Review Guide Ncba 2021

BANKING
PART I
THE NEW CENTRAL BANK ACT, as amended

GUIDE QUESTIONS
1. What are the prohibitions under the NCBA that apply to DOSRI?
2. Explain the meaning of the “BSP is the lender of last resort”.
3. Under what conditions may the Monetary Board summarily and
without need of prior hearing, forbid a bank from doing business and
designate the PDIC as receiver?
4. What operations of the BSP are subject to, or limited by, bank secrecy
laws?
5. When may the BSP/MB deal in foreign exchange transactions and
rates of exchange?
THE NEW CENTRAL
BANK ACT (RA 7635)
AS AMENDED BY RA 11211
RA 7653 (THE NEW CENTRAL BANK ACT OR THE BSP CHARTER)
AND THE AMENDMENTS BROUGHT ABOUT BY RA 11211
• The BSP Charter is RA 7653 or the New Central Bank Act (“NCBA”)
• In July 2018, RA 11211 was enacted providing amendments and adding new
provisions to the NCBA
• Briefly, among these amendments are on:
• Capitalization of BSP (Sec 2) *
• Responsibility and Primary Objective (Sec 3) *
• Indemnification of BSP personnel and compromise settlements (Sec 15 [e])
• Responsibility of MB and BSP personnel including non-disclosure (Sec 16) *
• Authority to obtain data and information (Sec 23) *
• Supervision and examination (Sec 25) *
• Authority to approve transfer of shares (Sec 25-A)
• Prohibitions on BSP personnel (Sec 27 [d]) *
• Examination and Fees (Sec 28) *
MORE AMENDMENTS BY VIRTUE OF RA 11211
• Proceedings in Receivership and Liquidation (Sec 30) *
• Deletion of Secs 31 and 32
• Refusal to make reports or permit examination (Sec 34)
• False statement (Sec 35)
• Proceedings upon violation of RA 7653 and other banking laws, rules, regulations, order and
instructions (Sec 36)
• Administrative sanctions on supervised entities (Sec 37) *
• New section on issuance of injunctive relief (Sec 38-A)
• BSP Reserve Fund (Sec 43-A)
• Composition of International Reserves (Sec 66)
• Emergency loans and advances (Sec 84) *
• Exemption of collaterals from attachments, executions and other restrictions (Sec 88-A)
• Right of redemption of foreclosed real property (Sec 88-C)
(NOTE: Those with * are included in the Bar Syllabus 2020/21)
STATE POLICIES
INTRO
Unlike the 1973 Constitution, the 1987 Constitution requires that the central monetary authority
should be independent. This means that it should be free from all undue control and influence,
whether it be from local capital interest or foreign interest, or even more from the State or the
government, particularly from the executive.
This does not mean however that the BSP should be above the law. On the contrary, its
independence is one burdened with responsibility and accountability.
The BSP fiscal autonomy is exemplified in the following instances:
a. Non-reliance on Congress for budgetary support as its funds are generated from its own
operations
b. Flexibility to fix remunerations of its personal, recruit competent personnel and prepare its
own plantilla without interference from other agencies of the government
c. Adoption of an annual budget with power to authorize expenditures as are in the interest of its
effective administration and operations.
Banking Laws of the Philippines Book I The New Central Bank Act Annotated, p. 17 to 18, BSP
(2010)
STATE POLICIES
Sec 1
• The State shall maintain a central monetary authority that is

• an independent and accountable body corporate with mandated responsibilities
concerning
• money,
• banking and
• credit.
• a government owned corporation with

• fiscal and
• administrative autonomy
CREATION OF BSP
INTRO
The law creating the BSP was meant primarily to strengthen the BSP (the former Central
Bank) and ensure its independence in compliance with the express requirements of the
Constitution.
To achieve this, BSP was given sufficient capitalization.
Its present capitalization is now two hundred billion fully subscribed by the Government.
Increase in capitalization shall be funded solely from the declared dividends of the BSP
in favor of the National Government, deposited in a special account in the General Fund
earmarked for the payment of its increase in capitalization.
The assets and liabilities of the Central Bank that were not determined nor transferred to
BSP were retained, administered, disposed of and liquidated by the Central Bank
transformed to Central Bank Board of Liquidators.
Banking Laws of the Philippines Book I The New Central Bank Act Annotated, p. 17 to
18, BSP (2010)
CREATION OF THE BSP
Sec 2
• BSP is established as the independent central monetary authority

• Its capital shall be P200 billion pesos to be fully subscribed by the
Government
• Increased capital shall be funded solely from declared dividends by the BSP in
favor of the Government
• Any and all declared dividends shall be deposited in a special account in the
General Fund
• Earmarked for the payment of BSP’s increase in capitalization
• Payment shall be released and disbursed immediately and shall continue until
the increase has been fully paid.
RESPONSIBILITY AND PRIMARY OBJECTIVE
INTRO
Monetary policy refers to such measures or actions taken to regulate the supply of money in the
economy aimed at influencing the timing, cost and availability of money and credit, as well as
other financial factors. The BSP maintains price stability through responsive and effective
monetary policy.
The BSP is able to promote price stability because of its ability to influence the amount of money
circulating in the economy thereby exerting some influence on the price of goods and services.
To achieve inflation target, the BSP uses monetary policy instruments including::
1. Operations in gold and FX
2. Regulations of FX operations of banks
3. Loans to banking and other financial institutions
4. Moral suasion
5. Selective regulation of bank operations
Banking Laws of the Philippines Book I The New Central Bank Act Annotated, p. 20 to 21, BSP
(2010)
Sec 3
The BSP shall:
• Provide policy directions in money, banking and credit
• Supervise operations of banks
• Exercise regulatory and examination powers under this Act and other pertinent
laws over quasi banking operations of non-banking financial institutions
• As may be determined by the Monetary Board (MB), exercise regulatory and
examination powers over
• money service businesses *
• credit granting businesses and
• payment system operators
*The MB is empowered to authorize entities or persons to engage in money service businesses.

Sec 3 (con’t)
The primary objective of BSP is to:
• Maintain price stability conducive to balanced and sustainable growth of the
economy and employment
• Promote and maintain monetary stability and convertibility of the peso
The BSP’s other objectives are
• Promote financial stability and closely work with Government such as DOF, SEC,
IC and the PDIC
• Oversee the payment and settlement systems in the Philippines including critical
financial market infrastructures to promote sound and prudent practices consistent
with maintenance of financial stability
In the attainment of its objectives, promote broad and convenient access to
high quality financial services and consider the interest of the general public.
BSP CORPORATE POWERS
INTRO
BSP has both governmental and proprietary powers.
It is a government agency with constitutional and statutory mandate, body corporate and a
quasi-judicial agency.
BSP may enter into contracts as it had done in the past many times involving different kinds
of contracts including purchase and sale of FX, currency market agreement with foreign
banks, minting of casino tokens, printing of passports, etc. In particular, the BSP may grant
loans or extend financial assistance to PDIC.
In Olizon v CB and Arcega v CA, the SC recognized that the then CB is authorized by its
charter to sue and be sued . The power to sue is lodged with the MB which empowers the
Governor as its principal representative to represent BSP personally or thru counsel,
including private counsel, in any legal proceeding.
Banking Laws of the Philippines Book I The New Central Bank Act Annotated, p. 32, BSP
(2010)
BSP CORPORATE POWERS
Sec 5
The BSP is authorized to:
• Adopt, alter and use a corporate seal which shall be of judicial notice
• Enter into contracts
• Lease or own real and personal property
• Sell or otherwise dispose of said property
• Sue and be sued
• Otherwise, do and perform any and all things that may be necessary or proper to carry out
the purposes of this Act.
• Acquire and hold such assets and incur such liabilities in connection with its operations
under this Act or as essential to the proper conduct of such operations
• Compromise, condone or release, in whole or in part, any claim of or settled liability of the
BSP, regardless of amount involved, under such terms and conditions prescribed by the MB
to protect its interests.
OPERATIONS OF THE BSP
• AUTHORITY TO OBTAIN DATA AND INFORMATION

• SUPERVISION AND EXAMINATION
• BANK DEPOSITS AND INVESTMENTS
• PROHIBITIONS
• EXAMINATION AND FEES
AUTHORITY TO OBTAIN DATA AND INFORMATION
Sec. 23
BSP shall have authority to:
• Request from government offices and instrumentalities or government-
owned or controlled corporations , any data which it may require for
proper discharge of its functions and responsibilities, provided,
disaggregated data gathered are subject to confidentiality laws;
• Through its Governor or duly authorized representative, issue subpoena for
production of books and records for the aforementioned purpose. Those
who refused without justifiable cause or refuse to supply the data required,
shall be subject to contempt under Rules of Court;
• Continue to require data from banks pursuant to its supervisory powers
under this Act and other laws;
Sec 23. (last par)
Data on individuals and firms, other than banks, gathered by BSP shall
not be made available to any person or entity outside the BSP, whether
public or private, except under order of the court or under such
conditions as may be prescribed by the MB; Provided, however, that the
collective data on firms may be released to interested persons or entities;
Provided, finally, that in case of data on banks, the provisions of Section
27 (Prohibitions) of this Act shall apply.
NOTES
The authority of the BSP to request documents and data covers not only government agencies
exercising sovereign powers but also those that possess proprietary ones such as GOCCs.
The information that may be obtained by the BSP may cover any data which it may require for the
proper discharge of its functions and responsibilities. This includes, among other things, information
on banks, quasi banks or their subsidiaries or affiliates, trust entities and other financial entities
pursuant to the supervisory and regulatory powers of BSP and MB.
Data from individual firms other than banks gathered by the BSP are considered confidential in
nature. They may not be released to any person or entity, whether private or public, without a proper
court order or prior clearance from the MB. The confidential data is limited to those collected from
non-banks.
Examples of data that may be released to third parties are those required by court, if allowed by MB,
if pertaining to collective data on firms and if made to BIR.
Banking Laws of the Philippines Book I The New Central Bank Act Annotated, p. 86, BSP (2010)
SUPERVISION AND EXAMINATION
INTRO
The BSP promotes financial stability through supervision of banks and regulation of
finance companies, quasi-banks and other institutions performing similar functions.
Effective banking supervision and regulation fosters the smooth and orderly
functioning of key players in the financial system, adequate protection to investors
and depositors, and prevention of both isolated and systemic failures of financial
institutions.
The power of supervision includes the power to audit to determine the soundness of
their operations and the safety of the deposits of the public. In the case of
government owned banks, the BSP and COA have concurrent jurisdiction.
Banking Laws of the Philippines Book I The New Central Bank Act Annotated, p. 23
to 24, BSP (2010)
Sec 25.
BSP shall have supervision over, and conduct regular or special examinations of
banking institutions and quasi-banks, including their subsidiaries and affiliates
engaged in allied activities.
Subsidiary – a corporation more than 50% of the voting stock is directly or

indirectly owned, controlled or held with power to vote by a bank or quasi-bank
Affiliate – a corporation the voting stock of which, to the extent of 50% or less,
is owned by a bank or quasi bank or which is related or linked directly or
indirectly to such institution or intermediary through common stockholders or
such other factors as may be determined by the MB.
Sec 25. (con’t)
The BSP shall:
• Have regulatory authority over, and conduct regular or special examinations of entities which under
this Act or by special laws are subject to its jurisdiction.
• Establish a mechanism for issues arising from bank examination. BSP shall be independent and
reports directly to the MB, without prejudice to the authority of the BSP and its MB to take
enforcement and supervisory actions against supervised entities.
The department heads and examiners of the supervising and examining departments of the BSP are
authorized to:
• Administer oaths; and,
• Compel the presentation of all books, documents, papers or records necessary in their judgment to
ascertain the facts relative to the true condition of any institution as well as the books and records of
persons and entities relative to or in connection with the operations, activities or transactions of the
institution under examination subject to laws protecting or safeguarding the secrecy or
confidentiality of bank deposits as well as investment of private persons, natural or juridical, in debt
instruments issued by the Government.
Sec 25. (last par.)
No restraining order or injunction shall be issued by the court enjoining the BSP
from examining any institution subject to supervision or examination by the
BSP unless there is convincing proof that the action of the BSP is plainly
arbitrary and made in bad faith and the petitioner or plaintiff files with the clerk
or judge a bond executed in favor of the BSP in an amount to be fixed by the
court.
Rule 58 of the Rules of Court as long as not inconsistent with this provision
shall govern the issuance and dissolution of the restraining order or injunction.
NOTES
The examinations are classified into regular or periodic and special. These are
complemented by “overseeing” which means limited investigation of an
institution, or any investigation that is limited in scope, conducted to inquire
into a particular aspect of an institution’s operations, for the purpose of
overseeing that laws and regulations are complied with, inquiring into the
solvency and liquidity of the institution, enforcing prompt coercive action, or
such other matters requiring immediate investigation, provided that specific
authorizations be issued by the supervising and examination sector, and
periodic summary reports on overseeing that may be submitted to the MB.
Banking Laws of the Philippines Book I The New Central Bank Act Annotated,
p. 116, BSP (2010)
The respondent banks have failed to show that they are entitled to copies of the ROEs. They can
point to no provision of law, no section in the procedures of the BSP that shows that the BSP is
required to give them copies of the ROEs. Sec. 28 of RA 7653, or the New Central Bank Act,
which governs examinations of banking institutions, provides that the ROE shall be submitted to
the MB; the bank examined is not mentioned as a recipient of the ROE.
The respondent banks cannot claim a violation of their right to due process if they are not
provided with copies of the ROEs. The same ROEs are based on the lists of findings/exceptions
containing the deficiencies found by the SED examiners when they examined the books of the
respondent banks. As found by the RTC, these lists of findings/exceptions were furnished to the
officers or representatives of the respondent banks, and the respondent banks were required to
comment and to undertake remedial measures stated in said lists. Despite these instructions,
respondent banks failed to comply with the SED's directive.
BSP et al v Hon. Nina G. Antonio Valenzuela, Rural Bank of Paranaque et al G R 184778 Oct 2,
2009
Respondent banks are already aware of what is required of them by the BSP, and cannot claim violation of
their right to due process simply because they are not furnished with copies of the ROEs. Respondent
banks were held by the CA to be entitled to copies of the ROEs prior to or simultaneously with their
submission to the MB, on the principles of fairness and transparency. Further, the CA held that if the
contents of the ROEs are essentially the same as those of the lists of findings/exceptions provided to said
banks, there is no reason not to give copies of the ROEs to the banks. This is a flawed conclusion, since if
the banks are already aware of the contents of the ROEs, they cannot say that fairness and transparency
are not present. If sanctions are to be imposed upon the respondent banks, they are already well aware of
the reasons for the sanctions, having been informed via the lists of findings/exceptions, demolishing that
particular argument. The ROEs would then be superfluities to the respondent banks, and should not be the
basis for a writ of preliminary injunction. Also, the reliance of the RTC on Banco Filipino v. Monetary
Board is misplaced. The petitioner in that case was held to be entitled to annexes of the Supervision and
Examination Sector's reports, as it already had a copy of the reports themselves. It was not the subject of
the case whether or not the petitioner was entitled to a copy of the reports. And the ruling was made after
the petitioner bank was ordered closed, and it was allowed to be supplied with annexes of the reports in
order to better prepare its defense. In this instance, at the time the respondent banks requested copies of
the ROEs, no action had yet been taken by the MB with regard to imposing sanctions upon said banks.
BSP et al v Hon. Nina G. Antonio Valenzuela, Rural Bank of Paranaque et al G R 184778 Oct 2, 2009
NOTES
In BSP et al v Hon. Nina G. Antonio Valenzuela, Rural Bank of Paranaque et al G R 184778 Oct
2, 2009, the Supreme Court held that the ROE shall be submitted to the MB, and that the bank
examined is not mentioned as a recipient of the ROE. There is no violation of the right to due
process if the bank is provided with a copy of the ROE. Allowing the bank to view the ROE and
act upon it to forestall any sanctions the MB might impose has no basis inlaw, and in fact, violates
the “Close now, hear later” doctrine.
Per the MORB, the ROE once approved by the MB or the appropriate BSP official, is transmitted
to the bank through its Board Chairman or President. The Bank should thereafter transmit a copy
of the ROE to each of the members of the Board who are required to personally receive the same
in a prescribed acknowledgement form. The directors are required to take action on the ROE
pursuant to corporate governance principles.
The approved recommendations in the ROE are considered MB directives or instructions whereby
non-compliance therewith shall be subject to the administrative sanctions provided under Sec 37
of RA 7653.
BANK DEPOSITS AND INVESTMENTS
Sec 26.
Any director, officer or stockholder who, together with his related interests (DOSRI), contracts a loan or
any form of financial accommodation from:
(1) his bank; or
(2) from a bank
(a) which is a subsidiary of a bank holding company of which both his bank and the lending bank are
subsidiaries or
(b) in which a controlling proportion of the shares is owned by the same interest that owns a controlling
proportion of the shares of his bank, in excess of five percent (5%) of the capital and surplus of the bank,
or in the maximum amount permitted by law, whichever is lower,
shall be required by the lending bank to waive the secrecy of his deposits of whatever nature in all banks in
the Philippines.
Any information obtained from an examination of his deposits shall be held strictly confidential and may
be used by the examiners only in connection with their supervisory and examination responsibility or by
the BSP in an appropriate legal action it has initiated involving the deposit account.
NOTES
The requirement on the waiver of the secrecy of bank deposits and investments in
government securities was imposed to strengthen the power of the BSP to control insider
lending that is loans to directors, officers and stockholders and to curb unsound banking
practices that led to bank failures in the 1980s. This Section is intended to apply not only
to loans granted to bank directors or officers or stockholders in their personal capacity,
but also to loans granted to companies where said persons have financial interest.
The lending bank shall require the director, officer or stockholder to waive the secrecy or
confidentiality of his deposits of whatever nature in all banks. Any information obtained
from an examination of his deposits shall be held strictly confidential and may be used by
the examiners only in connection with the supervisory and examination responsibility of
the BSP in an appropriate legal action that it has initiated involving the deposit accounts.
Banking Laws of the Philippines Book I The New Central Bank Act Annotated, p. 102,
BSP (2010)
NOTES
The director, officer or stockholder should himself be the borrower or recipient of
the loan or financial accommodation. If the borrower is the related interest but not
the director, officer or stockholder himself, any of the latter is not required to
waive the secrecy of bank deposits. The function of the phrase “who together with
his related interest” in Sec 26 is to determine whether the loans or financial
accommodations exceeds the aggregate ceiling prescribed therein.
To illustrate, where the loan is from a bank that is a subsidiary of a bank holding
company of which both the borrower’s bank and the lending bank are subsidiaries,
assume Mr. A is a director of Z Bank and he borrows from Y Bank he should
waive the secrecy of deposits of whatever nature in all banks in the Philippines if
both Y Bank and Z Bank are subsidiaries of Z Holding Company Inc.
Banking Laws of the Philippines Book I The New Central Bank Act Annotated, p.
102, BSP (2010)
The definition of deposit substitutes under the National Internal Revenue Code was lifted from
Section 95 of Republic Act No. 7653, otherwise known as the New Central Bank Act:
SEC. 95. Definition of Deposit Substitutes. The term "deposit substitutes" is defined as an
alternative form of obtaining funds from the public, other than deposits, through the issuance,
endorsement, or acceptance of debt instruments for the borrower's own account, for the
purpose of relending or purchasing of receivables and other obligations. These instruments
may include, but need not be limited to, bankers' acceptances, promissory notes,
participations, certificates of assignment and similar instruments with recourse, and
repurchase agreements. The Monetary Board shall determine what specific instruments shall
be considered as deposit substitutes for the purposes of Section 94 of this Act: Provided,
however, That deposit substitutes of commercial, industrial and other nonfinancial companies
issued for the limited purpose of financing their own needs or the needs of their agents or
dealers shall not be covered by the provisions of Section 94 of this Act. (Emphasis supplied)
Banco De Oro et al v Republic et al GR 198756 Aug 16, 2016

As defined in the banking sector, the term "public" refers to 20 or more

lenders."What controls is the actual number of persons or entities to whom the
products or instruments are issued. If there are at least twenty (20) lenders or
creditors, then the funds are considered obtained from the public."
If a bank or non-bank financial intermediary sells debt instruments to 20 or more

lenders/placers at any one time, irrespective of outstanding amounts, for the
purpose of relending or purchasing of receivables or obligations, it is considered to
be performing a quasi-banking function and consequently subject to the appropriate
regulations of the Bangko Sentral Pilipinas (BSP).
BANCO DE ORO ET AL V REPUBLIC, ET AL G R 198756 AUG 16, 2016

PROHIBITIONS
Sec 27. In addition to the prohibitions found in Republic Act Nos. 3019 (Anti-Graft and
Corrupt Practices Act) and 6713 (Code of Ethics for Public Officials and Employees),
personnel of the BSP are hereby prohibited from:
(a) being an officer, director, lawyer or agent, employee, consultant or stockholder, directly or
indirectly, of any institution subject to supervision or examination by the BSP, except non-stock
savings and loan associations and provident funds organized exclusively for employees of the BSP,
and except as otherwise provided in this Act;
(b) directly or indirectly requesting or receiving any gift, present or pecuniary or material benefit for
himself or another, from any institution subject to supervision or examination by the BSP;
(c) revealing in any manner, except under orders of the court, the Congress or any government
office or agency authorized by law, or under such conditions as may be prescribed by the MB,
information relating to the condition or business of any institution. This prohibition shall not be held
to apply to the giving of information to the MB or the BSP Governor, or to any person authorized by
either of them, in writing, to receive such information; and
(d) borrowing from any institution subject to supervision or examination by the BSP shall be
prohibited unless said borrowings are adequately secured, fully disclosed to the MB, and shall be
subject to such further rules and regulations as the MB may prescribe: Provided, however, That
personnel of the supervising and examining departments are prohibited from borrowing from a bank
under their supervision or examination.
PROHIBITIONS
Sec 28.
• 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 MB by an affirmative vote of five (5) members, may deem expedient and to make a
report on the same to the MB: Provided, That there shall be an interval of at least twelve (12)
months between annual examinations.
• The bank shall afford to the head and deputies full opportunity to examine its books, cash
and available assets and general condition at any time during banking hours when BSP has
requested:
• 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.
• Banks and quasi-banking institutions examined by the BSP shall pay to the BSP an annual fee
in an amount equal to a percentage as may be prescribed by the MB 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 BSP and banks abroad.
PROHIBITIONS
NOTES
Personnel of the BSP are prohibited from disclosing information relating to the condition or
business of a banking information.
The term “condition” means the mode or state of being; status or situation with regard to external
circumstances; essential quality; property, attribute. The word ”business” in its plain and ordinary
meaning means activities or affairs where profit is the purpose or livelihood is the motive. An
enterprise not conducted for the purpose of livelihood or profit is not deemed a business. The
business of a corporation is that which busies or occupies its time, attention or labor, as its
principal concern or occupation.
The information on the identify of directors, officers and stockholders of a bank does not fall
within the scope of the prohibition under Section 27( c ) for it does not relate to the condition or
business of the bank.
PROHIBITIONS
NOTES
The reports and documents obtained during the examination are not open
to inspection by the public except insofar as it is incidental to authorized
proceedings or is necessary for the prosecution of violations committed
by the banking institution. The prohibited disclosure is in addition to
those provided under Section 55.3 in relation to 55.1 (b) of RA 8791
[General Banking Law] and Sections 16, 23 and 27 ( c) of RA 7653
[NCBA].
Banking Laws of the Philippines Book I The New Central Bank Act
Annotated, p. 119, BSP (2010)
EXAMINATION AND FEES
Sec 28 last par
Supervised institutions shall pay to the BSP, no later than May 31 of each year, an annual
supervision fee as may be prescribed by the MB. In determining the amount of the annual
supervision fee, the MB shall consider the costs of supervision.
NOTES
The annual fee is assessed on and collected from banks and quasi-banks. The regulations provide
for the computation, including the exclusion therefrom, of the supervised entity’s Total Assessable
Assets and Average Assessable Assets upon which the rates for annual fees are imposed. The
manner of collectionis likewise provided (that is, debit to the bank’s demand deposit account with
the BSP. The MB prescribes the rate to be applied to the average total assets of the bank or quasi-
bank.
The BSP is also authorized to assess and collect fees under Sec 65 of RA 8791 (GBA) . The BSP
also charges a Branch Processing Fee for establishment of bank branches.
Banking Laws of the Philippines Book I The New Central Bank Act Annotated, p. 119-120, BSP
(2010)
MONETARY BOARD: POWERS AND FUNCIONS
Sec 15 Exercise of Authority. - In the exercise of its authority, the MB shall:
(a) issue rules and regulations it considers necessary for the effective discharge of the
responsibilities and exercise of the powers vested upon the MB and the BSP. The rules and
regulations issued shall be reported to the President and the Congress within fifteen (15) days
from the date of their issuance;
(b) direct the management, operations, and administration of the BSP, reorganize its
personnel, and issue such rules and regulations as it may deem necessary or convenient for
this purpose. The legal units of the BSP shall be under the exclusive supervision and control
of the MB;
(c) establish a human resource management system which shall govern the selection, hiring,
appointment, transfer, promotion, or dismissal of all personnel. Such system shall aim to
establish professionalism and excellence at all levels of the BSP in accordance with sound
principles of management.
xxx xxx xxx
MONETARY BOARD: POWERS AND FUNCTIONS
Sec. 15. (con’t)
On the recommendation of the Governor, appoint, fix the remunerations and other emoluments,
and remove personnel of the BSP, subject to pertinent civil service laws: Provided, That the MB
shall have exclusive and final authority to promote, transfer, assign, or reassign personnel of the
BSP and these personnel actions are deemed made in the interest of the service and not
disciplinary: Provided, further, That the MB may delegate such authority to the Governor under
such guidelines as it may determine.

(d) adopt an annual budget for and authorize such expenditures by the BSP as are in the interest of
its effective administration and operations in accordance with applicable laws and regulations;
and
(e) indemnify MB members and other officials of the BSP, including personnel of the departments
performing supervision and examination functions against all costs and expenses reasonably
incurred in connection with any civil or criminal action, suit or proceedings to which he may be,
or is, made a party by reason of the performance of his functions or duties, unless he is finally
adjudged in such action or proceeding to be liable for negligence or misconduct.
THE MB IS A QUASI-JUDICIAL BODY
Pursuant to Article XII, Section 20 of the Constitution,[127] Congress constituted Bangko Sentral[128] as an independent
central monetary authority. As an administrative agency, it is vested with quasi-judicial powers, which it exercises
through the Monetary Board. In United Coconut Planters Bank v. E. Ganzon, Inc.:[129]
A quasi-judicial agency or body is an organ of government other than a court and other than a legislature, which
affects the rights of private parties through either adjudication or rule-making. The very definition of an administrative
agency includes its being vested with quasi-judicial powers. The ever increasing variety of powers and functions given
to administrative agencies recognizes the need for the active intervention of administrative agencies in matters calling
for technical knowledge and speed in countless controversies which cannot possibly be handled by regular courts. A
"quasi-judicial function" is a term which applies to the action, discretion, etc., of public administrative officers or
bodies, who are required to investigate facts, or ascertain the existence of facts, hold hearings, and draw conclusions
from them, as a basis for their official action and to exercise discretion of a judicial nature.
Undoubtedly, the BSP Monetary Board is a quasi-judicial agency exercising quasi-judicial powers or functions. As
aptly observed by the Court of Appeals, the BSP Monetary Board is an independent central monetary authority and a
body corporate with fiscal and administrative autonomy, mandated to provide policy directions in the areas of money,
banking and credit. It has power to issue subpoena, to sue for contempt those refusing to obey the subpoena without
justifiable reason, to administer oaths and compel presentation of books, records and others, needed in its examination,
to impose fines and other sanctions and to issue cease and desist order. Section 37 of Republic Act No. 7653, in
particular, explicitly provides that the BSP Monetary Board shall exercise its discretion in determining whether
administrative sanctions should be imposed on banks and quasi-banks, which necessarily implies that the BSP
Monetary Board must conduct some form of investigation or hearing regarding the same.
Banco Filipino v BSP et al GR 200678 Jun 4, 2018 J. Leonen
THE MB IS A QUASI-JUDICIAL BODY
NOTES
In the case of UCPB v E. GANZON, INC. GR 168859 AND 168897 June 30,
2009, respondent filed with BSP an administrative complaint against UCPB for
violation of Sec 36 and 37 for the commission of irregularities and conducting
business in an unsafe or unsound manner. The SC held that BSP/MB is a quasi-
judicial agency exercising quasi-judicial powers or functions. It is an
independent central monetary authority and a body corporate with fiscal and
administrative autonomy, mandated to provide policy directions in the areas of
money, banking and credit. It has the power to issue subpoena, to sue for
contempt those refusing to obey the subpoena without justifiable reason, to
administer oaths and compel presenation of books, records and others needed in
its examination to impose fines and other sanctions and to issue a cease and resist
order.
HOW THE BSP HANDLES BANKS IN DISTRESS
• CONSERVATORSHIP
• CLOSURE
• RECEIVERSHIP
• LIQUIDATION
CONSERVATORSHIP
Sec 29. Appointment
• Whenever, on the basis of a report submitted by the appropriate supervising or examining
department, the MB finds that a bank or a quasi-bank is in a state of continuing inability or
unwillingness to maintain a condition of liquidity deemed adequate to protect the interest of
depositors and creditors, the MB may appoint a conservator with such powers as it shall
deem necessary to
• take charge of the assets, liabilities, and the management thereof,
• reorganize the management,
• collect all monies and debts due said institution, and
• exercise all powers necessary to restore its viability.
• The conservator shall report and be responsible to the MB and shall have the power to
overrule or revoke the actions of the bank’s previous management and board of directors.
• The conservator should be competent and knowledgeable in bank operations and

management. The conservatorship shall not exceed one (1) year.
CONSERVATORSHIP
SEC 29. (Con’t)
• The conservator shall receive remuneration to be fixed by the MB 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 MB may appoint a conservator connected with the BSP, in which case he shall not be entitled
to receive any remuneration or emolument from the BSP during the conservatorship. The expenses
attendant to the conservatorship shall be borne by the bank or quasi-bank concerned.
• The MB 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 MB, on the basis of the report of the
conservator or of its own findings, determine that the continuance in business of the institution
would involve probable loss to its depositors or creditors, in which case the provisions of Section
30 (Proceedings in Receivership and Liquidation) shall apply.
WHO DESIGNATES THE CONSERVATOR?
• The designation of a conservator under Section 29 or the appointment

of a receiver shall be vested exclusively with the MB. Furthermore,
the designation of a conservator is not a precondition to the
designation of a receiver.
• Regular courts do not have jurisdiction to hear and decide cases to

place a bank under receivership. It is the MB that exercises
jurisdiction over proceedings for receivership of banks.
DUTIES AND POWERS OF A CONSERVATOR
Such powers as the MB shall deem necessary to:

• take charge of the assets, liabilities, and the management
thereof;
• reorganize the management;
• collect all monies and debts due said institution; and,
• exercise all powers necessary to restore its viability.
The conservator shall have the power to
• overrule or revoke the actions of the previous management
and board of directors of the bank or quasi-bank; and
• shall report and be responsible to the MB.
LIMITS TO THE POWERS OF THE CONSERVATOR
A conservator may not revoke a contract that was already perfected and
enforceable at the time he was appointed as such conservator.
While admittedly, the BSP gives vast and far-reaching powers to the
conservator of a bank, it must be pointed out that such powers must be
related to the preservation of the assets of the bank, the reorganization
of the management thereof and the restoration of its viability.
[FIRST PHIL INTL BANK v CA GR 115849 (1996)]

TERMINATION OF CONSERVATORSHIP
• MB is satisfied that the institution can continue to operate on

its own and the conservatorship is no longer necessary
• Should the MB, on the basis of the report of the conservator

or of its own findings, determine that the continuance in
business of the institution would involve probable loss to its
depositors or creditors, in which case the provisions of
Section 30 (Proceedings In Receivership and Liquidation)
shall apply.
THE “CLOSE NOW, HEAR LATER” DOCTRINE
It is well-settled that the closure of a bank may be considered as an exercise of

police power. The action of the MB on this matter is final and executory. Such
exercise may nonetheless be subject to judicial inquiry and can be set aside if
found to be in excess of jurisdiction or with such grave abuse of discretion as to
amount to lack or excess of jurisdiction.
It is 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.
Unless adequate and determined efforts are taken by the government against
distressed and mismanaged banks, public faith in the banking system is certain
to deteriorate to the prejudice of the national economy itself, not to mention the
losses suffered by the bank depositors, creditors, and stockholders, who all
deserve the protection of the government.
[BSP v Valenzuela GR 184778 Oct 2, 2009]
THE “CLOSE NOW, HEAR LATER” DOCTRINE
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. [40] Swift, adequate and determined actions must
be taken against financially distressed and mismanaged banks by government agencies lest the
public faith in the banking system deteriorate to the prejudice of the national economy.
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. The procedure
for the involuntary closure of a bank is summary and expeditious in nature. Such action of the
MB shall be final and executory, but may be later subjected to a judicial scrutiny via a petition
for certiorari to be filed by the stockholders of record of the bank representing a majority of the
capital stock. Obviously, this procedure is designed to protect the interest of all concerned, that
is, the depositors, creditors and stockholders, the bank itself and the general public. The
protection afforded public interest warrants the exercise of a summary closure.
Vivas et al v Monetary Board, et al GR 191424 Aug 7, 2013

RECEIVERSHIP AND LIQUIDATION
Sec 30 Proceedings in Receivership and Liquidation.
Whenever, upon report of the head of the supervising or examining department, the MB finds that a bank
or quasi-bank:
1. is unable to pay its liabilities as they become due in the ordinary course of business: Provided, That this shall not
include inability to pay caused by extraordinary demands induced by financial panic in the banking community;
2. has insufficient realizable assets, as determined by the Bangko Sentral, to meet its liabilities; or
3. cannot continue in business without involving probable losses to its depositors or creditors; or
4. 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;
Sec 30 (con’t)
In which cases, the MB may summarily and without need for prior hearing forbid the
institution from doing business in the Philippines and designate the PDIC as receiver of
the banking institution.
For a quasi-bank, any person of recognized competence in banking or finance may be

designed as receiver.
The receiver shall immediately gather and take charge of all the assets and liabilities of
the institution, administer the same for the benefit of its creditors, and exercise the general
powers of a receiver under the Revised Rules of Court but shall not, with the exception of
administrative expenditures, pay or commit any act that will involve the transfer or
disposition of any asset of the institution:
Sec 30 (con’t)
Provided, That the receiver may deposit or place the funds of the institution in
non-speculative investments. The receiver shall determine as soon as possible,
but not later than ninety (90) days from take over, whether the institution may
be rehabilitated or otherwise placed in such a condition so that it may be
permitted to resume business with safety to its depositors and creditors and the
general public: Provided, That any determination for the resumption of business
of the institution shall be subject to prior approval of the MB.
If the receiver determines that the institution cannot be rehabilitated or

permitted to resume business in accordance with the next preceding paragraph,
the MB shall notify in writing the board of directors of its findings and direct
the receiver to proceed with the liquidation of the institution.
Sec 30 (con’t)
The receiver shall:
(1) file ex parte with the proper RTC, and without requirement of prior notice or any other action, a
petition for assistance in the liquidation of the institution pursuant to a liquidation plan 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. Upon acquiring jurisdiction, the court shall, upon motion by the receiver after due
notice, adjudicate disputed claims against the institution, 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. The receiver shall pay the cost of the proceedings from the assets of the
institution.
(2) convert the assets of the institutions to money, dispose of the same to creditors and other parties, for
the purpose of paying the debts of such institution in accordance with the rules on concurrence and
preference of credit under the Civil Code and he may, in the name of the institution, and with the
assistance of counsel as he may retain, institute such actions as may be necessary to collect and
recover accounts and assets of, or defend any action against, 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.
Sec 30 (con’t)
The actions of the MB under Secs 29 and 30 shall be final and executory, and
may not be restrained or set aside by the court except on petition for certiorari
on the ground that the action taken was in excess of jurisdiction or with such
grave abuse of discretion as to amount to lack or excess of jurisdiction.
The petition for certiorari may only be filed by the stockholders of record
representing the majority of the capital stock within ten (10) days from receipt
by the board of directors of the institution of the order directing receivership,
liquidation or conservatorship.
The designation of a conservator or the appointment of a receiver shall be
vested exclusively with the MB.
Furthermore, the designation of a conservator is not a precondition to the
designation of a receiver.
GROUNDS FOR APPOINTMENT OF A RECEIVER
The Monetary Board, under certain circumstances, is empowered to

(summarily) forbid a banking institution from doing business in the Philippines
and designate a receiver for the institution. Such grounds include:
1. Inability to pay its liabilities as they become due in the ordinary course of business:
Provided, That this shall not include inability to pay caused by extraordinary demands
induced by financial panic in the banking community; or
2. Has sufficient realizable assets, as determined by the BSP, to meet its liabilities; or
3. Cannot continue in business without involving probable losses to its depositors or
creditors; or
4. Willful violation of a cease and desist order that has become final, involving acts or
transactions which amount to fraud or a dissipation of the assets of the institution
[CONSOLIDATED BANK vs COURT OF APPEALS G.R. 169457 (2015)]

APPOINTMENT OF A RECEIVER
There is no requirement whether express or implied, that a hearing be first conducted

before a banking institution may be placed under receivership. On the contrary, the
law is explicit as to the conditions prerequisite to the action of the Monetary Board to
forbid the institution to do business in the Philippines and to appoint a receiver to
immediately take charge of the bank’s assets and liabilities. They are:
(a) Examination made by the examining department of the Central Bank;
(b) Report by said department to the Monetary Board; and
(c) Prima facie showing that the bank is in a condition of insolvency or so situated
that its continuance in business would involve probable loss to its depositors or
creditors.
(Rural Bank of Buhi vs. CA)

POWERS AND DUTIES OF A RECEIVER
• shall immediately gather and take charge of all the assets and liabilities of the
institution, administer the same for the benefit of its creditors
• exercise the general powers of a receiver under the Revised Rules of Court but shall not,
with the exception of administrative expenditures, pay or commit any act that will
involve the transfer or disposition of any asset of the institution
• may deposit or place the funds of the institution in non-speculative investments.
• shall determine as soon as possible, but not later than ninety (90) days from take-over,
whether the institution may be rehabilitated or otherwise placed in such a condition so
that it may be permitted to resume business with safety to its depositors and creditors
and the general public
POWERS AND DUTIES OF A RECEIVER
• convert the assets of the institution to money,

• dispose of the same to creditors and other parties, for the purpose of
paying the debts of such institution in accordance with the rules on
concurrence and preference of credit under the Civil Code of the
Philippines and
• may, in the name of the institution, and with the assistance of counsel as
he may retain, institute such actions as may be necessary to collect and
recover accounts and assets of, or defend any action against, 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.
A closed bank under receivership can only sue or be sued through its receiver, the
Philippine Deposit Insurance Corporation.
Under Republic Act No. 7653,[97] when the Monetary Board finds a bank insolvent, it may
"summarily and without need for prior hearing forbid the institution from doing business
in the Philippines and designate the Philippine Deposit Insurance Corporation as receiver
of the banking institution."[98]
Before the enactment of Republic Act No. 7653, an insolvent bank under liquidation could
not sue or be sued except through its liquidator. In Hernandez v. Rural Bank of Lucena:[99]
[A]n insolvent bank, which was under the control of the finance commissioner for
liquidation, was without power or capacity to sue or be sued, prosecute or defend, or
otherwise function except through the finance commissioner or liquidator.
Banco Filipino v BSP et al GR 200678 Jun 4, 2018 (J. Leonen)

In Balayan Bay Rural Bank v. National Livelihood Development Corporation, [109] this Court explained that a
receiver of a closed bank is tasked with the duty to hold the assets and liabilities in trust for the benefit of the
bank's creditors.
As fiduciary of the insolvent bank, Philippine Deposit Insurance Corporation conserves and manages the assets of
the bank to prevent the assets' dissipation. This includes the power to bring and defend any action that threatens to
dissipate the closed bank's assets. Balayan Bay Rural Bank explained that Philippine Deposit Insurance
Corporation does so, not as the real party-in-interest, but as a representative party, thus:
As the fiduciary of the properties of a closed bank, the PDIC may prosecute or defend the case by or against the
said bank as a representative party while the bank will remain as the real party in interest pursuant to Section 3,
Rule 3 of the Revised Rules of Court which provides:
SEC. 3. Representatives as parties. — Where the action is allowed to be prosecuted or defended by a
representative or someone acting in a fiduciary capacity, the beneficiary shall be included in the title of the case
and shall be deemed to be the real party in interest. A representative may be a trustee of an express trust, a
guardian, an executor or administrator, or a party authorized by law or these Rules. An agent acting in his own
name and for the benefit of an undisclosed principal may sue or be sued without joining the principal except when
the contract involves things belonging to the principal.
The inclusion of the PDIC as a representative party in the case is therefore grounded on its statutory role as the
fiduciary of the closed bank which, under Section 30 of R.A. 7653 (New Central Bank Act), is authorized to
conserve the latter's property for the benefit of its creditors.
Banco Filipino v BSP et al GR 200678 Jun 4, 2018 (J. Leonen)
LIQUIDATION
“Section 31. Distribution of Assets. - In case of liquidation of a bank or quasi-bank, after payment
of the cost of proceedings, including reasonable expenses and fees of the receiver to be allowed by
the court, the receiver shall pay the debts of such institution, under order of the court, in
accordance with the rules on concurrence and preference of credit as provided in the Civil Code.
Section 32. Disposition of Revenues and Earnings. - All revenues and earnings realized by the
receiver in winding up the affairs and administering the assets of any bank or quasi-bank within
the purview of this Act shall be used to pay the costs, fees and expenses mentioned in the
preceding section, salaries of such personnel whose employment is rendered necessary in the
discharge of the liquidation together with other additional expenses caused thereby. The balance
of revenues and earnings, after the payment of all said expenses, shall form part of the assets
available for payment to creditors.
Section 33. Disposition of Banking Franchise. - The Bangko Sentral may, if public interest so
requires, award to an institution, upon such terms and conditions as the Monetary Board may
approve, the banking franchise of a bank under liquidation to operate in the area where said bank
or its branches were previously operating: Provided, That whatever proceeds may be realized from
such award shall be subject to the appropriate exclusive disposition of the Monetary Board.”
LIQUIDATION
The law expressly provides that debts and liabilities of the bank under liquidation are to be paid in accordance
with the rules on concurrence and preference of credit under the Civil Code. Duties, taxes, and fees due the
Government enjoy priority only when they are with reference to a specific movable property, under Article
2241(1) of the Civil Code, or immovable property, under Article 2242(1) of the same Code. However, with
reference to the other real and personal property of the debtor, sometimes referred to as “free property,” the
taxes and assessments due the National Government, other than those in Articles 2241(1) and 2242(1) of the
Civil Code, such as the corporate income tax, will come only in ninth place in the order of preference. [26] On
the other hand, if the BIR’s contention that a tax clearance be secured first before the project of distribution of
the assets of a bank under liquidation may be approved, then the tax liabilities will be given absolute preference
in all instances, including those that do not fall under Articles 2241(1) and 2242(1) of the Civil Code. In order
to secure a tax clearance which will serve as proof that the taxpayer had completely paid off his tax liabilities,
PDIC will be compelled to settle and pay first all tax liabilities and deficiencies of the bank, regardless of the
order of preference under the pertinent provisions of the Civil Code. Following the BIR’s stance, therefore, only
then may the project of distribution of the bank’s assets be approved and the other debts and claims thereafter
settled, even though under Article 2244 of the Civil Code such debts and claims enjoy preference over taxes and
assessments due the National Government. The BIR effectively wants this Court to ignore Section 30 of
the New Central Bank Act and disregard Article 2244 of the Civil Code. However, as a court of law, this Court
has the solemn duty to apply the law. It cannot and will not give its imprimatur to a violation of the laws.
PDIC V BIR GR 172892 JUN 13, 2013
Section 30 of the New Central Bank Act lays down the proceedings for receivership and liquidation

of a bank. The said provision is silent as regards the securing of a tax clearance from the BIR. The
omission, nonetheless, cannot compel this Court to apply by analogy the tax clearance requirement
of the SEC, as stated in Section 52(C) of the Tax Code of 1997 and BIR-SEC Regulations No. 1,
since, again, the dissolution of a corporation by the SEC is a totally different proceeding from the
receivership and liquidation of a bank by the BSP. This Court cannot simply replace any reference
by Section 52(C) of the Tax Code of 1997 and the provisions of the BIR-SEC Regulations No. 1 to
the "SEC" with the "BSP." To do so would be to read into the law and the regulations something that
is simply not there, and would be tantamount to judicial legislation.
It should be noted that there are substantial differences in the procedure for involuntary dissolution
and liquidation of a corporation under the Corporation Code, and that of a banking corporation
under the New Central Bank Act, so that the requirements in one cannot simply be imposed in the
other.
In re Petition for Assistance in the Liquidation of Rural Bank of Bokod (Benguet), PDIC v BIR GR
158261 Dec 18, 2006
In contrast, the Monetary Board may summarily and without need for prior hearing, forbid the
banking corporation from doing business in the Philippines, for causes enumerated in Section
30 of the New Central Bank Act; and appoint the PDIC as receiver of the bank. PDIC
shall immediately gather and take charge of all the assets and liabilities of the closed bank and
administer the same for the benefit of its creditors. The summary nature of the procedure for the
involuntary closure of a bank is especially stressed in Section 30 of the New Central Bank Act,
which explicitly states that the actions of the Monetary Board under the said Section or Section
29 shall be final and executory, and may not be restrained or set aside by the court except on a
Petition for Certiorari filed by the stockholders of record of the bank representing a majority of
the capital stock. PDIC, as the appointed receiver, shall file ex parte with the proper RTC, and
without requirement of prior notice or any other action, a petition for assistance in the
liquidation of the bank. The bank is not given the option to undertake its own liquidation.
In re Petition for Assistance in the Liquidation of Rural Bank of Bokod (Benguet), PDIC v BIR
GR 158261 Dec 18, 2006
RECIEVERSHIP AND LIQUIDATION
The unreasonableness and impossibility of requiring a tax clearance before the approval by the RTC of the Project
of Distribution of the assets of the RBBI becomes apparent when the timeline of the proceedings is considered.
The BIR can only issue a certificate of tax clearance when the taxpayer had completely paid off his tax liabilities.
The certificate of tax clearance attests that the taxpayer no longer has any outstanding tax obligations to the
Government.
Should the BIR find that RBBI still had outstanding tax liabilities, PDIC will not be able to pay the same because
the Project of Distribution of the assets of RBBI remains unapproved by the RTC; and, if RBBI still had outstanding
tax liabilities, the BIR will not issue a tax clearance; but, without the tax clearance, the Project of Distribution of
assets, which allocates the payment for the tax liabilities, will not be approved by the RTC. It will be a chicken-and-
egg dilemma.
The Government, in this case, cannot generally claim preference of credit, and receive payment ahead of the other
creditors of RBBI. Duties, taxes, and fees due the Government enjoy priority only when they are with reference to a
specific movable property, under Article 2241(1) of the Civil Code, or immovable property, under Article 2242(1) of
the same Code. However, with reference to the other real and personal property of the debtor, sometimes referred to
as "free property," the taxes and assessments due the National Government, other than those in Articles 2241(1)
and 2242(1) of the Civil Code, will come only in ninth place in the order of preference.
In re Petition for Assistance in the Liquidation of Rural Bank of Bokod (Benguet) , PDIC v BIR GR 158261 Dec
18, 2006
ADMINISTRATIVE SANCTIONS ON SUPERVISED ENTITIES
Sec 37 Administrative Sanctions on Supervised Entities
The imposition of administrative sanctions shall be fair, consistent and reasonable.
Without prejudice to the criminal sanctions against the culpable persons provided in Secs 34, 35, and 36
the MB may, at its discretion, impose upon any bank, quasi-bank, including their subsidiaries and
affiliates engaged in allied activities, or other entity which under the NCBA or special laws are subject
to the BSP supervision, and/or their directors, officers or employees,
• for any willful violation of its charter or bylaws,
• willful delay in the submission of reports or publications thereof as required by law, rules and
regulations;
• any refusal to permit examination into the affairs of the institution;
• any willful making of a false or misleading statement to the Board or the appropriate supervising and
examining department or its examiners;
• any willful failure or refusal to comply with, or violation of, any banking law or any order, instruction
or regulation issued by the Monetary Board, or any order, instruction or ruling by the Governor; or
• any commission of irregularities, and/or conducting business in an unsafe or unsound manner as may
be determined by the MB, the following administrative sanctions, whenever applicable:
Sec 37. (con’t)
(a) fines in amounts as may be determined by the MB 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, such as the nature and gravity
of the violation or irregularity and the size of the bank or quasi-bank;
(b) suspension of rediscounting privileges or access to BSP credit facilities;
(c) suspension of lending or foreign exchange operations or authority to accept new deposits or make new investments;
(d) suspension of interbank clearing privileges; and/or
(e) revocation of quasi-banking license.
Resignation or termination from office shall not exempt such director or officer from administrative or criminal
sanctions.
The MB may, whenever warranted by circumstances, preventively suspend any director or officer of a bank or
quasi-bank pending an investigation: Provided, That should the case be not finally decided by the BSP within a
period of one hundred twenty (120) days after the date of suspension, said director or officer shall be reinstated in
his position: Provided, further, That when the delay in the disposition of the case is due to the fault, negligence or
petition of the director or officer, the period of delay shall not be counted in computing the period of suspension
herein provided.
Sec 37. (con’t)

The administrative sanctions need not be applied in the order of their severity.
Whether or not there is an administrative proceeding, if the institution and/or the directors and/or officers
concerned continue with or otherwise persist in the commission of the indicated practice or violation, the
MB may issue an order requiring the institution and/or the directors and/or officers concerned to cease
and desist from the indicated practice or violation, and may further order that immediate action be taken
to correct the conditions resulting from such practice or violation. The cease and desist order shall be
immediately effective upon service on the respondents.
The respondents shall be afforded an opportunity to defend their action in a hearing before the MB or any
committee chaired by any MB member created for the purpose, upon request made by the respondents
within five (5) days from their receipt of the order. If no such hearing is requested within said period, the
order shall be final. If a hearing is conducted, all issues shall be determined on the basis of records, after
which the MB may either reconsider or make final its order.
The Governor is hereby authorized, at his discretion, to impose upon banking institutions, for any failure
to comply with the requirements of law, MB regulations and policies, and/or instructions issued by the
MB or by the Governor, fines not in excess of Ten thousand pesos (P10,000) a day for each violation, the
imposition of which shall be final and executory until reversed, modified or lifted by the MB on appeal.
THE MB MAY IMPOSE ADMINISTRATIVE SANCTIONS
Bangko Sentral's Monetary Board is a quasi-judicial agency. Its decisions,

resolutions, and orders are the decisions, resolutions, and orders of a quasi-
judicial agency. Any action filed against the Monetary Board is an action against
a quasi-judicial agency.
This does not mean, however, that Bangko Sentral only exercises quasi-judicial
functions. As an administrative agency, it likewise exercises "powers and/or
functions which may be characterized as administrative, investigatory, regulatory,
quasi-legislative, or quasi-judicial, or a mix of these five, as may be conferred by
the Constitution or by statute."
Banco Filipino v BSP et al GR 200678 Jun 4, 2018 J. Leonen

THE MB MAY IMPOSE ADMINISTRATIVE SANCTIONS
Is declaratory relief a proper remedy for a resolution of the MB? – NO

Section 37 of Republic Act No. 7653, in particular, explicitly provides that the BSP
Monetary Board shall exercise its discretion in determining whether administrative
sanctions should be imposed on banks and quasi-banks, which necessarily implies that
the BSP Monetary Board must conduct some form of investigation or hearing regarding
the same.
The authority of the petitioners to issue the questioned MB Resolution emanated from its
powers under Section 37 of RA No. 7653 and Section 66 of RA No. 8791 to impose, at its
discretion, administrative sanctions, upon any bank for violation of any banking law.
The nature of the BSP Monetary Board as a quasi-judicial agency, and the character of
its determination of whether or not appropriate sanctions may be imposed upon erring
banks, as an exercise of quasi-judicial function, have been recognized by this Court
[Honorable Monetary Board vs. Philippine Veterans Bank GR 189571 (2015)]

RULES ON BANK DEPOSITS AND INVESTMENTS BY
DIRECTORS, OFFICERS, STOCKHOLDERS AND RELATED
INTERESTS (DOSRI)
What is the meaning of “related interests”? Per MORB X326.1 they are:
1. Spouse or relative within the first degree of consanguinity or affinity or relative by legal adoption of a DOS
of the bank;
2. Partnership of which DOS or those in no. 1 above, is a general partner
3. Co-owner with the DOS or those in no. 1 above of the property or interest or right mortgaged, pledged or
assigned to secure the loans or other credit accommodations, except whe the mortgage, pledge or assignment
covers only said co-owner’s undivided interest
4. Corporation, association or firm of which the DO or spouse is also a DO of such entity except:
1. Publicly listed companies and less than 50% of voting stock is owned by one persons or persons related within first degree
2. Where DOS of bank sits as representative of the bank in the BOD provided the bank representative shallnot have any
equity interest in the borrower corporation except for minimum shares required by law, rules and regulations or bylaws and
provided borrowing corporation not in MORB Sec X326.1
5. Corporation, association or firm of which any or a group of DOS of lending bank or those in no. 1 above
hold or own at least 20% of the subscribed capital of such entity
6. Other entities with related interests as mentioned in MORB Subsection X303.1
7. Corporation, association or firm which has an existing management contract or any similar arrangement with
the parent of the lending bank.
RULES ON BANK DEPOSITS AND INVESTMENTS BY DIRECTORS,
OFFICERS, STOCKHOLDERS AND RELATED INTERESTS (DOSRI)
“Sec. X326 Policy Statement. The Bangko Sentral recognizes that transactions
of its supervised financial institutions (BSFls) with related parties, which
include dealings with directors, officers, stockholders, and their related
interests (DOSRI), subsidiaries, and affiliates, may be both productive and
prudent. The Bangko Sentral also recognizes the need to provide BSFIs with
flexibility with respect to lending to DOSRI, subsidiaries, and affiliates
premised on the overarching principle that the transactions shall at all times be
kept above board and conducted on an arm's length basis, and that BSFIs have
adopted robust internal policies and procedures in handling related party
transactions that are compliant with the minimum requirements of law and
regulations.”
RULES ON BANK DEPOSITS AND INVESTMENTS
BY DIRECTORS, OFFICERS, STOCKHOLDERS AND RELATED
INTERESTS (DOSRI)
“Sec. X336 Supervisory Enforcement Actions. The Bangko Sentral reserves the right to
deploy its range of supervisory tools to promote adherence to the requirements set forth in
the foregoing rules and bring about timely corrective actions and compliance with Bangko
Sentral directives. The Bangko Sentral considers abuses in credit to related parties
(including credit to DOSRI, subsidiaries, and affiliates) as serious offenses and shall be
dealt with severely. In this regard, abuse shall be interpreted to include extending credit to
related parties without adopting appropriate internal policies.
For this purpose, the Bangko Sentral may among others, issue directives or sanctions on the
Bank and responsible persons, which may include restrictions or prohibitions of lending to
related parties or from certain authorities/activities, restrictions or prohibitions on dividend
declarations; and warning reprimand, suspension, removal and disqualification of
concerned bank directors, officers, and/or employees. In addition, the Bangko Sentral may
apply the borrowing director/ officer/stockholder's share in the bank's profit sharing
program against the excess of credit extended over any of the prescribed DOSRI ceilings. “
RULES ON BANK DEPOSITS AND INVESTMENTS
BY DIRECTORS, OFFICERS, STOCKHOLDERS AND RELATED INTERESTS
(DOSRI)
• To be considered a DOSRI loan or accommodation:

• Borrower is a DOS of a bank
• He contracts a loan or any form of financial accommodation
• The loan or financial accommodation is from (a) his bank or (b) a bank that is a
subsidiary of a bank holding company of which both his bank and the lending bank are
subsidiaries or (c ) a bank in which a controlling proportion of the shares is owned by the
same interest that owns a controlling proportion of the shares of his bank; and
• The loan or financial accommodation of the DOS singly or with that of his related
interest, is in excess of 5% of the capital and surplus of the lending bank or in the
maximum amount permitted by law, whichever is lower.
• The maximum amount permitted by law in Sec 26 refers to the limit on the loans that
may be extended to a DOS under Sec 36 of RA 8791 (GBA)
SUPERVISION AND REGULATION OF BANK OPERATIONS
• LOANS AND OTHER CREDIT OPERATIONS
• SELECTIVE REGULATION
• MARGIN REQUIREMENTS AGAINST LETTERS OF CREDIT
• REQUIRED SECURITY AGAINST BANK LOANS
• PORTFOLIO CEILINGS
• MINIMUM CAPITAL RATIOS
LOANS AND OTHER CREDIT ACCOMMODATIONS
INTRO
One way of influencing the volume of money is through credit. The BSP
lends out to banks through rediscounting, loans, or advances knwoing that
these will influence the volume of credit consistent with the objective of price
stability or control of domestic inflation.
The BSP may extend special credit with the following features:
1. Maturity of not more than 7 days
2. Collateral free
3. Purpose is to provide liquidity to the banking system in times of need.
Annotated, p. 297, BSP (2010)
LOANS AND OTHER ACCOMMODATIONS
INTRO
Central banks have been referred to as “lenders of last resort” or providers of
emergency liquidity financing, pursuant ot their function to achieve monetary
stability, maintain financial stability, and to provie financial support for their own
government. They provide a discretionary provisinof liquidity to financial institutions,
or the market as a whole, n reactin to an adverse shock which causes an abnormal
increase in demand for liquidity which cannot be met from an alternative source.
Emergency loan or advance is a credit facility intended to assist a bank experiencing
serious liquidity problems arising from causes not attributable to, or beyond the
control of, bank management. The grant of such facility is extended, upon discretion
of the MB, as a temporary remedial measure to help a solvent bank overcome serious
liquidity problems.
Banking Laws of the Philippines Book I The New Central Bank Act Annotated, p. 299,
BSP (2010)
LOANS AND OTHER CREDIT ACCOMMODATIONS
INTRO
Subject to specific requirements in each instance, emergency loans or advances may be granted
when there is
• Emergency or imminent financial panic
• Bank runs
• Massive movements by depositors of their funds from some banks to others
• Movements that endanger the economy
• Exchange crisis
• Threat to the international stability of the peso
• Precarious financial conditions or serious financial pressures
• Even during normal periods, to assist a bank in a precarious financial condition or under serious financial
pressures brought about by unforeseen events, or even which foreseeable could not be prevent by bank
concerned.
Banking Laws of the Philippines Book I The New Central Bank Act Annotated, p. 299, BSP
(2010)
LOANS AND OTHER CREDIT OPERATIONS
A. CREDIT POLICY
Section 81. Guiding Principles. - The rediscounts, discounts, loans and advances which the Bangko Sentral is
authorized to extend to banking institutions under the provisions of the present article of this Act shall be used
to influence the volume of credit consistent with the objective of price stability.
B. NORMAL CREDIT OPERATIONS

Section 82. Authorized Types of Operations. - Subject to the principle stated in the preceding section of this
Act, the Bangko Sentral may normally and regularly carry on the following credit operations with banking
institutions operating in the Philippines:
(a) Commercial credits. - The Bangko Sentral may rediscount, discount, buy and sell bills, acceptances,
promissory notes and other credit instruments with maturities of not more than one hundred eighty (180) days
from the date of their rediscount, discount or acquisition by the Bangko Sentral and resulting from transactions
related to:
(1) the importation, exportation, purchase or sale of readily saleable goods and products, or their transportation
within the Philippines; or
(2) the storing of non-perishable goods and products which are duly insured and deposited, under conditions
assuring their preservation, in authorized bonded warehouses or in other places approved by the Monetary
Board.
Sec 82. (con’t)

(b) Production credits. - The Bangko Sentral may rediscount, discount, buy and sell bills, acceptances,
promissory notes and other credit instruments having maturities of not more than three hundred sixty (360) days
from the date of their rediscount, discount or acquisition by the Bangko Sentral and resulting from transactions
related to the production or processing of agricultural, animal, mineral, or industrial products. Documents or
instruments acquired in accordance with this subsection shall be secured by a pledge of the respective crops or
products: Provided, however, That the crops or products need not be pledged to secure the documents if the
original loan granted by the Bangko Sentral is secured by a lien or mortgage on real estate property seventy
percent (70%) of the appraised value of which equals or exceeds the amount of the loan granted.
(c) Other credits. - Special credit instruments not otherwise rediscountable under the immediately preceding
subsections (a) and (b) may be eligible for rediscounting in accordance with rules and regulations which the
Bangko Sentral shall prescribe. Whenever necessary, the Bangko Sentral shall provide funds from non-
inflationary sources: Provided, however, That the Monetary Board shall prescribe additional safeguards for
disbursing these funds.
(d) Advances. - The Bangko Sentral may grant advances against the following kinds of collaterals for fixed
periods which, with the exception of advances against collateral named in clause (4) of the present subsection,
shall not exceed one hundred eighty (180) days:
Sec 82. (con’t)

(1) gold coins or bullion;
(2) securities representing obligations of the Bangko Sentral or of other domestic institutions of recognized solvency;
(3) the credit instruments to which reference is made in subsection (a) of this section;
(4) the credit instruments to which reference is made in subsection (b) of this section, for periods which shall not exceed
three hundred sixty (360) days;
(5) utilized portions of advances in current amount covered by regular overdraft agreements related to operations included
under subsections (a) and (b) of this section, and certified as to amount and liquidity by the institution soliciting the advance;
(6) negotiable treasury bills, certificates of indebtedness, notes and other negotiable obligations of the Government maturing
within three (3) years from the date of the advance; and
(7) negotiable bonds issued by the Government of the Philippines, by Philippine provincial, city or municipal governments,
or by any Philippine Government instrumentality, and having maturities of not more than ten (10) years from the date of
advance.
The rediscounts, discounts, loans and advances made in accordance with the provisions of this section may not be renewed or
extended unless extraordinary circumstances fully justify such renewal or extension.
Advances made against the collateral named in clauses (6) and (7) of subsection (d) of this section may not exceed eighty
percent (80%) of the current market value of the collateral.
C. SPECIAL CREDIT OPERATION

Section 83. Loans for Liquidity Purposes. - The Bangko Sentral may extend loans and advances to banking institutions for a
period of not more than seven (7) days without any collateral for the purpose of providing liquidity to the banking system in
times of need.
D. EMERGENCY CREDIT OPERATION

Section 84. Emergency Loans and Advances. - In periods of national and/or local emergency or of imminent financial panic
which directly threaten monetary and banking stability, the Monetary Board may, by a vote of at least five (5) of its members,
authorize the Bangko Sentral to grant extraordinary loans or advances to banking institutions secured by assets as defined
hereunder: Provided, That while such loans or advances are outstanding, the debtor institution shall not, except upon prior
authorization by the Monetary Board, expand the total volume of its loans or investments.
The Monetary Board may, at its discretion, likewise authorize the Bangko Sentral to grant emergency loans or advances to
banking institutions, even during normal periods, for the purpose of assisting a bank in a precarious financial condition or under
serious financial pressures brought by unforeseen events, or events which, though foreseeable, could not be prevented by the
bank concerned: Provided, however, That the Monetary Board has ascertained that the bank is not insolvent and has the assets
defined hereunder to secure the advances: Provided, further, That a concurrent vote of at least five (5) members of the Monetary
Board is obtained.
Sec 84. (con’t)
The amount of any emergency loan or advance shall not exceed the sum of fifty percent (50%) of total deposits and deposit
substitutes of the banking institution and shall be disbursed in two (2) or more tranches. The amount of the first tranche
shall be limited to twenty-five percent (25%) of the total deposit and deposit substitutes of the institution and shall be
secured by government securities to the extent of their applicable loan values and other unencumbered first class collaterals
which the Monetary Board may approve: Provided, That if as determined by the Monetary Board, the circumstances
surrounding the emergency warrant a loan or advance greater than the amount provided hereinabove, the amount of the
first tranche may exceed twenty-five percent (25%) of the bank's total deposit and deposit substitutes if the same is
adequately secured by applicable loan values of government securities and unencumbered first class collaterals approved
by the Monetary Board, and the principal stockholders of the institution furnish an acceptable undertaking to indemnify
and hold harmless from suit a conservator whose appointment the Monetary Board may find necessary at any time.
Prior to the release of the first tranche, the banking institution shall submit to the Bangko Sentral a resolution of its board
of directors authorizing the Bangko Sentral to evaluate other assets of the banking institution certified by its external
auditor to be good and available for collateral purposes should the release of the subsequent tranche be thereafter applied
for.
The Monetary Board may, by a vote of at least five (5) of its members, authorize the release of a subsequent tranche on
condition that the principal stockholders of the institution:
(a) furnish an acceptable undertaking to indemnify and hold harmless from suit a conservator whose appointment the
Monetary Board may find necessary at any time; and
(b) provide acceptable security which, in the judgment of the Monetary Board, would be adequate to supplement, where
necessary, the assets tendered by the banking institution to collateralize the subsequent tranche.
Sec 84 (con’t)
In connection with the exercise of these powers, the prohibitions in Section 128 of this Act shall not apply insofar as it refers to
acceptance as collateral of shares and their acquisition as a result of foreclosure proceedings, including the exercise of voting
rights pertaining to said shares: Provided, however, That should the Bangko Sentral acquire any of the shares it has accepted as
collateral as a result of foreclosure proceedings, the Bangko Sentral shall dispose of said shares by public bidding within one (1)
year from the date of consolidation of title by the Bangko Sentral.
Whenever a financial institution incurs an overdraft in its account with the Bangko Sentral, the same shall be eliminated within the
period prescribed in Section 102 of this Act.
E. CREDIT TERMS

Section 85. Interest and Rediscount. - The Bangko Sentral shall collect interest and other appropriate charges on all loans and
advances it extends, the closure, receivership or liquidations of the debtor-institution notwithstanding. This provision shall apply
prospectively.
The Monetary Board shall fix the interest and rediscount rates to be charged by the Bangko Sentral on its credit operations in
accordance with the character and term of the operation, but after due consideration has been given to the credit needs of the
market, the composition of the Bangko Sentral's portfolio, and the general requirements of the national monetary policy. Interest
and rediscount rates shall be applied to all banks of the same category uniformly and without discrimination.
Section 86. Endorsement. - The documents rediscounted, discounted, bought or accepted as collateral by the Bangko Sentral in the
course of the credit operations authorized in this article shall bear the endorsement of the institution from which they are received.
Section 87. Repayment of Credits. - Documents rediscounted, discounted or accepted as collateral by the Bangko
Sentral must be withdrawn by the borrowing institution on the dates of their maturities, or upon liquidation of the
obligations which they represent or to which they relate whenever said obligations have been liquidated prior to
their dates of maturity.
Banks shall have the right at any time to withdraw any documents which they have presented to the Bangko
Sentral as collateral, upon payment in full of the corresponding debt to the Bangko Sentral, including interest
charges.
Section 88. Other requirements. - The Monetary Board may prescribe, within the general powers granted to it
under this Act, additional conditions which borrowing institutions must satisfy in order to have access to the
credit of the Bangko Sentral. These conditions may refer to the rates of interest charged by the banks, to the
purposes for which their loans in general are destined, and to any other clearly definable aspect of the credit
policy of the bank.
Section 89. Provisional Advances to the National Government. - The Bangko Sentral may make direct
provisional advances with or without interest to the National Government to finance expenditures authorized in
its annual appropriation: Provided, That said advances shall be repaid before the end of three (3) months
extendible by another three (3) months as the Monetary Board may allow following the date the National
Government received such provisional advances and shall not, in their aggregate, exceed twenty percent (20%)
of the average annual income of the borrower for the last three (3) preceding fiscal years.
BSP HAS JURISDICTION OVER FRAUDULENT BANK LOANS
Koruga was a minority stockholder of the Banco Filipino, who filed a complaint against that
bank’s board of directors. Koruga filed his complaint in the Regional Trial Court. Issue arose as
to whether the BSP had jurisdiction, or whether it was the regular Courts.
Was Koruga correct in filing his complaint directly with the RTC?  NO
It is clear that the acts complained of pertain to the conduct of Banco Filipino’s banking
business. Thus, the BSP, pursuant to its Charter, is authorized to administer the monetary,
banking, and credit system of the Philippines. It is further authorized to take the necessary steps
against any banking institution if its continued operation would cause prejudice to its depositors,
creditors and the general public as well. This falls within the ambit of their supervisory and
regulatory powers (Sec. 25, New Central Bank Act)
Koruga’s allegations, involving fraudulent loans taken by the directors, called for the
examination of these loans, and therefore such is a matter for the BSP to determine. These are
not ordinary intra-corporate matters; rather, they involve banking activities which are, by law,
regulated and supervised by the BSP.
[Ana Maria Koruga vs Arcenas et al.G.R. 168332 (2002)]

SELECTIVE REGULATION
INTRO
The guiding principles to be observed by the MB for selective regulation of bank operations are
designed to:
1. Ensure the supply, availability and cost of money are in accord with the needs of the Philippine
economy
2. Ensure that bank credit is not used for speculative purposes preducial to the national interest; and
3. Apply uniformly and without discrimination to all banks of the same category
The requirement of uniform and non-discrimination of application of banking regulations is designed

to remove undue pressure on the MB and to assure equitable treatment of banks within the same
category. This in turn means observance of the principle of equal protection of the law.
Banking Laws of the Philippines Book I The New Central Bank Act Annotated, p. 353 - 357, BSP
(2010)
INTRO
Different margins may be prescribed by thy issue regulations e MB for different classes of trasanctions to
be financed by means of letters of credit. Banks may impose their own respective minimum cash
margins as long as it is not in violation of any law or regulation issued by the BSP.
The MB may regulate the maturities of loans and investment made by banks and the kind and amount of
security to be required against various types of credit operations, to enable banks to meet their liabilities
and promote the liquidity and solvency of the banking system.
The MB may issue regulations on bank credit exposure limits and specify the limits in various
undertakings and investments in which different categories of banks may engage in.
The importance of capital adequacy is indicated by the development of an internationally accepted
measure based on which is known as the “risk asset approach”. The size of capital of a bank is a measure
of its ability to lend, and its lending capability affects the liquidity of the banking system. Establishing
minimum capital ratios ensure that a bank holds sufficient capital andsurplus reserves appropriate to
address the different risks that a bank may expose itself from its various lending and investment
practices.
Banking Laws of the Philippines Book I The New Central Bank Act Annotated, p. 353 - 357, BSP (2010)
Section 104. Guiding Principle. - The Monetary Board shall use the powers granted to it under this
Act to ensure that the supply, availability and cost of money are in accord with the needs of the
Philippine economy and that bank credit is not granted for speculative purposes prejudicial to the
national interests. Regulations on bank operations shall be applied to all banks of the same category
uniformly and without discrimination.
Section 105. Margin Requirements Against Letters of Credit. - The Monetary Board may at any time
prescribe minimum cash margins for the opening of letters of credit, and may relate the size of the
required margin to the nature of the transaction to be financed.

Section 106. Required Security Against Bank Loans. - In order to promote liquidity and solvency of
the banking system, the Monetary Board may issue such regulations as it may deem necessary with
respect to the maximum permissible maturities of the loans and investments which the banks may
make, and the kind and amount of security to be required against the various types of credit
operations of the banks.
Section 107. Portfolio Ceilings. - Whenever the Monetary Board considers it advisable to

prevent or check an expansion of bank credit, the Board may place an upper limit on the
amount of loans and investments which the banks may hold, or may place a limit on the
rate of increase of such assets within specified periods of time. The Monetary Board may
apply such limits to the loans and investments of each bank or to specific categories
thereof.
In no case shall the Monetary Board establish limits which are below the value of the loans
or investments of the banks on the date on which they are notified of such restrictions. The
restrictions shall be applied to all banks uniformly and without discrimination.
Section 108. Minimum Capital Ratios. - The Monetary Board may prescribe minimum
ratios which the capital and surplus of the banks must bear to the volume of their assets, or
to specific categories thereof, and may alter said ratios whenever it deems necessary.
RATE OF EXCHANGE
INTRO
The BSP must have sufficient FX resources so that it can mainatian the
interntional stability and convertifiblity of the pesos and in order to promote
the domestic investments of bank resources, to achieve this purpose, banks
may be required to sell to BSP or other banks their surplus holdings of FX
for all currencies and at the exchange rates determined by the MP pursuant o
Sec 74. This is a standard feature of central banking actions.
Annotated, p. 278-279, BSP (2010)
RATE OF EXCHANGE
SEC 70 PURCHASES AND SALES OF FX
1. BSP may buy and sell foreign notes and coins, documents and
instruments employes for international transfer of funds
2. It may engage in FX operations with the following persons or entities
only:
a. Banks operating in the Philippines
b. Government, political subdivisions and instrumentalities
c. Foreign international financial institutions
d. Foreign government and their instrumentalities
e. Others that the MB is empowered to authorize as foreign exchange dealers
subject to rules it may prescribe
RATE OF EXCHANGE
Sec 70 (con’t)
In order to maintain the convertibility of the peso, the BSP may at the request
of any bank in the Philippines,
a. buy any quantity of FX offered, and
b. sell any quantity of FX demanded,
by such bank provided the foreign currencies are freely convertible into god
or US dollars.
This requirement shall not apply to demands for foreign notes and coins.
These exchange transactions shall be effected at rates determined in
accordance with Sec 74.
RATE OF EXCHANGE
SEC. 71 Foreign asset position of BSP should always be at all times a net
procitive foreign asset position in that its FX assets will always exceed gross
foreign liabilities.
SEC. 72 To protect international reserves of BSP during a crisis or national
emergency and to give MB and Government time to take constructive measures to
forestall, combat or overcome the same, the MB with 2/3 concurrence of its
members and approval by the President may
1. Temporarily suspend or restrict sale of exchange by the BSP
2. Subject all transactions in gold and FX to license by BSP
3. Require that any FX obtained by any person residing or entity operating in the
Philippines be delivered to BSP or to any bank designated by it for that
purpose at the effective exchange rate or rates
4. FCDs under RA 6462 shall be exempt from these requirements
RATE OF EXCHANGE
Sec 73 Acquisition of Inconvertible Currency
The BSP shall avoid acquisition and holding of currencies that are not freely
convertible, and may acquire such currencies in an amount exceeding the
minimum balance necessary to cover current demands for said currencies
only when and to the extent that it is considered by the MB of national
interest. The MB shall set the procedures that shall apply.
Sec. 74 Exchange Rates
The MB determines the exchange rate policy of the country and
1.Sets the rates at which the BSP shall buy and sell spot exchange
2. Establishes deviation limits from the effective exchange rates or rates as
may be proper
RATE OF EXCHANGE
Sec. 74 (con’t)
3. The BSP shall not collect additional commission or charges other than actual costs
incurred.
4. The MB shall determine the rates ofr other types of FX transactions by the BSP including
purchases and sale of foreign notes and coins
5. But margins between effective rates and rates thus established may not exceed
corresponding margins for spot exchange transaction by more than the additional costs or
expenses in each type of transaction.
Sec 75 Operations with Foreign Entities

The MB may authorize the BSP to grant loans to and receive loans from foreign banks and
other foreign or international entities both public and private, and may engage ins uch other
operations with those entities are are in the national interest and appropriate to its character
as central bank. The BSP may also act as agent or correspondent for such entities.
Upon authority of the MB, the BSP may pledge any gold or toher assets with it possess as
security against loans which it receives from foreign or international entities.
RATE OF EXCHANGE
Article III
Regulation Of Foreign Exchange Operations Of The Banks

Section 76. Foreign Exchange Holdings of the Banks. -
• In order that the Bangko Sentral may at all times have foreign exchange resources
sufficient to enable it to maintain the international stability and convertibility of the
peso, or
• in order to promote the domestic investment of bank resources, the Monetary
Board may require the banks to sell to the Bangko Sentral or to other banks all or
part of their surplus holdings of foreign exchange.
• Such transfers may be required for all foreign currencies or for only certain of such
currencies, according to the decision of the Monetary Board. The transfers shall be
made at the rates established under the provisions of Section 74 of this Act.

RATE OF EXCHANGE
Sec 76 (con’t)
The Monetary Board may, whenever warranted, determine the net assets
and net liabilities of banks and shall, in making such a determination,
take into account the bank's networth, outstanding liabilities, actual and
contingent, or such other financial or performance ratios as may be
appropriate under the circumstances. Any such determination of net
assets and net liabilities shall be applied in all banks uniformly and
without discrimination.
RATE OF EXCHANGE
NOTES
To allow more open and liberalized regime to facilitate freer flow of capital and
provide more flexibility to banks, corporations and individuals to meet their foreign
currency needs and manage their risks, the BSP continuously reviews foreign
exchange regulations.
A spot transaction is a single outright transaction involving the exchange of 2
currencies at a rate agreed on the date of the contract for value or delivery (cash
settlement) within 2 business days.
While the MB is granted the power to require banks to report on their foreign
exchange transactions or certain data relative to such transactions, said report must
exclude information covered by the mantle of confidentiality under the Foreign
Currency Deposit Act.
Banking Laws of the Philippines Book I The New Central Bank Act Annotated, p.
279, BSP (2010)
RATE OF EXCHANGE
NOTES
Notwithstanding the confidential nature of foreign currency deposits, the PDIC

and the BSP may inquire into or examine deposit accounts and all information
related thereto in case there is a finding of unsafe or unsound banking practice.
In order to avoid overlapping of efforts, the examination shall maximize the
efficient use of the relevant reports, information, and findings at the BSP which
it shall make available to PDIC.
Banking Laws of the Philippines Book I The New Central Bank Act Annotated,
p. 286, BSP (2010)

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BANKING

THE NEW CENTRAL BANK ACT, as amended

• The State shall maintain a central monetary authority that is

• a government owned corporation with

• BSP is established as the independent central monetary authority

*The MB is empowered to authorize entities or persons to engage in money service businesses.

• AUTHORITY TO OBTAIN DATA AND INFORMATION

Sec 23. (last par)

Subsidiary – a corporation more than 50% of the voting stock is directly or

Sec 25. (last par.)

Banco De Oro et al v Republic et al GR 198756 Aug 16, 2016

As defined in the banking sector, the term "public" refers to 20 or more

If a bank or non-bank financial intermediary sells debt instruments to 20 or more

BANCO DE ORO ET AL V REPUBLIC, ET AL G R 198756 AUG 16, 2016

• The conservator should be competent and knowledgeable in bank operations and

• The designation of a conservator under Section 29 or the appointment

• Regular courts do not have jurisdiction to hear and decide cases to

Such powers as the MB shall deem necessary to:

[FIRST PHIL INTL BANK v CA GR 115849 (1996)]

• MB is satisfied that the institution can continue to operate on

• Should the MB, on the basis of the report of the conservator

It is well-settled that the closure of a bank may be considered as an exercise of

Vivas et al v Monetary Board, et al GR 191424 Aug 7, 2013

For a quasi-bank, any person of recognized competence in banking or finance may be

If the receiver determines that the institution cannot be rehabilitated or

The Monetary Board, under certain circumstances, is empowered to

[CONSOLIDATED BANK vs COURT OF APPEALS G.R. 169457 (2015)]

There is no requirement whether express or implied, that a hearing be first conducted

(Rural Bank of Buhi vs. CA)

• may deposit or place the funds of the institution in non-speculative investments.

• convert the assets of the institution to money,

Banco Filipino v BSP et al GR 200678 Jun 4, 2018 (J. Leonen)

Section 30 of the New Central Bank Act lays down the proceedings for receivership and liquidation

Sec 37. (con’t)

Sec 37. (con’t)

Bangko Sentral's Monetary Board is a quasi-judicial agency. Its decisions,

Banco Filipino v BSP et al GR 200678 Jun 4, 2018 J. Leonen

Is declaratory relief a proper remedy for a resolution of the MB? – NO

[Honorable Monetary Board vs. Philippine Veterans Bank GR 189571 (2015)]

• To be considered a DOSRI loan or accommodation:

• LOANS AND OTHER CREDIT OPERATIONS

B. NORMAL CREDIT OPERATIONS

Sec 82. (con’t)

Sec 82. (con’t)

C. SPECIAL CREDIT OPERATION

D. EMERGENCY CREDIT OPERATION

E. CREDIT TERMS

[Ana Maria Koruga vs Arcenas et al.G.R. 168332 (2002)]

The requirement of uniform and non-discrimination of application of banking regulations is designed

Section 107. Portfolio Ceilings. - Whenever the Monetary Board considers it advisable to

Sec 75 Operations with Foreign Entities

Notwithstanding the confidential nature of foreign currency deposits, the PDIC

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