INTRODUCTION TO BANKING LAW RELATED TERMS

o Banks are to the commercial world what arteries

BANKS
to the human heart
Components of a financial market that move
o Public confidence is the anchor or any banking
funds from people who save to people who have
system – public trust
a productive investment opportunities
o Subject to police power of the State
o Exercise of utmost diligence
Statutes:
o Extraordinary diligence in some cases
o General Banking Act decided by the SC though there is no
o New Central Bank Act statutory basis
o Special Laws – PDIC charter, Credit
Information System Act, Creation of the diligence required to banks, therefore, is more
AMLC, AMLA than that of a good father of a family. In every case,
the depositor expects the bank to treat their account
BANKS – MORE DEFINITON with the utmost fidelity, whether such accounts
❖ According to General Banking Law (GBL) consists only of a few hundreds or of millions. The
o Entities engaged in the lending of funds bank must record every transactions accurately,
obtained in the form of deposits down to the last centavo as promptly as possible
o Must be a stock corporation and its funds
must be obtained from public. Deposits
of 20 or more person EFFECTS OF STRIKES AND LOCKOUTS IN
❖ According to jurisprudence THE BANKING SECTOR
o a moneyed institute founded to facilitate TO CUSTOMERS TO THE MARKET
borrowing, lending, and safekeeping of ❖ ATMs run out of cash ❖ Creates uncertainty
money and to deal in notes, bills of that may lead to and doubt
exchange and credits customers failing to
meet their financial ❖ As for the money
o a place where deposits are received and
obligation market, strikes briefly
paid out and where money is loaned on
hamper the liquidity
security ❖ Delay in loan
approvals
NATURE OF BUSINESS ❖ Causes delay in the
GBL, SECTION 2. Declaration of Policy. — trading of short-term
The State recognizes the vital role of banks in ❖ Advent of technology financial instruments
providing an environment conducive to the sustained – made things
development of the national economy and the bearable
fiduciary nature of banking that requires high
standards of integrity and performance. In
furtherance thereof, the State shall promote and ❖ Stike – employee’s actions
maintain a stable and efficient banking and financial ❖ Lockout – employer’s action
system that is globally competitive, dynamic, and
responsive to the demands of a developing economy
 GOVERNING LAWS CLASSIFICATION OF BANKS
❖ RA 8791 – An act providing for the regulation of
the organization and operation of banks, quasi- ❖ UNIVERSAL BANKS – authorized to:
banks, trust entities, and other purposes o Exercise powers of a commercia bank
o aka the General Banking Law of o Exercise powers of an investment house
2000 o Power to invest in non-allied enterprises
o superseded RA337 – General o Own up to 100% equity in a thrift bank, a
Banking Act rural bank, a financial allied or non-allied
❖ RA 7353 - as amended by RA 10574 – Rural enterprise
Banks o In case of publicly listed UB, power to
❖ RA 7906 – Thrifts Banks own up 100% of the voting stock of only
❖ RA 10641 – allowed full entry of foreign banks in one other universal or commercial bank
the Philippines IMPORTANT CONCEPTS
❖ RA 10574 – allowed foreign capital infusion in INVESTMENT HOUSE NON-ALLIED
Rural Banks ENTERPRISES
Any enterprise which o enterprises engaged
AUTHORITY TO OPERATE engages or purports to in physically
engage in underwriting productive activities
✓ from the Bangko Sentral ng Pilipans – BSP
of securities, an act of in agriculture, mining,
✓ articles of incorporation to be filed with the SEC
and quarrying,
must be accompanied by the favorable guaranteeing
manufacturing, public
recommendation of the BSP distribution and sale
utilities, construction,
w/in the Philippines of wholesale trade,
MONETARY BOARD securities of the community, and
Determines whether a person of entity is government or its social services –
performing banks or quasi-banking functions w/o instrumentalities o industrial park /
BSO, branch service officer, authority developments –
o other as maybe
GBL - SECTION 64. Unauthorized Advertisement declared by the MB
or Business Representation.
No person, association, or corporation unless duly ❖ COMMERCIAL BANKS (CB)
authorized to engage in the business of a bank, o Accepts drafts
quasi-bank, trust entity, or savings and loan o Issue letters of credit
association as defined in this Act, or other banking o Discount and negotiate PNs, bills of
laws, shall advertise or hold itself out as being exchange, other evidences of debt
engaged in the business of such bank, quasi-bank, o Accept or create demand credits
trust entity, or association, or use in connection with o Receive other types of deposit or deposit
its business title, the word or words "bank", substitute
"banking", "banker", "quasi-bank", "quasi-banking", o Buy and sell forex and gold or silver
"quasi-banker", "savings and loan association", bullion
"trust corporation", "trust company" or words of o Acquire marketable bonds and other debt
similar import or transact in any manner the business securities
of any such bank, corporation or association o Extend credit
BANKING LAWS OTHER OBJECTIVES – BSP
✓ Maintain price stability conducive to a
RA No. 7653 – The New Central Bank act balanced and sustainable growth of the
(NCBA) economy and employment
14 June 1993 ✓ Maintain monetary stability and the
Section 1. Declaration of Policy. - The State convertibility of the peso
shall maintain a central monetary authority, which ✓ Promote financial stability and coordinate
shall enjoy fiscal and administrative autonomy with the National Government – DOF, SEC,
while being a government-owned corporation, IC, PDIC
and function and operate as an independent and ✓ Oversee the payment and settlement stems
accountable body corporate in the discharge of in the Philippines including financial market
mandated responsibilities concerning money, infrastructure
banking, and credit.
FINANCIAL MARKET INFRASTRACTURE
o Clear and transparent
BANGKO SENTRAL NG PILIPINAS o Promote safety and efficiency
GOCC established by law to the INDEPENDENT o Support the stability of the broader financial
central monetary authority of the country system, other relevant public interest
o Php 50B capital considerations, and the objectives of
Php 10B paid upon effectivity - 1993 relevant stakeholders
Balance to be paid within 2 years -1995 o Risk management
o Monitoring
RESPONSIBILITY – BSP
1. To provide policy directions in the areas of BSP AS THE LENDER OF LAST RESORT
money, banking, and credit
2. To supervise bank operations and exercise INDIVIDUAL BANKS BSP
such regulatory and examination powers as BORROWER
provided by the NCBA and other pertinent
laws over the quasi-banking operations of OPERATIONS OF THE BSP
non-bank financial institutions • Authority to obtain data
3. To exercise regulatory and examination The BSP shall have the authority to require from
powers over money service business, credit any person of entity, including government
granting businesses, and payment system offices and instrumentalities, or government-
operators owned or controlled corporations, any data, for
statistical and policy developments purposes in
PRIMARY OBJECTIVE – BSP relation to the proper discharge of its functions
1. To maintain price stability conducive to a and responsibilities
balance and sustainable growth of the • power to issue subpoena
economy and employment
The Bangko Sentral, through the Governor or in
2. To promote an maintain monetary his absence, a duly authorized representative
stability and convertibility of the peso shall have the power to issue subpoena for the
production of books and records for the
aforesaid purpose. Those who refuse the
subpoena without justifiable cause, or who
refuse to supply the Bangko Sentral with data
required, shall be subject to punishment for
contempt in accordance with the provisions of
the Rules of Court
 o Subpoena duces tecum – documents, CURRENT MONETARY BOARD
books, etc
o Subpoena ad testificandum – personal CHAIRMAN AND GOVERNOR
appearance of the person invited Eli M. Remonola, Jr.
• Authority to require data from banks
The authority of the BSP to require data from DEPUTY GOVERNORS
banks shall continue to be exercised pursuant to Francisco G. Dakila, Jr.
its supervisory powers Monetary and Economics Sector
Chuchi G. Fonacier
Supervision and Examination Financial Supervisor Sector
o Supervision over, and conduct regular or Mamerto E. Tangonan
special examinations of banking Payments and Currency Management Sector -
institutions and quasi-banks, including Bernadette Romulo-Puyat
their subsidiaries and affiliates engaged Regional Operations and Advocacy Sector
in allied activities. Elmore O. Capule
o Regulatory authority over, and conduct Corporate Services Sector
regular or special examination, of
entities which under the NCBA or by MONETARY BOARD
special laws are subject to its Ralph G. Recto
jurisdiction. Benjamin E. Diokno
Romeo L. Bernardo
MONETARY BOARD Rosalia V. De Leon
Exercise the powers and functions of the BSP Walter C. Wassmer
Jose L. Querubin
• Composed of 7 members
o Appointed by the President
o 6 year term
o May only be reappointed once

COMPOSITION
• CHAIRPERSON – BSP governor
o DEPUTY GOVERNOR – alternate
• MEMBER OF THE CABINET DESIGNATED BY
THE PRESIDENT
o UNDERSECRETARY – alternate
• FIVE MEMBERS FROM THE PRIVATE
SECTOR