deposit for the Faithful Performance of Trust Duties. - Before transacting trust
business, every trust entity shall deposit with the Bangko Sentral, as security for the faithful
performance of its trust duties, cash or securities approved by the Monetary Board in an
amount equal to or not less than Five hundred thousand pesos (P500,000.00) or such higher
amount as may fixed by the Monetary Board: Provided, however, That the Monetary Board
shall require every trust entity to increase the amount of its cash or securities on deposit
with the Bangko Sentral in accordance with the provisions of this paragraph. Should the
capital and surplus fall below said amount, the Monetary Board shall have the same authority
as that granted to it under the provisions of the fifth paragraph of Section 34 of this Act. A
trust entity so long as it shall continue to be solvent and comply with laws or regulations
shall have the right to collect the interest earned on such securities deposited with the
Bangko Sentral and, from time to time, with the approval of the Bangko Sentral, to exchange
the securities for others. If the trust entity fails to comply with any law or regulation, the
Bangko Sentral shall retain such interest on the securities deposited with it for the benefit of
rightful claimants. Al claims rising out of the trust business of a trust entity shall have
priority over all other claims as regards the cash or securities deposited as above provided.
The Monetary Board may not permit the cash or securities deposited in accordance with the
provisions of this Section to be reduced below the prescribed minimum amount until the
depositing entity shall discontinue its trust business and shall satisfy the Monetary Board
that it has complied with all its obligations in connection with such business. (65a)
Section 85. Bond of Certain Persons for the Faithful Performance of Duties. - Before an
executor, administrator, guardian, trustee, receiver or depositary appointed by the court
enters upon the execution of his duties, he shall, upon order of the court, file a bond in such
sum as the court may direct. Upon the application of any executor, administrator, guardian,
trustee, receiver, depositary or any other person in interest, the court may, after notice and
hearing, order that the subject matter of the trust or any part, thereof be deposited with a
trust entity. Upon presentation of proof to the court that the subject matter of the trust has
been deposited with a trust entity. Upon presentation of proof to the court that the subject
matter of the trust has been deposited with a trust entity, the court may order that the bond
given by such persons for the faithful performance of their duties be reduced to such sums
as it may deem proper: Provided, however, That the reduced bond shall be sufficient to
secure adequately the proper administration and care of any property remaining under the
control of such persons and the proper accounting for such property. Property deposited
with any trust entity in conformity with this Section shall be held by such entity under the
orders and direction of the court. (59)
Section 86. Exemption of Trust Entity from Bond Requirement. - No bond or other security
shall be required by the court from a trust entry for the faithful performance of its duties as
court-appointed trustee, executor, administrator, guardian, receiver, or depositary. However,
the court may, upon proper application with it showing special cause therefore, require the
trust entity to post a bond or other security for the protection of funds or property confided to
such entity. (59)
Section 87. Separation of Trust Business from General Business. - The trust business and all
funds, properties or securities received by any trust entity as executor, administrator,
guardian, trustee, receiver, or depositary shall be kept separate and distinct from the general
business including all other funds, properties, and assets of such trust entity. The accounts
of all such funds, properties, or securities shall likewise be kept separate and distinct from
the accounts of the general business of the trust entity. (61)
Section 88. Investment Limitations of a Trust Entity. - Unless otherwise directed by the
instrument creating the trust, the lending and investment of funds and other assets acquired
by a trust entity as executor, administrator, guardian, trustee, receiver or depositary of the
estate of any minor or other incompetent person shall be limited to loans or investments as
may be prescribed by law, the Monetary Board or any court of competent jurisdiction. (63a)
Section 89. Real Estate Acquired by a Trust Entity. - Unless otherwise specifically directed by
the trustor or the nature of the trust, real estate acquired by a trust entity in whatever manner
and for whatever purposes, shall likewise be governed by the relevant provisions of Section
52 of this Act. (64a)
Section 90. Investment of Non-Trust Funds. - The investment of funds other than trust funds
of a trust entity which is a bank, financing company or an investment house shall be
governed by the relevant provisions of this Act and other applicable laws. (64)
Section 91. Sanctions and Penalties. - A trust entity or any of its officers and directors found
to have willfully violated any pertinent provisions of this Act, shall be subject to the
sanctions and penalties provided tinder Section 66 of this Act as well as Sections 36 and 37
of the New Central Bank Act.
Section 92. Exemption of Trust Assets from Claims. - No assets held by a trust entity in its
capacity as trustee shall be subject to any claims other than those of the parties interested in
the specific trusts. (65)
Section 93. Establishment of Branches of a Trust Entity. - The ordinary business of a trust
entity shall be transacted at the place of business specified in its articles of incorporation.
Such trust entity may, with prior approval of the Monetary Board, establish branches in the
Philippines and the said entity shall be responsible for all business conducted in such
branches to the same extent and in the same manner as though such business had all been
conducted in the head office. For the purpose of this Act, the trust entity and its branches
shall be treated as one unit. (67)
CHAPTER X
FINAL PROVISIONS
Section 94. Phase Out of Bangko Sentral Powers Over Building and Loan Associations. -
Within a period of three (3) years from the effectivity of this Act, the Bangko Sentral shall
phase out and transfer its supervising and regulatory powers over building and loan
associations to the Home Insurance and Guaranty Corporation which shall assume the same.
Until otherwise provided bylaw1 building and loan associations shall continue to be
governed by Sections 39 to 55, Chapter VI of the General Banking Act, as amended, including
such rules and regulations issued pursuant thereto. Upon assumption by the Home
Insurance and Guaranty Corporation of supervising and regulatory powers over building and
loan associations, a references in Sections 39 to 55 of the General Banking Act, as amended,
to the Bangko Sentral and the Monetary Board shall be deemed to refer to the Home
Insurance and Guaranty Corporation and its board of directors, respectively. (n)
Section 95. Repealing Clause. - Except as may be provided for in Sections 34 and 94 of this
Act, the General Banking Act, as amended, and the provisions of any other law, special
charters, rule or regulation issued pursuant to said General Banking Act, as amended, or
parts thereof, which may be inconsistent with the provisions of this Act are hereby repealed.
The provisions of paragraph 8, Section 8, Republic Act No. 3591, as amended by republic Act
No. 7400, are likewise repealed. (90a)
Section 96. Separability Clause. - If any provision or section of this Act or the application
thereof to any person or circumstance is held invalid, the other provisions or sections of this
Act, and the application of such provision or section to other persons or circumstances shall
not be affected thereby. (n)
Section 97. Effectivity Clause - This Act shall take effect fifteen (15) days following its
publication in the Official Gazette or in two (2) national newspapers of general circulation.
(91)
Approved.

Anti-Money Laundering Act (R.A. No. 9160, as amended by R.A. Nos. 9194,10167, 10365,
10927, and 11521)

REPUBLIC ACT NO. 9160 September 29, 2001

AN ACT DEFINING THE CRIME OF MONEY LAUNDERING, PROVIDING PENALTIES
THEREFOR AND FOR OTHER PURPOSES
Be it enacted by the Senate and House of Representatives of the Philippines in Congress
assembled:
Section 1. Short Title. – This Act shall be known as the "Anti-Money Laundering Act of 2001."
Section 2. Declaration of Policy. - It is hereby declared the policy of the State to protect and
preserve the integrity and confidentiality of bank accounts and to ensure that the Philippines
shall not be used as a money laundering site for the proceeds of any unlawful activity.
Consistent with its foreign policy, the State shall extend cooperation in transnational
investigations and prosecutions of persons involved in money laundering activities wherever
committed, as well as in the implementation of targeted financial sanctions related to the
financing of the proliferation of weapons of mass destruction, terrorism, and financing of
terrorism, pursuant to the resolution of the United Nations Security Council.
Section 3. Definitions. For purposes of this Act, the following terms are hereby defined as
follows:

(a) Covered persons', natural or juridical refer to:

(1) banks, non-banks, quasi-banks, trust entities, foreign exchange dealers,

pawnshops, money changers, remittance and transfer companies and other
similar entities and all other persons and their subsidiaries and affiliates
supervised or regulated by the Bangko Sentral ng Pilipinas (BSP);
(2) insurance companies, pre-need companies and all other persons
supervised or regulated by the Insurance Commission (IC);
(3) (i) securities dealers, brokers, salesmen, investment houses and other
similar persons managing securities or rendering services as investment
agent, advisor, or consultant, (ii) mutual funds, close-end investment
companies, common trust funds, and other similar persons, and (iii) other
entities administering or otherwise dealing in currency, commodities or
financial derivatives based thereon, valuable objects, cash substitutes and
other similar monetary instruments or property supervised or regulated by the
Securities and Exchange Commission (SEC);
(4) jewelry dealers in precious metals, who, as a business, trade in precious
metals, for transactions in excess of One million pesos (P1,000,000.00);
(5) jewelry dealers in precious stones, who, as a business, trade in precious
stones, for transactions in excess of One million pesos (P1,000,000.00);
 (6) company service providers which, as a business, provide any of the
following services to third parties: (i) acting as a formation agent of juridical
persons; (ii) acting as (or arranging for another person to act as) a director or
corporate secretary of a company, a partner of a partnership, or a similar
position in relation to other juridical persons; (iii) providing a registered office,
business address or accommodation, correspondence or administrative
address for a company, a partnership or any other legal person or
arrangement; and (iv) acting as (or arranging for another person to act as) a
nominee shareholder for another person; and

(7) persons who provide any of the following services:

(i) managing of client money, securities or other assets;

(ii) management of bank, savings or securities accounts;

(iii) organization of contributions for the creation, operation or

management of companies; and

(iv) creation, operation or management of juridical persons or

arrangements, and buying and selling business entities.

"Notwithstanding the foregoing, the term ‘covered persons’ shall exclude lawyers and
accountants acting as independent legal professionals in relation to information
concerning their clients or where disclosure of information would compromise client
confidences or the attorney-client relationship: Provided, That these lawyers and
accountants are authorized to practice in the Philippines and shall continue to be
subject to the provisions of their respective codes of conduct and/or professional
responsibility or any of its amendments.

(8) casinos, including internet and ship-based casinos, with respect to their
casino cash transactiotus related to they gaming operations
(9) Real estate developers and brokers;
(10) Offshore gaming operation, as well as their service providers, supervised,
accredited or regulated by the Philippine Amusement and Gaming Corporation
(PAGCOR) or any government agency

(b) 'Covered transactions' is a transaction in cash or other equivalent monetary instrument

involving a total amount in excess of Five hundred thousand pesos (P500,000.00) within one
(1) banking day; for covered persons under Section 3(a)(8), a single casino cash transaction
involving an amount in excess of Five million pesos (P5,000,000.00) or its equivalent in any
other currency.
"For covered persons under Section 3(a)(9) herein, a single cash transaction involving an
amount in excess of Seven million five hundred thousand pesos (P7,500,000.00) or its
equivalent in any other currency.

"(b-1) 'Suspicious transactions' are transactions with covered persons, regardless of the
amounts involved, where any of the following circumstances exist:

"1. There is no underlying legal or trade obligation, purpose or economic justification;

"2. The client is not properly identified;

"3. The amount involved is not commensurate with the business or financial capacity of the
client;

"4. Taking into account all known circumstances, it may be perceived that the client's
transaction is structured in order to avoid being the subject of reporting requirements under
the Act

"5. Any circumstance relating to the transaction which is observed to deviate from the profile
of the client and/or the client's past transactions with the covered person;

"6. The transaction is in any way related to an unlawful activity or offense under this Act that
is about to be, is being or has been committed; or

"7. Any transaction that is similar or analogous to any of the foregoing.

(c) "Monetary Instrument" refers to:

(1) coins or currency of legal tender of the Philippines, or of any other country;

(2) drafts, checks and notes;

(3) securities or negotiable instruments, bonds, commercial papers, deposit certificates, trust
certificates, custodial receipts or deposit substitute instruments, trading orders, transaction
tickets and confirmations of sale or investments and money marked instruments; and

(4) other similar instruments where title thereto passes to another by endorsement,
assignment or delivery.

(d) "Offender" refers to any person who commits a money laundering offense.

(e) "Person" refers to any natural or juridical person.

(f) "Proceeds" refers to an amount derived or realized from an unlawful activity.

(g) "Supervising Authority" refers to the appropriate supervisory or regulatory agency,

department or office supervising or regulating the covered institutions enumerated in Section
3(a).

(h) "Transaction" refers to any act establishing any right or obligation or giving rise to any
contractual or legal relationship between the parties thereto. It also includes any movement
of funds by any means with a covered institution.

(l) "Unlawful activity" refers to any act or omission or series or combination thereof involving
or having relation to the following:

(1) Kidnapping for ransom under Article 267 of Act No. 3815, otherwise known as the Revised
Penal Code, as amended;

(2) Sections 3, 4, 5, 7, 8 and 9 of Article Two of Republic Act No. 6425, as amended, otherwise
known as the Dangerous Drugs Act of 1972;

(3) Section 3 paragraphs B, C, E, G, H and I of Republic Act No. 3019, as amended; otherwise
known as the Anti-Graft and Corrupt Practices Act;
(4) Plunder under Republic Act No. 7080, as amended;

(5) Robbery and extortion under Articles 294, 295, 296, 299, 300, 301 and 302 of the Revised
Penal Code, as amended;

(6) Jueteng and Masiao punished as illegal gambling under Presidential Decree No. 1602;

(7) Piracy on the high seas under the Revised Penal Code, as amended and Presidential
Decree No. 532;

(8) Qualified theft under, Article 310 of the Revised Penal Code, as amended;

(9) Swindling under Article 315 of the Revised Penal Code, as amended;

(10) Smuggling under Republic Act Nos. 455 and 1937;

(11) Violations under Republic Act No. 8792, otherwise known as the Electronic Commerce
Act of 2000;

(12) Hijacking and other violations under Republic Act No. 6235; destructive arson and
murder, as defined under the Revised Penal Code, as amended, including those perpetrated
by terrorists against non-combatant persons and similar targets;

(13) Fraudulent practices and other violations under Republic Act No. 8799, otherwise known
as the Securities Regulation Code of 2000;

(14) Felonies or offenses of a similar nature that are punishable under the penal laws of other
countries.

(15) Bribery under Articles 210, 211 and 211-A of the Revised Penal Code, as amended, and
Corruption of Public Officers under Article 212 of the Revised Penal Code, as amended;
"(16) Frauds and Illegal Exactions and Transactions under Articles 213, 214, 215 and 216 of
the Revised Penal Code, as amended;
"(17) Malversation of Public Funds and Property under Articles 217 and 222 of the Revised
Penal Code, as amended;
"(18) Forgeries and Counterfeiting under Articles 163, 166, 167, 168, 169 and 176 of the
Revised Penal Code, as amended;
"(19) Violations of Sections 4 to 6 of Republic Act No. 9208, otherwise known as the Anti-
Trafficking in Persons Act of 2003;
"(20) Violations of Sections 78 to 79 of Chapter IV, of Presidential Decree No. 705, otherwise
known as the Revised Forestry Code of the Philippines, as amended;
"(21) Violations of Sections 86 to 106 of Chapter VI, of Republic Act No. 8550, otherwise
known as the Philippine Fisheries Code of 1998;
"(22) Violations of Sections 101 to 107, and 110 of Republic Act No. 7942, otherwise known as
the Philippine Mining Act of 1995;
"(23) Violations of Section 27(c), (e), (f), (g) and (i), of Republic Act No. 9147, otherwise known
as the Wildlife Resources Conservation and Protection Act;
"(24) Violation of Section 7(b) of Republic Act No. 9072, otherwise known as the National
Caves and Cave Resources Management Protection Act;
"(25) Violation of Republic Act No. 6539, otherwise known as the Anti-Carnapping Act of
2002, as amended;
"(26) Violations of Sections 1, 3 and 5 of Presidential Decree No. 1866, as amended, otherwise
known as the decree Codifying the Laws on Illegal/Unlawful Possession, Manufacture,
Dealing In, Acquisition or Disposition of Firearms, Ammunition or Explosives;
"(27) Violation of Presidential Decree No. 1612, otherwise known as the Anti-Fencing Law;
"(28) Violation of Section 6 of Republic Act No. 8042, otherwise known as the Migrant
Workers and Overseas Filipinos Act of 1995, as amended by Republic Act No. 10022;
"(29) Violation of Republic Act No. 8293, otherwise known as the Intellectual Property Code of
the Philippines;
"(30) Violation of Section 4 of Republic Act No. 9995, otherwise known as the Anti-Photo and
Video Voyeurism Act of 2009;
"(31) Violation of Section 4 of Republic Act No. 9775, otherwise known as the Anti-Child
Pornography Act of 2009;
"(32) Violations of Sections 5, 7, 8, 9, 10(c), (d) and (e), 11, 12 and 14 of Republic Act No. 7610,
otherwise known as the Special Protection of Children Against Abuse, Exploitation and
Discrimination
(33) Fraudulent practice and other violations under Republic Actr No. 8799, otherwise known
as "The Securities Regulation Code of 2000;
"(34) Violation of Section 9 (a)(3) of Republic Act No. 10697, otherwise known as the
"Strategic Trade Management Act", in relation to the proliferation of weapons of mass
destruction and its financing pursuant to United Nations Security Council Resolution
Numbers 1718 of 2006 and 2231 of 2015";
"(35) Violation of Section 254 of Chapter II, Title X of the National Internal Revenue Code of
1997, as amended, where the deficiency basic tax due in the final assessment is in excess of
Twenty-five million pesos (P25,000,000.00) per taxable year, for each tax type covered and
there has been a finding of probable cause by the competent authority: Provided,further, That
there must be a finding of fraud, willful misrepresenting or malicious intent on the part of the
taxpayer: Provided, finally, That in no case shall the AMLC institute forfeiture proceedings to
recover monetary instruments, property or proceeds representing, involving, or relating to a
tax crime, if the same has already been recovered or collected by the Bureau of Internal
Revenue (BIR) in a separate proceeding and
"(36) Felonies and offenses of a similar nature that are punishable under the penal laws of
other countries.

Section 4. Section 4 of the same Act is hereby amended to read as follows:

"SEC. 4. Money Laundering Offense. – Money laundering is committed by any person who,
knowing that any monetary instrument or property represents, involves, or relates to the
proceeds of any unlawful activity:
"(a) transacts said monetary instrument or property;
"(b) converts, transfers, disposes of, moves, acquires, possesses or uses said monetary
instrument or property;
"(c) conceals or disguises the true nature, source, location, disposition, movement or
ownership of or rights with respect to said monetary instrument or property;
"(d) attempts or conspires to commit money laundering offenses referred to in paragraphs
(a), (b) or (c);
"(e) aids, abets, assists in or counsels the commission of the money laundering offenses
referred to in paragraphs (a), (b) or (c) above; and
"(f) performs or fails to perform any act as a result of which he facilitates the offense of
money laundering referred to in paragraphs (a), (b) or (c) above.
"Money laundering is also committed by any covered person who, knowing that a covered or
suspicious transaction is required under this Act to be reported to the Anti-Money
Laundering Council (AMLC), fails to do so."

Section 9. Prevention of Money Laundering; Customer Identification Requirements and

Record Keeping. –
(a) Customer Identification, - Covered institutions shall establish and record the true identity
of its clients based on official documents. They shall maintain a system of verifying the true
identity of their clients and, in case of corporate clients, require a system of verifying their
legal existence and organizational structure, as well as the authority and identification of all
persons purporting to act on their behalf.

The provisions of existing laws to the contrary notwithstanding, anonymous accounts,

accounts under fictitious names, and all other similar accounts shall be absolutely
prohibited. Peso and foreign currency non-checking numbered accounts shall be allowed.
The BSP may conduct annual testing solely limited to the determination of the existence and
true identity of the owners of such accounts.

(b) Record Keeping – All records of all transactions of covered institutions shall be
maintained and safely stored for five (5) years from the date of transactions. With respect to
closed accounts, the records on customer identification, account files and business
correspondence, shall be preserved and safety stored for at least five (5) years from the
dates when they were closed.

(c) Reporting of Covered and Suspicious Transactions. – Covered persons shall report to the
AMLC all covered transactions and suspicious transactions within five (5) working days from
occurrence thereof, unless the AMLC prescribes a different period not exceeding fifteen (15)
working days.
Lawyers and accountants acting as independent legal professionals are not required to
report covered and suspicious transactions if the relevant information was obtained in
circumstances where they are subject to professional secrecy or legal professional privilege.
When reporting covered transactions to the AMLC, covered institutions and their officers,
employees, representatives, agents, advisors, consultants or associates shall not be deemed
to have violated Republic Act No. 1405, as amended; Republic Act No. 6426, as amended;
Republic Act No. 8791 and other similar laws, but are prohibited from communicating,
directly or indirectly, in any manner or by any means, to any person the fact that a covered
transaction report was made, the contents thereof, or any other information in relation
thereto. In case of violation thereof, the concerned officer, employee, representative, agent,
advisor, consultant or associate of the covered institution, shall be criminally liable.
However, no administrative, criminal or civil proceedings, shall lie against any person for
having made a covered transaction report in the regular performance of his duties and in
good faith, whether or not such reporting results in any criminal prosecution under this Act
or any other Philippine law.
When reporting covered or suspicious transactions to the AMLC, covered persons and their
officers and employees are prohibited from communicating, directly or indirectly, in any
manner or by any means, to any person or entity, the media, the fact that a covered or
suspicious transaction has been reported or is about to be reported, the contents of the
report, or any other information in relation thereto. Neither may such reporting be published
or aired in any manner or form by the mass media", electronic mail, or other similar devices.
In case of violation thereof, the concerned officer and employee of the covered person and
media shall be held criminally liablee.
Section 10. Authority to Freeze. – Upon determination that probable cause exists that any
deposit or similar account is in any way related to an unlawful activity, the AMLC may issue a
freeze order, which shall be effective immediately, on the account for a period not exceeding
fifteen (15) days. Notice to the depositor that his account has been frozen shall be issued
simultaneously with the issuance of the freeze order. The depositor shall have seventy-two
(72) hours upon receipt of the notice to explain why the freeze order should be lifted. The
AMLC has seventy-two (72) hours to dispose of the depositor's explanation. If it falls to act
within seventy-two (72) hours from receipt of the depositor's explanation, the freeze order
shall automatically be dissolved. The fifteen (15)-day freeze order of the AMLC may be
extended upon order of the court, provided that the fifteen (15)-day period shall be tolled
pending the court's decision to extend the period.
No court shall issue a temporary restraining order or writ of injunction against any freeze
order issued by the AMLC except the Court of Appeals or the Supreme Court.
Section 10. Freezing Monetary Instrument or Property. -
"(a) Upon a verified ex parte petition by the AMLC and after determination that probable
cause exists that any monetary instrument or property is in any way related to an unlawful
activity as defined in Section 3(i) hereof, the Court of Appeals may issue a freeze order which
shall be effective immediately, for a period of twenty (20) days. Within the twenty (20) day
period, the Court of Appeals shall conduct a summary hearing, with notice to the parties, to
determine whether or not to modify or lift the freeze order, or extend its effectivity. The total
period of the freeze order issued by the Court of Appeals under this provision shall not
exceed six (6) months. This is without prejudice to an asset preservation order that the
Regional Trial Court having jurisdiction over the appropriate anti-money laundering case or
civil forfeiture case may issue on the same account depending on the circumstances of the
case, where the Court of Appeals will remand the case and its records: Provided, That if there
is no case filed against a person whose account has been frozen within the period
determined by the Court of Appeals, not exceeding six (6) months, the freeze order shall be
deemed ipso facto lifted: Provided,further, That this new rule shall not apply to pending
cases in the courts. In any case, the court should act on the petition to freeze within twenty-
four (24) hours from filing of the petition. If the application is filed a day before a nonworking
day, the computation of the twenty-four (24) hour period shall exclude the nonworking days.
"The freeze order or asset preservation order issued under this Act shall be limited only to
the amount of cash or monetary instrument or value of property that court finds there is
probable cause to be considered as proceeds of a predicate offense, and the freeze order or
asset preservation order shall not apply tyo amounts in the same account in excess of the
amount or value of the proceeds of the predicate offense.
"A person whose account has been frozen may file a motion to lift the freeze order and the
court must resolve this motion before the expiration of the freeze order.
"No court shall issue a temporary restraining order or a writ of injunction against any freeze
order, except the Supreme Court.
"(b) For purposes of implementing targeted financial sanctions in relation to proliferation of
weapons of mass destruction and its financing, as provided under Section 3(15), the AMLC
shall have the power to issue, ex porte, an order to freeze without delay.
"The freeze order shall be effective until the basis for its issuance shall have been lifted.
During the effectivity of the freeze order, the aggrieved party may, within twenty (20) days
from issuance, file with the Court of Appeals a petition to determine the basis of the freeze
order according to the principle of effective judicial protection: Provided, That the person
whose property or funds have been frozen may withdraw such sums as the AMLC determines
to be reasonably needed for monthly family needs and sustenance including the services of
counsel and the family medical needs of such person.
"The AMLC, if circumstance warrant, may initiate civil forfeiture proceedings to preserve the
assets and to protect it from dissipation. No court shall issue a temporary restraining order
ℒαwρhi ৷

or a writ of injunction against the freeze order, except the Court of Appeals or the Supreme
Court.
Section 11. Authority to inquire into Bank Deposits. – Notwithstanding the provisions of
Republic Act No. 1405, as amended; Republic Act No. 6426, as amended; Republic Act No.
8791, and other laws, the AMLC may inquire into or examine any particular deposit or
investment with any banking institution or non-bank financial institution upon order of any
competent court in cases of violation of this Act when it has been established that there is
probable cause that the deposits or investments involved are in any way related to a money
laundering offense: Provided, That this provision shall not apply to deposits and investments
made prior to the effectivity of this Act.
Section 12. Forfeiture Provisions. –
(a) Civil Forfeiture. – Upon determination by the AMLC that probable cause exists that any
monetary instrument or property is in any way related to an unlawful activity as defined in
Section 3(i) or a money laundering offense under Section 4 hereof, the AMLC shall file with
the appropriate court through the Office of the Solicitor General, a verified ex parte petition
for forfeiture, and the Rules of Court on Civil Forfeiture shall apply.
"The forfeiture shall include those other monetary instrument or property having an
equivalent value to that of the monetary instrument or property found to be related in any
way to an unlawful activity or a money laundering offense, when with due diligence, the
former cannot be located, or it has been substantially altered, destroyed, diminished in value
or otherwise rendered worthless by any act or omission, or it has been concealed, removed,
converted, or otherwise transferred, or it is located outside the Philippines or has been
placed or brought outside the jurisdiction of the court, or it has been commingled with other
monetary instrument or property belonging to either the offender himself or a third person or
entity, thereby rendering the same difficult to identify or be segregated for purposes of
forfeiture.
"(b) Claim on Forfeited Assets. – Where the court has issued an order of forfeiture of the
monetary instrument or property in a criminal prosecution for any money laundering offense
defined under Section 4 of this Act, the offender or any other person claiming an interest
therein may apply, by verified petition, for a declaration that the same legitimately belongs to
him and for segregation or exclusion of the monetary instrument or property corresponding
thereto. The verified petition shall be filed with the court which rendered the judgment of
forfeiture, within fifteen (15) days from the date of the finality of the order of forfeiture, in
default of which the said order shall become final and executor. This provision shall apply in
both civil and criminal forfeiture.
"(c) Payment in Lieu of Forfeiture. – Where the court has issued an order of forfeiture of the
monetary instrument or property subject of a money laundering offense defined under
Section 4, and said order cannot be enforced because any particular monetary instrument or
property cannot, with due diligence, be located, or it has been substantially altered,
destroyed, diminished in value or otherwise rendered worthless by any act or omission,
directly or indirectly, attributable to the offender, or it has been concealed, removed,
converted, or otherwise transferred to prevent the same from being found or to avoid
forfeiture thereof, or it is located outside the Philippines or has been placed or brought
outside the jurisdiction of the court, or it has been commingled with other monetary
instruments or property belonging to either the offender himself or a third person or entity,
thereby rendering the same difficult to identify or be segregated for purposes of forfeiture,
the court may, instead of enforcing the order of forfeiture of the monetary instrument or
property or part thereof or interest therein, accordingly order the convicted offender to pay
an amount equal to the value of said monetary instrument or property. This provision shall
apply in both civil and criminal forfeiture.