NEW CENTRAL BANK ACT

Republic Act 7653

A. Characteristics and Nature of Bangko Sentral ng Pilipinas

• It is an independent central monetary authority. (sec. 1)

• Fully government-owned and control corporation with P50B
capital. (sec. 2)
• The BSP shall be exempt for a period of five (5) years from the
approval of RA 7653 from all national, provincial, municipal and
city taxes, fees, and from all other taxes, assessments and
charges related to such importation and exportation.
 A. Characteristics and Nature of Bangko Sentral ng Pilipinas

• Officers and employees of the Bangko Sentral ng Pilipinas,

including all the members of the Monetary Board, shall not
engage directly or indirectly in partisan activities or take part in
any election except to vote.
• The BSP shall not acquire shares of any kind or accept them as
collateral, and shall not participate in the ownership or
management of any enterprise, either directly or indirectly.
 A. Characteristics and Nature of Bangko Sentral ng Pilipinas

• The BSP shall not engage in development banking or financing:

Provided, however, that outstanding loans obtained or extended
for development financing shall not be affected by the prohibition
of this section
 B. Primary Responsibility and Objective of BSP

• The BSP shall provide policy directions in the areas of money,

banking, and credit.
• It shall have the supervision over the operations of banks and
exercise such regulatory powers provided in RA 7653 and other
pertinent laws over the operations of finance companies and non-
bank financial institutions performing quasi-banking functions, and
institutions performing similar functions.
 B. Primary Responsibility and Objective of BSP

• Primary objective of the BSP is to maintain price stability

conducive to a balanced and sustainable growth of the economy.
• It shall also promote and maintain monetary stability and
convertibility of the Peso.
 C. Governing Body of BSP
(BSP Monetary Board)

a. Composition of BSP Monetary Board (sec. 6)

 BSP Governor
 Another member of the Cabinet
 5 members from the private sector
 b. Qualifications of members of the BSP Monetary Board (Sec. 8)

i. Natural- born citizens of the Philippines

ii. 35 years of age
iii. Of good moral character, of unquestionable integrity, of known
probity and patriotism
iv. with recognized competence in social and economic disciplines
 c. Inhibitions and Disqualifications of members of the BSP Monetary
Board (Sec. 9)

i. Disqualifications imposed by RA 6713

ii. A member of the MB 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 of the Bangko Sentral.
iii. the members of the MB coming from the Private sector shall not hold
any other public office during their tenure.
iv. No person shall be a member of the MB if he has been connected
directly with any multilateral banking or has a substantial interest in
any private bank in the Philippines.
d. Grounds for Removal of member of BSP Monetary Board by President
of the Philippines (Sec. 10)

i. If the member is subsequently disqualified under the provisions of

RA 7653.
ii. If he is physically or mentally incapacitated
iii. If the member is guilty of acts or operations which are of fraudulent
or illegal
iv. If the member no longer possesses the qualifications specified in
Section 8 RA 7653
 D. Legal Tender Power of Coins and Note
Legal Tender - refers to the type of currency which a debtor can
compel a creditor to accept in case of obligation to pay a sum of
money.

a. Unit of Monetary Value (Sec. 48)

i. the PESO “₱”

ii. centavos “c”

b. Definition of Currency (Sec. 49)

 c. Exclusive Issue Power of BSP (Sec. 50)
 Sole Power
 No other person or entity, may put into circulation notes, coins or any
other object or document which, in the opinion of the MB, might
circulate as currency, nor reproduce or imitate the facsimiles of Bangko
Sentral notes without prior authority from the Bangko Sentral.
 The MB may issue such regulations as it may deem advisable in order to
prevent the circulation of foreign currency or of currency substitutes as
well as to prevent the reproduction of facsimiles of Bangko Sentral notes.
 Authority to investigate, make arrests, conduct searches and seizures in
accordance with law.
 Offense punishable by imprisonment of not less than 5years but not
more than 10 years.
 d. Liability for Notes and Coins (Sec.51)

 Notes and Coins issued by the Bangko Sentral shall be liabilities of the
Bangko Sentral and may be issued only against, and in amounts not
exceeding , the assets of the Bangko Sentral.
 Shall not be considered as part of its currency issue and accordingly, shall
not form part of the assets or liabilities of the Bangko Sentral.
 e. Legal Tender Power of BSP ( Sec. 52)

Legal Tender
- refers to the type of currency which a debtor can compel a creditor to
accept in case of obligation to pay a sum of money.

 All notes and coins issued by the Bangko Sentral shall be fully guaranteed
by the Government of the Republic of the Philippines and shall be legal
tender in the Philippines for all debts, both public and private.
 e. Legal Tender Power of BSP ( Sec. 52)

 5 centavos, 10 centavos and 25

centavos - Up to ₱100 only
 ₱1 coin, ₱5 coin, ₱10 coin - Up
to ₱1000 only
 ₱20, ₱50, ₱100, ₱200, ₱500,
₱1000 bills or notes - Unlimited
legal tender.
Anti-coin hoarding bill exempts piggy bank users
• Senate Bill No. 2452 or the
proposed Anti-Hoarding of
Philippine Legal Tender Coins
Act will exempt individuals who
save coins in piggy banks, jars,
drawers and wallets "because the
volume is so small," said Senator
Sergio Osmeña III, who authored
the bill.
 e. Legal Tender Power of BSP ( Sec. 52)

The MB , with the approval of

the Pres. of the Philippines,
shall prescribe the
denominations, dimensions,
designs, inscriptions and other
char. of notes issued by the
Bangko Sentral.
 f. Printing of Notes and Minting of Coins (Sec. 54)

 The Monetary Board shall prescribe the amounts of notes and coins to be
printed and minted, respectively, and the conditions to which the
printing of notes and the minting of coins shall be subject. The Monetary
Board shall have the authority to contract institutions, mints or firms for
such operations.
 All expenses incurred in the printing of notes and the minting of coins
shall be for the account of the Bangko Sentral.
 g. Interconvertibility of Currency (Sec.55)

 The Bangko Sentral shall exchange, on demand and without charge,

Philippine currency of any denomination for Philippine notes and coins
of any other denomination requested. If for any reason the Bangko
Sentral is temporarily unable to provide notes or coins of the
denominations requested, it shall meet its obligations by delivering notes
and coins of the denominations which most nearly approximate those
requested.
 h. Replacement of Currency Unfit for Circulation (Sec.56)

 The Bangko Sentral shall withdraw from circulation and shall demonetize
all notes and coins which for any reason whatsoever are unfit for
circulation and shall replace them by adequate notes and coins.
 A currency note shall be considered unfit for circulation when:

a. It contains heavy creases which break the fiber of the paper and indicate
that disintegration has begun. Provided, however, that mere creasing or
wrinkling which has not broken nor weakened the note does not render the
note unfit for circulation; or

b. It is badly soiled/contaminated and/or with writings even if it has proper

life or sizing; or

c. It presents a limp or rag-like appearance.

A currency note shall be considered mutilated when:

a. Torn parts of banknotes are joined together with adhesive tape in a

manner which tries to preserve as nearly as possible the original design and
size of the note; or
b. The original size of the note has been reduced/lost through wear and tear
or has been otherwise torn, damaged, defaced or perforated through action
of insects, chemicals or other causes; or
c. It is scorched or burned to such an extent that although recognizable as
such, it has become frail and brittle as to render further handling thereof
impossible without disintegration or breaking; or
d. It is split edgewise; or
e. It has lost all the signatures inscribed thereon.
A currency coin shall be considered unfit for circulation when:
a. It is bent or twisted out of shape or defaced, but its genuineness and/or
denomination can still be readily and clearly determined/identified; or
b. It has been considerably reduced in weight by natural abrasion/wear and
tear.

A currency coin shall be considered mutilated when:

a. It shows signs of filing, clipping or perforation; or

b. It shows signs of having been burned or has been so defaced, that its
genuineness and/or denomination cannot be readily and clearly identified.
 i. Retirement of Old Notes and Coins (Sec. 57)

 The Bangko Sentral may call in

for replacement notes of any
series or denomination which are
more than five (5) years old and
coins which are more than (10)
years old.
 Notes and coins called in for
replacement in accordance with
this provision shall remain legal
tender for a period of one (1) year
from the date of call
 E. Supervision and examination of banks and quasi-banking
institutions

Article IV SEC. 25. Supervision and Examination. _ The Bangko

Sentral shall have supervision over, and conduct periodic or special
examinations of, banking institutions and quasi-banks, including
their subsidiaries and affiliates engaged in allied activities.
 E. Supervision and examination of banks and quasi-banking
institutions

• Scope of examination may include, but need not be limited to, the following:
(1) Appraisal of the overall quality of corporate governance;
(2) Assessment of the risk management system, which shall include the
evaluation of the effectiveness of management oversight and self-
assessment functions (e.9., internal audit, risk management and
compliance); adequacy of policies, procedures, and limits; effectiveness of
risk measurement, monitoring and management information system; and
robustness of internal controls;
(3) Review of the institution's operations and overall risk profile;
(4) Evaluation of financial performance, capital adequacy, asset quality, and
liquidity; and
(5) Any other activity relevant to the above
 E. Supervision and examination of banks and quasi-banking
institutions

• Refusal to permit examination.

Any act or omission that impedes, delays or obstructs the duly
authorized BSP examiner from conducting an examination, including
the act of refusing to accept or honor the letter of authority to
examine presented by the examiner of the BSP, shall be considered
as a refusal to permit examination.
 E. Supervision and examination of banks and quasi-banking
institutions

• SEC. 34. Refusal to Make Reports or Permit Examination. _ Any officer,

owner, agent, manager, director or officer-in-charge of any institution subject
to the supervision or examination by the Bangko Sentral within the purview of
this Act who, being required in writing by the Monetary Board or by the head
of the supervising and examining department willfully refuses to file the
required report or permit any lawful examination into the affairs of such
institution shall be punished by a fine of not less than Fifty thousand pesos
(P50,000) nor more than One hundred thousand pesos (P100,000) or by
imprisonment of not less than one (1) year nor more than five (5) years, or
both, in the discretion of the court.
 E. Supervision and examination of banks and quasi-banking
institutions

A. The supervising and examining department head, personally or

by deputy, shall examine the books of every banking institution
once in every twelve (12) months, and at such other times as the
Monetary Board by an affirmative vote of five (5) members, may
deem expedient and to make a report on the same to the
Monetary Board: Provided, That there shall be an interval of at
least twelve (12) months between annual examinations.
 E. Supervision and examination of banks and quasi-banking
institution

B. The bank concerned shall afford to the head of the appropriate

supervising and examining departments and to his authorized
deputies full opportunity to examine its books, cash and available
assets and general condition at any time during banking hours when
requested to do so by the Bangko Sentral: Provided, however, That
none of the reports and other papers relative to such examinations
shall be open to inspection by the public except insofar as such
publicity is incidental to the proceedings hereinafter authorized or is
necessary for the prosecution of violations in connection with the
business of such institutions.
 E. Supervision and examination of banks and quasi-banking
institution

C. Banking and quasi-banking institutions which are subject to

examination by the Bangko Sentral shall pay to the Bangko Sentral,
within the first thirty (30) days of each year, an annual fee in an
amount equal to a percentage as may be prescribed by the
Monetary Board of its average total assets during the preceding
year as shown on its end-of-month balance sheets, after deducting
cash on hand and amounts due from banks, including the Bangko
Sentral and banks abroad.
 F. Conservatorship of Banks

A. Grounds for placing a bank or quasi-bank under conservatorship

• 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
 F. Conservatorship of Banks

B. Responsibilities of Bank Conservator appointed by BSP Monetary

Board
• To take charge of the assets, liabilities, and the management of the
bank
• To reorganize the management of the bank
• To collect all monies and debts due said institution
• To exercise all powers necessary to restore its viability
• To report and be responsible to the Monetary Board
• To have the power to overrule or revoke the actions of the previous
management and board of directors of the bank or quasi-bank.
 F. Conservatorship of Banks

C. Qualifications of Bank Conservator

• He should be competent and knowledgeable in bank operations
and management

D. Period of Conservatorship
• The conservatorship shall not exceed one (1) year.
 F. Conservatorship of Banks

HOW IS A CONSERVATOR COMPENSATED?

• 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.
 F. Conservatorship of Banks

E. Grounds for termination of Conservatorhip

• 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 receivership and
liquidation shall apply.
 G. Proceedings in Bank Receivership

a. Grounds for Bank Receivership and Liquidation

Bank is unable to pay its liabilities as they become due in the ordinary
course of business.
Bank cannot continue in business without involving probable losses to
its depositors or creditors; or
Bank has willfully violated a cease and desist order under Section 37
that has become final, involving acts or transactions which amount to
fraud or a dissipation of the assets of the institution
Administrative Sanctions:

Fines in amounts as may be determined by the MB to be appropriate, but

in no case to exceed Thirty thousand pesos (30,000) a day for each
violation
Suspension of rediscounting privileges or access to BSP credit facilities
Suspension of lending or forex operations ;
Suspension of interbank clearing privileges; and/or
Revocation of quasi-banking license.
b. Receivers of Bank and Quasi Banks

 PDIC for Banking Institution

 for a quasi-bank, any person of recognized competence in banking or
finance may be designed as receiver
 c. Procedures for Bank or Quasi-Bank Receivership

The receiver shall immediately gather and take charge of all the assets and
liabilities of the institutions, administer the same for the benefit of its
creditors, and exercise the general powers of a receiver under the Revised
Rules of Court.
The receiver shall determine as soon as possible, but not later than (90)
days from take over, whether the institution may be rehabilitated or
otherwise placed in such a condition as that it may be permitted to
resume business with safety to its depositors and creditors and the general
public.
 H. Proceedings for Bank Liquidation

a. Ground for Bank Liquidation

the Monetary Board shall notify in writing the board of directors of its
findings and direct the receiver to proceed with the liquidation of the
institution.
b. Procedures for Bank Liquidation

The receiver shall file ex parte with the proper regional trial court, and
without requirement of prior notice or any other action, a petition for
assistance in the liquidation of the institution pursuant to liquidation
adopted by the PDIC for general application to all closed banks.

 In case of quasi-banks, the liquidation plan shall be adopted by the MB.

i. the court shall, upon motion by the receiver after due notice
ii. adjudicate disputed claims against the institution
 iii. assist the enforcement of individual liabilities of the
stockholders, directors and officers, and decide on other issues as
may be material to implement the liquidation plan adopted.
iv. the receiver shall pay the cost of the proceedings from the assets of
the institution.

 The assets of an institution under receivership or liquidation shall be

deemed in custodia legis in the hands of the receiver and shall, from the
moment the institution was placed under such receivership or
liquidation, be exempt from any order of garnishment, levy, attachment
or execution.
 I. Nature of actions of Monetary Board for
Conservatorship, Receivership and Liquidation
a. The actions of the Monetary Board taken for
conservatorship, receivership and liquidation shall be
final and executory, and may not be restrained or set
aside by the court.
b. The designation of a conservator or the appointment of
a receiver under this section shall be vested exclusively
with the Monetary Board.
c. The designation of a conservator is not a precondition to
the designation of receiver.
 J. “Close Now Hear Later Order by BSP
Monetary Board
a. The “Close Now, Hear Later” doctrine has already been
justified as a measure for the protection of the public
interest. Swift Action is called for on the part of the BSP
when it finds that a bank is in dire straits.
b. Due process does not necessarily require a prior hearing.
c. The doctrine is founded on practical and legal
considerations to obviate unwarranted dissipation of the
bank’s assets and as a valid exercise of police power to
protect the depositors, creditors, stockholders, and the
general public
d. Accordingly, The MB can immediately implement its
resolution prohibiting a banking institution to do business in
the Philippines and, thereafter, appoint the PDIC as
receiver.
 K. Administrative Sanctions on Banks
and Quasi-Banks
a. Grounds for sanctioning Banks and Quasi-Banks
i. Willful violation of banking laws and rules and
regulations of BSP
ii. Willful delay in submission of reports in BSP
iii. Refusal to permit examination into the affairs of the
institution
iv. Willful making of a false or misleading statement to
the Board or the appropriate supervising and examining
department or its examiners
 v. A false or misleading statement to the Board or the
appropriate supervising and examining department or its
examiners
vi. Commission of irregularities
vii. Conducting business in an unsafe or unsound
manner as may be determined by the Monetary Board.
b. Administrative sanctions that may be imposed
i. fines in amounts as may be determined by the
Monetary Board to be appropriate, but in no case to exceed
Thirty thousand pesos (P30,000) a day for each violation,
taking into consideration the attendant circumstances.
ii. Suspension of rediscounting privileges or access to
Bangko Sentral Credit facilities
iii. Suspension of lending or foreign exchange
operations or authority to accept new deposits or make new
investments.
iv. Suspension of interbank clearing privileges
v. revocation of quasi-banking license.