Page 1 of 10

BANKING QUESTIONS Andrew failed to pay the loan on its due date on September 1,
2002. When the Bank attempted to collect from the Obligor, the
Banks: Applicability: Foreign Currency Deposit Act & Bank discovered that the latter had already closed operations and
Secrecy of Bank Deposits (2005) liquidated all its assets. The Bank sued Andrew for collection, but
Andrew moved to dismiss the complaint on the ground that the
Hi Yielding Corporation filed a complaint against five of its officers debt had already been paid by reason of his execution of the
for violation of Section 31 of the Corporation Code. The aforesaid Deed of Assignment which, being absolute and
corporation claimed that the said officers were guilty of advancing unconditional, was in essence a dacion en pago. The Bank
their personal interests to the prejudice of the corporation, and opposed the motion, contending that the Deed of Assignment was
that they were grossly negligent in handling its affairs. Aside from only a security for a loan. If you were the Judge, how would you
documents and contracts, the corporation also submitted in resolve the motion to dismiss filed by Andrew? Explain (5%)
evidence records of the officers’ U.S. Dollar deposits in several
banks overseas - Boston Bank, Bank of Switzerland, and Bank of SUGGESTED ANSWER:
New York.
(Since the question is outside the scope of the Bar Examination, it
For their part, the officers filed a criminal complaint against the is recommended that the candidate be given full credit of 5%,
directors of Hi Yielding Corporation for violation of Republic Act whatever may be his answer, and he be given a bonus if he made
No. 6426, otherwise known as the Foreign Currency Deposit Act an answer in the following manner:)
of the Philippines. The officers alleged that their bank deposits
were illegally disclosed for want of a court order, and that such The motion to dismiss should be granted. The simple absolute
deposits were not even the subject of the case against them. and unconditional conveyance embodied in the deed of
assignment would be operative, and the assignment would
a) Will the complaint filed against the directors of Hi Yielding constitute essentially a mode of payment or dacion en pago.
Corporation prosper? Explain.
Banks: Secrecy of Bank Deposits; Garnishment (2004)
SUGGESTED ANSWER:
CDC maintained a savings account with CBank. On orders of the
No, because the Foreign Currency Deposit Act (R.A. No. 6426), MM Regional Trial Court, the Sheriff garnished P50,000 of his
including its punitive provisions, refers to foreign currency account, to satisfy the judgment in favor of his creditor, MO. CDC
deposits accounts constituted within the Philippines. It has no complained that the garnishment violated the Law on the Secrecy
application at all to accounts, even though they are banks, of Bank Deposits because the existence of his savings account
opened and constituted abroad. was disclosed to the public. (5%) Is CDC's complaint meritorious
or not? Reason briefly.
b) Was there a violation of the Secrecy of Bank Deposits Law
(Republic Act No. 1405)? Explain. (5%) SUGGESTED ANSWER:

SUGGESTED ANSWER: No. CDC's complaint is not meritorious. It was held in China
Banking Corporation v. Ortega, 49 SCRA 355 (1973)that peso
No, because the punitive provisions of the Secrecy of Bank deposits may be garnished and the depositary bank can comply
Deposits Law (R.A. No. 1405), including the statutory exemptions with the order of garnishment without violating the Law on the
provided therein, are not applicable to FCDU accounts, even when Secrecy of Bank Deposits. Execution is the goal of litigation as it
constituted locally. (Intengan v. Court of Appeals, G.R. No. is its fruit. Garnishment is part of the execution process. Upon
128996, February 15, 2002) service of the notice of garnishment on the bank where the
defendant deposited funds, such funds become part of the subject
Banks: Collateral Security (2002)
matter of litigation.
Andrew is engaged in the business of building low-cost housing
Banks; Classifications of Banks (2002)
units under contracts with real estate developers. He applied for a
loan of P3 Million from Ready Credit Bank (the Bank), which There are six (6) classes of banks identified in the General
required Andrew to provide collateral security for it. Andrew Banking Law of 2000. Name at least four (4) of them and explain
offered to assign to the Bank his receivables amounting to P4 the distinguishing characteristic or function of each one. (5%)
million from Home Builders Development Corporation (the
Obligor). SUGGESTED ANSWER:

The Bank accepted the offer. Accordingly, Andrew obtained the Any four (4) of the following six (6) classes of banks identified in
loan and he executed a promissory note undertaking to pay the the General Banking Law of 2002, to wit:
loan in full in one lump sum on September 1, 2002, together with
interest thereon at the rate of 20% per annum. At the same time, 1. Universal Banks – These are those which used to be called
Andrew executed a Deed of Assignment in favor of the Bank expanded commercial banks and the operations of which are now
assigning to the Bank his receivables from the Obligor. primarily governed by the General Banking Law of 2002. They can
exercise the powers of an investment house and invest in non-
The deed of assignment read: “I, Andrew Lee, hereby assign, allied enterprises. They have the highest capitalization
transfer and convey, absolutely and unconditionally, to Ready requirement.
Credit Bank (hereinafter called the Bank) all of my right, title and
interest in and to my accounts receivable from Home Builders 2. Commercial Banks – These are ordinary or regular commercial
Development Corporation (hereinafter called the Obligor) arising banks, as distinguished from a universal bank. They have a lower
from delivery of housing units with a total contract price of capitalization requirement than universal banks and cannot
P4,000,000.00, the description and contract value of which are exercise the powers of an investment house and invest in non-
attached hereto as Annex A (hereinafter called the Receivables).” allied enterprises.
“In the event that I shall be unable to pay my outstanding
indebtedness owned to the Bank, the Bank shall have the right, 3. Thrift Banks – These banks (such as savings and mortgage
without any further formality or act on its part, to collect the banks, stock savings and loan associations, and private
Receivables from the Obligor and to apply the proceeds thereof development banks) may exercise most of the powers and
toward payment of my said indebtedness.” functions of a commercial bank except that they cannot, among
others, open current or check accounts without prior Monetary
Board approval, and they cannot issue letters of credit. Their
 Page 2 of 10

operations are governed primarily by the Thrift Banks Act of 1995 The Monetary Board of the BSP closed Urban Bank after it
(RA 7906). encountered crippling financial difficulties that resulted in a bank
run. X, one of the members of the BOD of the bank, attended and
4. Rural Banks – these are those which are organized primarily to stayed throughout the entire meeting of the Board that was held
extend loans and other credit facilities to farmers, fishermen or well in advance of the bank run and before news had begun to
farm families, as well as cooperatives, merchants, and private trickle to the business community about the dire financial pit the
and public employees and whose operations are primarily bank had fallen into. Immediately after the meeting, X caused the
governed by the Rural Banks Act of 1992 (RA 7353). preparation and issuance of a manager’s check payable to himself
in the sum of 5 million pesos equivalent to the amount placed or
5. Cooperative Banks – these are those which are organized invested in the bank by a business acquaintance. He now claims
primarily to provide financial and credit services to cooperatives that he is keeping the funds in trust for the owner and that he
and whose operations are primarily governed by the Cooperative had committed no violation of the General Banking Act (RA 337,
Code of the Philippines (RA 6938). as amended) for which he should be punished. Do you agree that
there has been no violation of the statute? (3%)
6. Islamic Banks – these are those which are organized primarily
to provide financial and credit services in a manner or transaction SUGGESTED ANSWER:
consistent with the Islamic Shari’ah. At present, only the Al
Amanah Islamic Investment Bank of the Philippines has been No. I do not agree that there is no violation of the statute (RA
organized as an Islamic Bank. 337, as amended). X violated Sec 85 when he caused the
preparation and issuance of a manager’s check payable to himself
Banks; Conservator vs. Receiver (2006) in the sum of P5 million. This is paying out or permitting to be
paid out funds of the bank after the latter became insolvent. This
Distinguish between the role of a conservator and that of a
act is penalized by fine of not less than P1,000.00 nor more than
receiver of a bank. (2.5%)
P10,000.00 and by imprisonment for not less than two nor more
SUGGESTED ANSWER: than ten years.

The Conservator is appointed for a period not exceeding one (1) Banks; Insolvency; Requirements (1997)
year, to take charge of the assets, liabilities, and the
Give the basic requirements to be complied with by the BSP
management of a bank or a quasi-bank in a state of continuing
before the Monetary Board can declare a bank insolvent, order it
inability, or unwillingness to maintain a condition of liquidity
closed and forbid it from doing further business in the Philippines.
deemed adequate to protect the interest of depositors and
creditors. SUGGESTED ANSWER:
On the other hand, the Receiver is appointed to manage a bank Before the Monetary Board can declare a bank insolvent, order it
or quasi-bank that is unable to pay its liabilities inthe ordinary closed and forbid it from doing further business in the Philippines,
course of business, or has insufficient realizable assets to meet its the following basic requirements must be complied with by the
liabilities, or cannot continue in business without probable losses BSP, to wit:
to its depositors or creditors; or has willfully violated a final cease
and desist order, involving acts or transactions amounting to 1. There must be an examination by the head of the Department
fraud or a dissipation of the assets of the institution. The main of Supervision or his examiners or agents into the condition of the
purpose of the Receiver is to recommend the rehabilitation or bank.
liquidation of the bank.
2. The examination discloses that the condition of the bank is one
Banks; Diligence Required (1992) of insolvency, or that its continuance in business would involve
probable loss to creditors or depositors.
Placido, a bank depositor, left his checkbook on his desk at his
house. Unknown to him, a visitor at the time, noticing the same, 3. The head of said Department shall inform in writing the
took a check therefrom, filled it up in the amount of P3,000.00 Monetary Board of such facts.
and succeeded in encashing the check on the same day. Placido’s
account was thereby debited in the same amount. 4. Upon finding said information or statement to be true, the
Monetary Board shall appoint a receiver to take charge of the
Discovering the erroneous debit, Placido demanded that the bank assets and liabilities of the bank.
credit him with a like amount. The bank refused on the ground
that Placido was negligent in leaving his checkbook on his desk so 5. Within 60 days, the Monetary Board shall determine and
that he could not put up the defense of forgery or want of confirm if the bank is insolvent, and public interest requires, to
authority under the NIL. order the liquidation of the bank.

The Facts disclose that even to the naked eye, there were marked Banks; Restrictions on Loan Accommodations (2002)
differences between Placido’s signature and the one in the check
forged by the visitor. As between Placido and the bank, who As part of the safeguards against imprudent banking, the General
should bear the loss? Explain. Banking Law imposes limits or restrictions on loans and credit
accommodations which may be extended by banks. Identify at
SUGGESTED ANSWER: least two (2) of these limits or restrictions and explain the
rationale of each of them. (5%)
The bank should bear the loss. A drawee bank must exercise the
highest diligence in safeguarding the accounts of its client- SUGGESTED ANSWER:
depositors. The bank is also charged with genuineness of the
signatures of its current account holders. But what can be more Any two (2) of the following limits or restrictions on loan and
striking is that there were marked differences between Placido’s credit transactions which may be extended by banks, as part of
signature and the one in the check forged by the visitor. the safeguards against imprudent banking, to wit:
Certainly, Placido was not negligent in leaving his checkbook in
his own desk (PNB v Quimpo 158 SCRA 582) 1. SBL Rules – (i.e., Single Borrower’s Limit) rules are those
promulgated by the Bangko Sentral ng Pilipinas, upon the
Banks; Insolvency; Prohibited Transactions (2000) authority of Section 35 of the General Banking Law of 2000,
which regulate the total amount of loans, credit accommodations
and guarantees that may be extended by a bank to any person,
 Page 3 of 10

partnership, association, corporation or other entity. The rules Banks; Secrecy of Bank Deposit; AMLC (2006)
seek to protect a bank from making excessive loans to a single
borrower by prohibiting it from lending beyond a specified ceiling. Rudy is jobless but is reputed to be a jueteng operator. He has
never been charged or convicted of any crime. He maintains
2. DOSRI Rules – These rules promulgated by the BSP, upon several bank accounts and has purchased 5 houses and lots for
authority of Section 5 of the General Banking Law of 2000, which his children from the Luansing Realty, Inc. Since he does not
regulate the amount of credit accommodations that a bank may have any visible job, the company reported his purchases to the
extend to its directors, officers, stockholders and their related Anti-Money Laundering Council (AMLC). Thereafter, AMLC charged
interests (thus, DOSRI). Generally, a bank’s credit him with violation of the Anti-Money Laundering Law.
accommodations to its DOSRI must be in the regular course of
business and on terms not less favorable to the bank than those Upon request of the AMLC, the bank disclosed to it Rudy's bank
offered to non-DOSRI borrowers. deposits amounting to P100 Million. Subsequently, he was
charged in court for violation of the Anti-Money Laundering Law.
3. No commercial bank shall make any loan or discount on the
security of shares of its own capital stock. 1. Can Rudy move to dismiss the case on the ground that he has
no criminal record? (2.5%)
Banks; Restrictions on Loan Accommodations (2006)
SUGGESTED ANSWER:
Pio is the president of Western Bank. His wife applied for a loan
with the said bank to finance an internet cafe. The loan officer No. Under the Anti-Money Laundering Law, Rudy would be guilty
told her that her application will not be approved because the of a "money laundering crime" committed when the proceeds of
grant of loans to related interests of bank directors, officers, and an "unlawful activity," like jueteng operations, are made to
stockholders is prohibited by the General Banking Law. Explain appear as having originated from legitimate sources. The money
whether the loan officer is correct. (5%) laundering crime is separate from the unlawful activity of being a
jueteng operator, and requires no previous conviction for the
SUGGESTED ANSWER: unlawful activity (See also Sec. 3, Anti-Money Laundering Act of
2001).
Section 36 of the General Banking Law of 2000 does not entirely
prohibit directors or officers of the bank, directly or indirectly, 2. To raise funds for his defense, Rudy sold the houses and lots to
from borrowing from the bank. In this case, Pio is the president of a friend. Can Luansing Realty, Inc. be compelled to transfer to the
Western Bank, which makes him an officer, director and buyer ownership of the houses and lots? (2.5%)
stockholder of the said bank. The General Banking Law provides
for additional restrictions to the bank before it can lend to its SUGGESTED ANSWER:
directors or officers.
Luansing Realty, Inc. is a real estate company, hence it is not a
A written approval of the majority vote of all the directors of the covered institution under Section 3 of the Anti-Money Laundering
bank, excluding the director concerned, is required. Furthermore, Act. Only banking institutions, insurance companies, securities
such dealings must be upon terms not less favorable to the bank dealers and brokers, pre-need companies and other entities
than those offered to others (Section 1326, Central Bank's administering or otherwise dealing in currency, commodities or
"Manual of Regulations for Banks and Other Financial financial derivatives are covered institutions. Hence, Luansing
Intermediaries, cited in Ranioso v. CA, G.R. No. 117416,
December 8, 2000). A violation of this provision will cause his or Realty, Inc. may not use the Anti-Money Laundering Act to refuse
her position to be declared vacant and the erring director or to transfer to the buyer ownership of the houses and lots.
officer subjected to the penal provisions of the New Central Bank
3. In disclosing Rudy's bank accounts to the AMLC, did the bank
Act.
violate any law? (2.5%)
Banks; Safety Deposit Box; Liability
SUGGESTED ANSWER:
MN and OP rented a safety deposit box at SIBANK. The parties
No, the bank did not violate any law. The bank being specified as
signed a contract of lease with the conditions that: the bank is
a "covered institution" under the Anti-Money Laundering Law, is
not a depository of the contents of the safe and has neither the
obliged to report to the AMLC covered and suspicious
possession nor control of the same; the bank assumed no interest
transactions, without thereby violating any law. This is one of
in said contents and assumes no liability in connection therewith.
the exceptions to the Secrecy of Bank Deposit Act. 4. Supposing
The safety deposit box had two keyholes: one for the guard key
the titles of the houses and lots are in possession of the Luansing
which remained with the bank; and the other for the renters' key.
Realty, Inc., is it under obligation to deliver the titles to Rudy?
The box can be opened only with the use of both keys.
(2.5%)
The renters deposited certificates of title in the box. But later,
SUGGESTED ANSWER:
they discovered that the certificates were gone. MN and OP now
claim for damages from SIBANK. Is the bank liable? Explain Yes, it has an obligation to deliver titles to Rudy. As Luansing
briefly. (5%) Realty, Inc. is not a covered institution under Section 3 of the
Anti-Money Laundering Act, it may not invoke this law to refuse
SUGGESTED ANSWER:
delivery of the titles to Rudy.
The bank is liable, based on the decisions of the Supreme Court in
Banks; Secrecy of Bank Deposit; Exceptions (2006)
CA Agro-Industrial Development Corp. v. Court of Appeals, 219
SCRA 426 (1993) and Sia v. Court of Appeals, 222 SCRA 24 Under Republic Act No.1405 (The Bank Secrecy Law), bank
(1993). In those cases, the Supreme Court ruled that the renting deposits are considered absolutely confidential and may not be
out of safety deposit boxes is a "special kind of deposit" wherein examined, inquired or looked into by any person, government
the bank is the depositary. In the absence of any stipulation official, bureau or office. What are the exceptions? (5%)
prescribing the degree of diligence required, that of a good father
of a family is to be observed by the depositary. Any stipulation SUGGESTED ANSWER:
exempting the depositary from any liability arising from the loss
of the thing deposited would be void for being contrary to law and The exceptions to the Bank Secrecy Law are the following:
public policy. The deposit box is located in the bank premises and
is under the absolute control of the bank.
 Page 4 of 10

1. Special or general examination of a bank, authorized by the not the disclosure contemplated by law. If anyone should be
Bangko Sentral ng Pilipinas' Monetary Board, in connection with a liable, it will be the bank employee who disclosed the information.
bank fraud or serious irregularity.
SUGGESTED ANSWER:
2. Examination by an independent Auditor, hired by the Bank and
for the Bank's exclusive use. b) Among the instances excepted from the coverage of the
Secrecy of Bank Deposits Act are Anti-graft cases. Hence Gigi
3. Disclosure with the Depositor's written permission. may not validly oppose the issuance of a subpoena duces tecum
for the bank records on her.
a. In case of Impeachment.
Banks; Secrecy of Bank Deposits (1991)
b. In cases of Bribery or dereliction of duty by a Public Officer,
upon order of a competent court. The law (RA 6832) creating a Commission to conduct a Thorough
Fact-Finding Investigation of the Failed Coup d’etat of Dec 1989,
c. In cases of money deposited/invested which, in turn, is the Recommend Measures to Prevent the Occurrence of Similar
subject of Litigation, upon order of a competent Court. Attempts At a Violent Seizure of Power and for Other Purposes,
provides that the Commission may ask the Monetary Board to
4. DOSRI Loans: Loans with their Banks of Bank Directors, disclose information on and/or to grant authority to examine any
Officers, Stockholders and related interests. bank deposits, trust or investment funds, or banking transactions
in the name of and/or utilized by a person, natural or juridical,
a. Loans in excess of 5% of the Bank's Capital & Surplus
under investigation by the Commission, in any bank or banking
b. The Borrower waived his right as regards the Secrecy of Bank institution in the Philippines, when the Commission has
Deposits reasonable ground to believe that said deposits, trust or
investment funds, or banking transactions have been used in
5. Violation of the Anti-Graft and Corrupt Practices Act. support or in furtherance of the objectives of the said coup d’etat.
Does the above provision not violate the Law on Secrecy of Bank
6. Coup d' etat Law (RA 6968, Oct 24,1990). Deposits (RA 1405)?

7. BIR Commissioner's authority to verify a decedent's Gross SUGGESTED ANSWER:

Estate and a taxpayer's request for a compromise agreement due
to incapacity to pay his tax liability. The Law on Secrecy of Bank Deposits is itself merely a statutory
enactment, and it may, therefore, be modified, or amended (such
8. Foreign Currency Deposits by foreign lenders & investors under as by providing further exceptions therefrom), or even repealed,
PDs 1034. expressly or impliedly, by a subsequent law. The Secrecy of Bank
Deposits Act did not amount to a contract between the depositors
9. Violations of the Anti-Money Laundering Law. and depository banks within the meaning of the nonimpairment
clause of the Constitution. Even if it did, the police power of the
10. When the State exercises/invokes its Police Power.
State is superior to the non-impairment clause. RA 6832, creating
(NOTA BENE: It is suggested that any 6 of the above be given full a commission to conduct an investigation of the failed 1989 coup
credit) d’etat and to recommend measures to prevent similar attempts to
seize power is a valid exercise of police power.
Banks; Secrecy of Bank Deposits (1990)
Banks; Secrecy of Bank Deposits (1992)
Manosa, a newspaper columnist, while making a deposit in a
bank, overheard a pretty bank teller informing a co-employee Socorro received $10,000 from a foreign bank although she was
that Gigi, a well known public official, has just a few hundred entitled only to $1,000.00. In an apparent plan to conceal the
pesos in her bank account and that her next check will in all erroneously sent amount, she opened a dollar account with her
probability bounce. Manosa wrote this information in his local bank, deposited the $10,000 and issued 4 checks in the
newspaper column. Thus, Gigifiled a complaint with the City Fiscal amount of $2,000 and 1 check for $1,000 each payable to
of Manila for unlawfully disclosing information about her bank different individuals who deposited the same in their respective
account. dollar accounts with different local banks.

a) Will the said suit prosper? Explain your answer. The sender bank then brought a civil suit before the RTC for the
recovery of the erroneously sent amount. In the course of the
b) Supposing that Gigi is charged with unlawfully acquiring wealth trial, the sender presented testimonies of bank officials to show
under RA 1379 and that the fiscal issued a subpoena duces tecum that the funds were, in fact, deposited in a bank by Socorro and
for the records of the bank account of Gigi. May Gigi validly paid out to several persons, who participated in the concealment
oppose the said issuance on the ground that the same violates and dissipation of the amount that Socorro had erroneously
the law on secrecy of bank deposits? Explain your answer. received.

SUGGESTED ANSWER: Socorro moved to strike out said testimonies from the record
invoking the law on secrecy of bank deposits. If you were the
a) The Secrecy of Bank Deposits Act prohibits, subject to its Judge, would you issue an order to strike them out? Why?
exclusionary clauses, any person from examining, inquiring or
looking into all deposits of whatever nature with banks or banking SUGGESTED ANSWER:
institutions in the Philippines which by law are declared
“absolutely confidential” in nature. Manosa who merely overheard I will not strike out the testimonies from the record. The
what appeared to be a vague remark of a Bank employee to a co- testimonies of bank officials indicating where the questioned
employee and writing the same in his newspaper column is dollar accounts were opened in depositing misappropriated sums
neither the inquiry nor disclosure contemplated by law. must be considered as likewise involved in litigation – one which
is among the excepted cases under the Secrecy of Bank Deposits
ALTERNATIVE ANSWER: Act (Melon Bank v Magsino 190 SCRA 633)

a) The complaint against Manosa will not prosper because merely Banks; Secrecy of Bank Deposits (1994)
writing a vague remark of a Bank employee to a co-employee is
 Page 5 of 10

Miguel, a special customs agent is charged before the of preliminary attachment. In addition to the writ, the Bank is
Ombudsman with having acquired property out of proportion to also served a subpoena to examine the account records of A. The
his salary, in violation of the Anti-Graft and Corrupt Practices Act. Bank declines to provide any information in response to the writ
The Ombudsman issued a subpoena duces tecum to the Banco de and moves to quash the subpoena invoking secrecy of bank
Cinco commanding its representative to furnish the Ombudsman deposits under RA 1405, as amended. Can the Bank justifiably
records of transactions by or in the name of Miguel, his wife and invoke RA 1405 and a) not respond to the writ and b) quash the
children. A second subpoena was issued expanding the first by subpoena for examination? (5%)
including the production of records of friends of Miguel in said
bank and in all its branches and extension offices, specifically SUGGESTED ANSWER:
naming them. Miguel moved to quash the subpoenas arguing that
they violate the Secrecy of Bank Deposits Law. In addition, he Yes. Whether the transaction is considered a sale or money
contends that the subpoenas are in the nature of “fishing placement does not make the money “subject matter of litigation”
expedition” or “general warrants” and are constitutionally within the meaning of Sec 2 of RA 1405 which prohibits the
impermissible with respect to private individuals who are not disclosure or inquiry into bank deposit except “in cases where the
under investigation. Is Miguel’s contention tenable? money deposited or invested is the subject matter of litigation”
nor will it matter whether the money was “swindled.”
SUGGESTED ANSWER:
Banks; Secrecy of Bank Deposits (2000)
No. Miguel’s contention is not tenable. The inquiry into illegally
acquired property extends to cases where such property is GP is a suspected jueteng lord who is rumored to be enjoying
concealed by being held by or recorded in the name of other police and military protection. The envy of many drug lords who
persons. To sustain Miguel’s theory and restrict the inquiry only to had not escaped the dragnet of the law, GP was summoned to a
property held by or in the name of the government official would hearing of the Committee on Racketeering and Other Syndicated
make available to persons in government who illegally acquire Crimes of the House of Representatives, which was conducting a
property an easy means of evading prosecution. All they have to congressional investigation “in aid of legislation” on the
do would be to simply place the property in the name of persons involvement of police and military personnel, and possibly even of
other than their spouses and children (Banco Filipino Savings vs. local government officials, in the illegal activities of suspected
Purisima 161 scra 576; Sec 8 Anti-Graft Law as amended by BP gambling and drug lords. Subpoenaed to attend the investigation
195) were officers of certain identified banks with a directive to them
to bring the records and documents of bank deposits of
Banks; Secrecy of Bank Deposits (1995) individuals mentioned in the subpoenas, among them GP. GP and
the banks opposed the production of the banks’ records of
Michael withdrew without authority funds of the partnership in the deposits on the ground that no such inquiry is allowed under the
amounts of P500th and US$50th for services he claims he Law on Secrecy of Bank Deposits (RA 1405 as amended). Is the
rendered for the benefit of the partnership. He deposited the opposition of GP and the banks valid? Explain.
P500th in his personal peso current account with Prosperity Bank
and the US$50th in his personal foreign currency savings account SUGGESTED ANSWER:
with Eastern Bank.
Yes. The opposition is valid. GP is not a public official. The
The partnership instituted an action in court against Michael, investigation does not involve one of the exceptions to the
Prosperity, and Eastern to compel Michael to return the subject prohibition against disclosure of any information concerning bank
funds to the partnership and pending litigation to order both deposits under the Law on Secrecy of Bank Deposits. The
banks to disallow any withdrawal from his accounts. Committee conducting the investigation is not a competent court
or the Ombudsman authorized under the law to issue a subpoena
At the initial hearing of the case the court ordered Prosperity to for the production of the bank record involving such disclosure.
produce the records of Michael’s peso current account, and
Eastern to produce the records of his foreign currency savings Banks; Secrecy of Bank Deposits; Exceptions (2004)
account.
The Law on Secrecy of Bank Deposits provides that all deposits of
Can the court compel Prosperity and Eastern to disclose the bank whatever nature with banks or banking institutions are absolutely
deposits of Michael? Discuss fully. confidential in nature and may not be examined, inquired or
looked into by any person, government official, bureau or office.
SUGGESTED ANSWER: However, the law provides exceptions in certain instances. Which
of the following may not be among the exceptions:
Yes, as far as the peso account is concerned. Sec 2 of RA 1405
allows the disclosure of bank deposits in case where the money 1. In cases of impeachment.
deposited is the subject matter of litigation. Since the case filed
against Michael is aimed at recovering the amount he withdrew 2. In cases involving bribery
from the funds of the partnership, which amount he allegedly
deposited in his account, a disclosure of his bank deposits would 3. In cases involving BIR inquiry.
be proper.
4. In cases of anti-graft and corrupt practices.
No, with respect to the foreign currency account. Under the
5. In cases where the money involved is the subject of litigation.
Foreign Currency Law, the exemption to the prohibition against
disclosure of information concerning bank deposits is the written Explain your answer or choice briefly. (5%)
consent of the depositor.
SUGGESTED ANSWER:
Banks; Secrecy of Bank Deposits (1998)
Under Section 6(F) of the National Internal Revenue Code, the
(20) An insurance company is deluded into releasing a check to A Commissioner of Internal Revenue can inquire into the deposits of
for P35th to pay for Treasury Bills (T-bills) which A claims to be a decedent for the purpose of determining the gross estate of
en route on board an armored truck from a government bank. such decedent. Apart from this case, a BIR inquiry into bank
The check is delivered to A who deposits it to his account with deposits cannot be made. Thus, exception 3 may not always be
XYZ Bank before the insurance company realizes it is a scam. applicable. Turning to exception 4, an inquiry into bank deposits
Upon such realization, the insurance company files an action is possible only in prosecutions for unexplained wealth under the
against A for recovery of the amount defrauded and obtains a writ Anti-Graft and Corrupt Practices Act, according to the Supreme
 Page 6 of 10

Court in the cases of Philippine National Bank v. Gancayco, 15 a) The P10th savings account and the P20th checking account are
SCRA 91 (1965) and Banco Filipino Savings and Mortgage Bank v. deemed insured by the PDIC.
Purisima, 161 SCRA 576 (1988).
b) The P10th savings account and the P20th checking account are
However, all other cases of anti-graft and corrupt practices will covered by the Law on Secrecy of Bank Deposits.
not warrant an inquiry into bank deposits. Thus, exception 4 may
not always be applicable. Like any other exception, it must be Responsibilities & Objectives of BSP (1998)
interpreted strictly. Exceptions 1, 2 and 5, on the other hand, are
provided expressly in the Law on Secrecy of Bank Depositors. What are the responsibilities and primary objectives of the BSP?
They are available to depositors at all times. (5%)

Banks; Secrecy of Bank Deposits; Garnishment (2001) SUGGESTED ANSWER:

The Law on Secrecy of Bank Deposits, otherwise known as RA The BSP shall provide policy directions in the areas of money,
1405, is intended to encourage people to deposit their money in banking and credit. It shall have supervision over the operations
banking institutions and also to discourage private hoarding so of banks and exercise such regulatory powers as provided in the
that the same may be properly utilized by banks to assist in the Central Bank Act and other pertinent laws over the operations of
economic development of the country. Is a notice of garnishment finance companies and non-bank financial institutions performing
served on a bank at the instance of a creditor of a depositor quasi-banking functions, such as quasi-banks and institutions
covered by the said law? State the reason(s) for your answer. performing similar functions.
(5%)
The primary objective of the BSP is to maintain price stability
SUGGESTED ANSWER: conducive to a balanced and sustainable growth of the economy.
It shall promote and maintain monetary stability and convertibility
No. The notice of garnishment served on a bank at the instance of of the Peso.
a creditor is not covered by the Law on Secrecy of Bank Deposits.
Garnishment is just a part of the process of execution. The Truth in Lending Act (1991)
moment a notice of garnishment is served on a bank and there
Dana Gianina purchased on a 36 month installment basis the
exists a deposit by the judgment debtor, the bank is directly
latest model of the Nissan Sentra Sedan car from the Jobel Cars
accountable to the sheriff, for the benefit of the judgment
Inc. In addition to the advertised selling price, the latter imposed
creditor, for the whole amount of the deposit. In such event, the
finance charges consisting of interests, fees and service charges.
amount of the deposit becomes, in effect, a subject of the
It did not, however, submit to Dana a written statement setting
litigation.
forth therein the information required by the Truth in Lending Act
BSP; Receivership; Jurisdiction (1992) (RA 3765). Nevertheless, the conditional deed of sale which the
parties executed mentioned that the total amount indicated
Family Bank was placed under statutory receivership and therein included such finance charges.
subsequently ordered liquidated by the Central Bank (CB) due to
fraud and irregularities in its lending operations which rendered it a. Has there been substantial compliance of the aforesaid Act?
insolvent. Judicial proceedings for liquidation were thereafter
b. If your answer to the foregoing question is in the negative,
commenced by the CB before the RTC. Family Bank opposed the
what is the effect of the violation on the contract?
petition.
c. In the event of a violation of the Act, what remedies may be
Shortly thereafter, Family Bank filed in the same court a special
availed of by Dana?
civil action against the CB seeking to enjoin and dismiss the
liquidation proceeding on the ground of grave abuse of discretion SUGGESTED ANSWER:
by the CB. The court poised to: 1) restrain the CB from closing
Family Bank; and 2) authorize Family Bank to withdraw money a) There was no substantial compliance with the Truth in Lending
from its deposits during the pendency of the case. If you were the Act. The law provides that the creditor must make a full
Judge, would you issue such orders? Why? disclosure of the credit lost. The statement that the total amount
due includes the principal and the financial charges, without
SUGGESTED ANSWER: specifying the amounts due on each portion thereof would be
insufficient and unacceptable.
No. The RTC has no authority to restrain the monetary board of
the BSP from statutory authority to undertake receivership and b) A violation of the Truth in Lending Act will not adversely affect
ultimate liquidation of a bank. Any opposition to such an action the validity of the contract itself.
could be made to the court itself where assistance is sought. The
action of the RTC where the proceeding is pending appeal have to c) It would allow Dana to refuse payment of financial charges or,
be made in the Court of Appeals. if already paid, to recover the same. Dana may also initiate
criminal charges against the creditor.
PDIC Law vs. Secrecy of Bank Deposits Act (1997)
ALTERNATIVE ANSWER:
An employee of a large manufacturing firm earns a salary which is
just a bit more than what he needs for a comfortable living. He is c) (Per Atty Jomby Paras if u read the provisions closely) Under
thus able to still maintain a P10,000 savings account, a P20,000 the Truth in Lending Act, said financial charges are valid, and
checking account, a P30,000 money market placement and a Dana may not refuse payment thereof. Only criminal charges may
P40,000 trust fund in a medium-size commercial bank. be initiated against the creditor.

a) State which of the four accounts are deemed insured by the Truth in Lending Act (2000)
PDIC.
Embassy Appliances sells home theater components that are
b) State which of the above accounts are covered by the Law on designed and customized as entertainment centers for consumers
Secrecy of Bank Deposits. within the medium-to-high price bracket. Most, if not all, of these
packages are sold on installment basis, usually by means of credit
SUGGESTED ANSWER: cards allowing a maximum of 36 equal monthly payments.
Preferred credit cards of this type are those issued by banks,
 Page 7 of 10

which regularly hold mall wide sales blitzes participated in by SCRA 24 (1993); CA Agro-Industrial Development Corp. v. Court
appliance retailers like Embassy Appliances. You are a buyer of a of Appeals, 219 SCRA 426(1993)).
home theater center at Embassy Appliances. The salesclerk who
is attending to you simply swipes your credit card on the ALTERNATIVE ANSWER:
electronic approval machine (which momentarily prints out your
charge slip since you have unlimited credit), tears the slip from The legal relationship of the bank and its safety deposit box client
the machine, hands the same over to you for your signature, and is that of lessor and lessee.
without more, proceeds to arrange the delivery and installation of
(B) Is a stipulation in the contract for the use of a safety deposit
your new home theater system. You know you will receive a
box relieving the bank of liability in connection with the use
statement on your credit card purchases from the bank containing
thereof valid? (2%).
an option to pay only a minimum amount, which is usually 1/36
of the total price you were charged for your purchase. Did SUGGESTED ANSWER:
Embassy Appliances comply with the provisions of the Truth in
Lending Act (RA 3765)? The stipulation relieving the bank of liability in connection with
the use of the safety deposit box is void as it is against law and
SUGGESTED ANSWER: public policy (CA Agro-Industrial Development Corp. v. Court of
Appeals, supra).
There is no need for Embassy Appliances to comply with the Truth
in Lending Act. The transaction is not a sale on installment basis. Banks; Money Laundering: Predicate Crimes (2007)
Embassy Appliances is a seller on cash basis. It is the credit card
company which allows the buyer to enjoy the privilege of paying No. X. Name at least five predicate crimes to money laundering.
the price on installment basis. (5%)

------- SUGGESTED ANSWER:

Banks; Bank Deposits vs. Deposit Substitutes (2010) Any five of the following are predicate crimes to money
laundering:
No.II. (C) Differentiate ―bank deposits‖ from ―deposit
substitutes.‖ (2%) (1) Kidnapping for ransom under Article 267 of Act No.3815,
otherwise known as the Revised Penal Code, as amended;
SUGGESTED ANSWER:
(2) Sections 3,4,5,7,8 and 9 of Article Two of Republic Act No.
Bank deposits are funds obtained by a bank from the public which 6425, as amended, otherwise known as the Dangerous Drugs Act
are relent by such bank to its own borrowers. Deposit substitutes of 1972;
are alternative forms of obtaining funds from the public, other
than deposits, through the issuance, endorsement, or acceptance (3) Section 3 paragraphs B,C,E,G,H and I of Republic Act No.
of debt instruments for the own account of the borrower, for the 3019, as amended; otherwise known as the Anti-graft and
purpose of relending or purchasing of receivables and other Corrupt Practices Act;
obligations. These instruments may include, but need not be
limited to, banker’s acceptances, promissory notes, participations, (4) Plunder under Republic Act No. 7080, as amended;
certificates of assignment and similar instruments with recourse,
and repurchase agreements (Section 95, Rep. Act No. 7653, “The (5) Robbery and extortion under Articles
New Central Bank Act”). 294,295,296,299,300,301 and 302 of the Revised Penal Code, as
amended;
(D) Why are banks required to maintain reserves against their
deposits and deposit substitutes? State one of three purposes for (6) Jueteng and Masiao punished as illegal gambling under
these reserves. (2%) Presidential Decree No. 1602;

SUGGESTED ANSWER: (7) Piracy on the high seas under the Revised Penal Code, as
amended and Presidential Decree No. 532;
Any one of the following 4 purposes for requiring banks to
maintain reserves against their deposits and deposit substitutes (8) Qualified theft under Article 310 of the Revised Penal Code, as
will suffice: amended; (9) Swindling under Article 315 of the Revised Penal
Code, as amended.
(1) One of the purposes of the requirement to maintain bank
reserves is to control the volume of money created by the credit (9) Swindling under 315 of the Revised Penal code, as amended;
operations of the banking system (Section 94 of the New Central
(10) Smuggling under Republic Act Nos. 455 and 1937
Bank Act);
(11) Violations under Republic Act No. 8792, otherwise known as
(2) It is to enable the banks to answer any withdrawal;
the Electronic Commerce Act of 2000
(3) To help Government to finance its operation;
(12) Hijacking and other violations under Republic Act No
(4) To help the Government control money supply. 6235;destructive arson and murder, as defined under the Revised
Penal Code, as amended, including those perpetrated by terrorist
Banks; Deposit: Safety Deposit Box, Relationship from against non-combatant persons and similar targets;
Banks (2010)
(13) Fraudulent practices and other violations under Republic Act
No.II. (A) How do you characterize the legal relationship between No. 8799, otherwise known as the securities Regulation Code of
a commercial bank and its safety deposit box client? (20%) 2000

SUGGESTED ANWERS: (14) Felonies or offenses of a similar nature those are punishable
under the penal laws of other countries. (Sec 3, Anti-Money
The Relationship between a commercial bank and its safety Laundering Act of 2001).
deposit box client is that of a bailee and a bailor, the bailment
being for hire and mutual benefit (Sia v. Court of Appeals, 222 Banks; Mortgage; Redemption (2007)
 Page 8 of 10

No.IX. On December 4, 2003, RED Corporation executed a real money market placement. Under the Philippine Deposit Insurance
estate mortgage in favor of BLUE Bank. RED Corporation Corporation Act, how much could Manuel recover? Explain. (2%)
defaulted in the payment of its loan. Consequently, on June 4,
2004, BLUE Bank extra judicially foreclosed the property. Being SUGGESTED ANSWER:
the highest bidder in the auction sale conducted, the Bank was
issued a Certificate of Sale which was registered on August 4, Manuel can recover P500, 000.00, because this is the total of his
2004.Does RED Corporation still have the right to redeem the savings deposit, time deposit and current account (Section 4(g) of
property as of September 14, 2007? Reason briefly. (5%) Republic Act No. 3591, as amended). The trust account and the
money market placements are not included in the insured
SUGGESTED ANSWER: deposits (section 4(f) of Republic Act No. 3591, as amended).

No, RED Corporation has lost its right to redeem the property. Banks; Receivership (2007)
Juridical persons whose property is sold pursuant to an
extrajudicial foreclosure, shall have the right to redeem the No.VIII. Due to growing financial difficulties, Z Bank was unable
property until registration of the certificate of sale with the to finish construction of its 21-storey building on a prime lot
Register of Deeds, which shall in no case be more than three located in Makati City. Inevitably, the Bangko Sentral ordered the
months after foreclosure, whichever is earlier (Section 47, closure of Z Bank and consequently placed it under receivership.
General Banking Law). In a bid to save the bank’s property investment, the President of
Z Bank entered into a financing agreement with a group of
Banks; Insolvency; Actions of the Monetary Board (2009) investors for the completion of the construction of the 21-storey
building in exchange for a ten-year lease and the exclusive option
No.VIII. Maharlikang Pilipino Banking Corporation (MPBC) to purchase the building.(10%) (A) Is the act of the President
operates several branches of Maharlikang Pilipino Rural Bank in valid? Why or why not?
Eastern Visayas. Almost all the branch managers are close
relatives of the members of the Board of Directors of the SUGGESTED ANSWER:
corporation. Many undeserving relatives of the branch managers
were granted loans. In time, the branches could not settle their No, the bank president’s act is not valid. He had no authority to
obligations to depositors and creditors. Receiving reports of these enter into the financing agreement. Z Bank was ordered closed
irregularities, the Supervising and Examining Department (SED) and placed under receivership. Control over the properties of Z
of the Monetary Board prepared a detailed report (SED Report) Bank passed to the receiver. The appointment of a receiver
specifying the facts and the chronology of events relative to the operates to suspend the authority of the bank and its officers over
problems that beset MPBC rural bank branches. The report the bank’s assets and properties, such authority being reposed in
concluded that the bank branches were unable to pay their the receiver (Abacus Real Estate Development Center, Inc. v.
liabilities as they fell due, and could not possibly continue in Manila Banking Corporation, 455 SCRA 97 (2005)).
business without incurring substantial losses to its depositors and
(B) Will a suit to enforce the exclusive right of the investors to
creditors.
purchase the property prosper? Reason briefly.
(A) May the Monetary Board order the closure of the MPBC rural
SUGGESTED ANSWER:
banks relying only on the SED Report, without need of an
examination? Explain. (3%) No, the exclusive options granted to the investors, having been
entered into by one without authority to do so, is unenforceable.
SUGGESTED ANSWER:
The bank, therefore, cannot be compelled to sell the property.
Yes. Upon receipt of the report of the SED, the Monetary Board is Under Section 30 of Republic Act No. 7653, New Central Bank
authorized to take any of the actions enumerated under Sec. 30, Act, the properties of Z Bank should be administered for the
Republic Act No. 7653, otherwise known as the New Central Bank benefit of its creditors. The property in question can be disposed
Act, leading to the receivership and liquidation of a bank or quasi- of only for the purpose of paying the debts of Z Bank (Sec. 30,
bank. Republic Act No. 7653, and New Central Bank Act).

There is no requirement that an examination be first conducted Banks; Receivership; Prohibited Transaction (2009)
before a banking institution may be placed under receivership
No.I. (E) A bank under receivership can still grant new loans and
( Rural Bank of Buhi v. Court of Appeals, 162 SCRA 288 (1988)).
accept new deposits.
(B) If MPBC hires you as lawyer because the Monetary Board has
SUGGESTED ANSWER:
forbidden it from carrying on its business due to its imminent
insolvency, what action will you institute to question the Monetary False. During the receivership, the assets and properties of the
Board’s order? Explain. (3%)] corporation are being gathered for conversion into cash in
preparation for distribution to creditors. Granting new loans and
SUGGESTED ANSWER:
accepting new deposits would constitute doing business for the
The order of the Monetary Board may be questioned on a petition bank in the ordinary course of business which is contrary to the
for certiorari on the ground that the action taken was in excess of purpose and nature of a receivership proceeding.
jurisdiction or with grave abuse of discretion amounting to lack or
Banks; Secrecy of Bank Deposit; AMLC (2013)
excess of jurisdiction. The petition of certiorari may only be filed
by the stockholders of record representing themajority of the No.III. From his first term in 2007, Congressman Abner has been
capital stock within ten (10) days from receipt by the board of endorsing his pork barrel allocations to Twin Rivers in exchange
directors of MPBC of the order directing receivership, liquidation for a commission of 40% of the face value of the allocation. Twin
or conservatorship (Sec. 30, par. (2), R.A. No. 7653). Rivers is a non-governmental organization whose supporting
papers, after audit, were found by the Commission on Audit to be
Banks; Insolvency; Claims (2010)
fictitious. Other than to prepare and submit falsifies papers to
No.XIV. When OCCIDENTAL Bank folded up due to insolvency, support the encashment of the pork barrel checks, Twin Rivers
Manuel had the following separate deposits in his name: does not appear to have done anything on the endorsed projects
P200,000 in savings deposit; P250,000 in time deposit; P50,000 and Congressman Abner likewise does not appear to have
in current account; P1 million in a trust account and P3 million in bothered to monitor the progress of the project he endorsed. The
congressmen converted most of the commissions he generated
into US dollars, and deposited these in a foreign currency account
 Page 9 of 10

with Banco de Plata (BDP). Based on amply-supported tips given merely a collateral contract, it can be enforced only to the
by a congressman from another political party, the Anti-Money amount of the loan; and the moment the loan exposure is
Laundering Council sent B DP an order: (1) to confirm Cong. reduced, then automatically, reduction of the collateral coverage
Abner’s deposits with the bank and to provide details of these of the real estate mortgage follows.
deposits; and (2) to hold all withdrawals and other transactions
involving the congressman’s bank accounts. As counsel for BDP, Truth in Lending Act (2009)
would you advise the bank to comply with the order? (8%)
No.XI. (A) A loan agreement which provides that the debtor shall
SUGGESTED ANSWER: pay interest at the rate determined by the bank’s branch manager
violates the disclosure requirement of the Truth in Lending Act.
I shall advise Banco de Plata not to comply with the order of the
Anti-Money Laundering Council. It cannot inquire into the deposits SUGGESTED ANSWER:
of Congressman Abner, regardless of currency, without a bank
inquiry order from a competent court, because crimes involved True. This contrary to the duty of the creditor to disclose in detail
are not kidnapping for ransom, violations of the Comprehensive the interests, charges and other figures indicating in detail the
Dangerous Drugs Act, hijacking and other violations of Republic cost of the credit granted to the debtor (United Coconut Planters
Act No. 6235, destructive arson, murder, and terrorism and Bank v. Beluso, 530 SCRA 567 (2007)).
conspiracy to commit terrorism (Section 11 of Anti-Money
Laundering Act).
2014
The Anti-Money Laundering Council cannot order Banco de Plata
to hold all withdrawals and other transactions involving the XI.
accounts of Congressman Abner. It is the Court of Appeals which
has the power to issue a freeze order over the accounts upon A. Why is the Bangko Sentral ng Pilipinas considered a lender of
petition of the Anti-Money Laundering Council (Anti-Money last resort? (2%)
Laundering Act; Republic v. Cabrini Green Ross, 489 SCRA 644,
B. Distinguish a conservator from a receiver of a bank. (2%)
2006).
XII.
Banks; Secrecy of Bank Deposits (2009)
A. Raymond invested his money in securities issued by the
No.I. (B) If the Ombudsman is convinced that there is a violation
Philippine government, through his bank. Subsequently, the
of law after investigating a complaint alleging illicit bank deposits
Bureau of Internal Revenue asked his bank to disclose his
of public officer, the Ombudsman may order the bank concerned
investments. His bank refused the request for disclosure on the
to allow in camera inspection of bank records and documents.
ground that the investments are confidential under the Secrecy of
SUGGESTED ANSWER: Bank Deposits Law (Republic Act No. 1405, as amended). Is the
bank's refusal justified? Defend your answer. (2%)
False. The Bank Secretary Law prohibits the inspection of a bank
account unless the permission of the account holder is obtained, B. First Bank received an order of garnishment over a client's
or upon lawful order of the court or when the deposit is the peso and dollar deposits in First Bank. Should First Bank comply
subject of litigation. Investigation by the Ombudsman is not with that order? Explain. (3%)
considered as a pending litigation to allow the examination of the
XIII.
bank records and documents (Marquez v. Desierto, 359 SCRA 772
(2001)). A. A commercial bank wants to acquire shares in a cement
manufacturing company. Do you think it can do that? Why or why
Banks; Single Borrower’s Limit; Collateral Security (2008)
not? (2%)
No.XIX. Industry Bank, which has a net worth of P1 Billion,
B. A court found the interest charged by a bank as excessive and
extended a loan to Celestial Properties Inc. amounting to P270
unconscionable and struck down the contractual stipulation on
Million. The loan was secured by a mortgage over a vast
interest. If you were the judge, what would you impose as the
commercial lot in the Fort Bonifacio Global City, appraised at P350
applicable interest rate? State your legal basis. (2%)
Million. After audit, the Banko Sentral ng Pilipinas gave notice
that the loan to Celestial Properties exceeded the single C. What is the single borrower's limit? (2%)
borrower’s limit of 25% of the bank’s net worth under a recent
BSP Circular. In light of other previous similar violations of the XVI.
credit limit requirement, the BSP advised Industry Bank to reduce
the amount of the loan to Celestial Properties under pain of A. On the anti-money laundering laws:
severe sanctions. When Industry Bank informed Celestial
Properties that it intended to reduce the loan by P50 Million, 1. What is the distinction between a "covered transaction report"
Celestial Properties countered that the bank should first release a and a "suspicious transaction report"? (2%)
part of the collateral worth P50 Million. Industry Bank rejected the
2. Does the Anti-Money Laundering Council have the authority to
counter-proposal, and referred the matter to you as counsel. How
freeze deposits? Explain. (2%)
would you advise Industry Bank to proceed, with its best interests
in mind? (5%) 2016 BAR
SUGGESTED ANSWER: XIV
With a net worth of P1.0 Billion, the maximum loan exposure of X, a government official, has a number of bank accounts in T
the bank to Celestial Properties can reach up to P250.0 Million. Bank containing millions of pesos. He also opened several trust
The bank should proceed with to reduce the loan of Celestial accounts in the same bank which specifically covered the
properties by P20.0 Million, but should not release any part of the placement and/or investment of funds. X was later charged with
collateral by the amount of reduction. The collateral is a single graft and corruption before the Sandiganbayan (SB) by the
commercial lot in the Fort, covered by a single title and beings Ombudsman. The Special Prosecutor filed a motion praying for a
essentially indivisible in character, the mortgage cannot be court order authorizing it to look into the savings and trust
“partially released.” Besides, since a real estate mortgage cannot accounts of X in T Bank. X opposed the motion arguing that the
be “partially released.” Besides, since a real estate mortgage is
 Page 10 of 10

trust accounts are not "deposits" under the Law on Secrecy of

Bank Deposits (Rep. Act No. 1405). Is the contention of X
correct? Explain. (5%)

2017 BAR

III. C. Samito is the President and a Director of Lucky Bank

(Lucky}, a commercial bank holding its main office in Makati. His
brother, Othello, owned a big fishing business based in Malabon.
Othello applied for a loan of PSO Million with Lucky. Othello
followed the ordinary banking procedures in all the stages of the
processing of his application. When required, he made the
necessary arrangements to guarantee the loan. Thus, in addition
to the real estate mortgage, Othello executed a joint and solidary
suretyship, issued postdated checks, and submitted all other
requirements prescribed by Lucky.

When the loan application was about to be approved and the

proceeds released, BG Company, a keen competitor of Othello in
the fishing industry, wrote to the Board of Directors and the
management of Lucky questioning the loan on the ground of
conflict of interest due to Samito and Othello being brothers,
citing the legal restriction against bank exposure of directors,
officers, stockholders or their related interests (DOSRI).

(a) What are the three restrictions imposed by law on DOSRI

transactions? (4%)

(b) Is BG Company's opposition based on conflict of interest and

violation of the restrictions on DOSRI transactions legally and
factually correct? Explain your answer. (4%)

XVIII. B.

Prosperous Bank is a domestic bank with head office in Makati. It

handles the banking requirements of thousands of clients.

The AMLC initiated a discreet investigation of the financial

transactions of Lorenzo, a suspected drug trafficker based in Naga
City. The intelligence group of the AMLC, in coordination with the
counterpart group from the PDEA and the NBI, gathered ample
evidence establishing Lorenzo's unlawful drug activities. The
AMLC had probable cause that his deposits and investments in
various banks, including Prosperous Bank, were related to money
laundering.

Accordingly, the AMLC now transmits to Prosperous Bank a formal

demand to allow its agents to examine the banking transactions
of Lorenzo, but Prosperous Bank refuses the demand.

Is Prosperous Bank's refusal justified? Explain your answer. (4%)

2018 BAR

XVIII

Through various acts of graft and bribery, Mayor Ycasiano

accumulated a large amount of wealth which he converted into
U.S. dollars and deposited in a Foreign Currency Deposit Unit
(FCDU) account with the Yuen Bank (YB). On a tip given by the
secretary of the mayor, the Anti-Money Laundering Council
(AMLC) sent an order to YB to confirm the amount of U.S. dollars
that Mayor Ycasiano had in his FCDU account. YB claims that,
under the Foreign Currency Deposit Act (R.A. No. 6426, as
amended), a written permission from the depositor is the only
instance allowed for the examination of FCDU accounts. YB
alleges that AMLC on its own cannot order a banking institution to
reveal matters relating to bank accounts.

(a) Is the legal position of YB, in requiring written permission

from the depositor, correct? (2.5%)

(b) Does AMLC have the power to order a banking institution to

reveal matters relating to bank accounts? (2.5%)