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Ra 8791 General Banking Law: Maria Ginalyn Calderon
Ra 8791 General Banking Law: Maria Ginalyn Calderon
BANKING LAW
1. The Monetary Board may prescribe rules and regulations on the types of
stock a bank may issue;
2. Banks shall issue par value stocks only (Sec. 9);
GR: No bank shall purchase or acquire shares of its own capital stock or
accept its own shares as a security for a loan.
XPN: When authorized by the Monetary Board; Provided, Every case stock so
purchased/acquired shall be sold/disposed of within 6 months from purchase
or acquisition.
BANK POWERS AND LIABILITIES
FUNCTIONS OF BANKS
1. Deposit Function
2. Loan Function
OTHER FUNCTIONS
Universal banks and commercial banks (as well as other banks depending on the type
of bank and/or the corresponding authority given by the Monetary Board) may also
exercise any of the following functions:
1. Receive in custody funds, documents and valuable objects;
2. Act as financial agent and buy and sell, by order of and for the account of their
customers, shares, evidences of indebtedness and all types of securities;
3. Make collections and payments fir the account if others and perform such other
services for their customers as are not incompatible with banking business;
4. Upon prior approval of the Monetary Board, act as managing agent, adviser,
consultant or administrator of investment management/advisory/consultancy accounts;
and
5. Rent out safety deposit boxes.
BANK POWERS AND LIABILITIES
PROHIBITED ACTS
1. Banks are prohibited from engaging in insurance business as insurer
(Sec. 54, GBL). However, it can indirectly engage in the insurance
business by distributing product of insurance. (Sec. 53.3, GBL)
2. Outsourcing of functions is generally prohibited. Example: A bank
cannot hire another company to accept deposits (Sec. 55.1, GBL).
3. No bank or quasi-bank shall declare dividends under any of the
following conditions:
a. if it is greater than its accumulated net profits then on hand,
deducting therefrom its losses and bad debts.; or
b. If at the time of its declaration, its clearing account with the Bangko
Sentral is overdrawn;
BANK POWERS AND LIABILITIES
c. It is deficient in the required liquidity floor for government
deposits for five (5) or more consecutive days;
d. It does not comply with the liquidity standards/ratios
prescribed by the Bangko Sentral for purposes of determining
funds available for dividend declaration; or
e. It has committed a major violation as may be determined by
the Bangko Sentral.
4. Without order of a court of competent jurisdiction, disclose to
any unauthorized person any information relative to the funds or
properties in the custody of the bank belonging to private
individuals, corporations, or any other entity (Sec. 55.1, GBL).
DILIGENCE REQUIRED OF BANKS
• Section 2. Declaration Of Policy. - The State recognizes the vital
role of banks providing an environment conducive to the sustained
development of the national economy and the fiduciary nature of
banking that requires high standards of integrity and
performance. In furtherance thereof, the State shall promote and
maintain a stable and efficient banking and financial system that is
globally competitive, dynamic and responsive to the demands of a
developing economy. (n)
• Banking business is so impressed with public interest where the trust
and confidence of the public in general is of paramount importance
such that the appropriate standard of diligence must be a high degree
of diligence, if not the utmost diligence (BA v. Phil Racing, G.R. NO.
150228, July 30, 2009).
NATURE OF BANK FUNDS AND
BANK DEPOSITS
• SERRANO VS CB 96 SCRA 1980
The relationship between the bank and its depositor is not that
of deposit, but one that is called “irregular deposit” which is
actually CREDITOR-DEBTOR RELATIONSHIP, since the bank
is not required to return the very same currency bill that was
deposited. Under Article 1953 of Civil Code, a person who
receives a loan or money or any other fungible thing acquires the
ownership thereof, and is bound to pay to the creditor an equal
amount of the same kind and quality. Article 1980 provides that
savings and current deposits of money in banks shall be governed
by the provision concerning simple loan.
NATURE OF BANK FUNDS AND
BANK DEPOSITS
• CONSOLIDATED BANK VS CA 410 SCRA 562
The fiduciary nature of banking does not convert a simple
loan into a trust relationship because banks do not accept deposits
to enrich depositors but to earn money for themselves. Law
allows banks to offer the lowest possible interest rate to
depositors while charging the highest possible interest rate on
their own borrowers; and the interest spread belongs to the bank
and not to the depositors who are not cestui que trust; otherwise,
the interest spread belongs to depositors, a situation that
Congress certainly did not intend in enacting GBL
CONSEQUENCES OF CREDITOR
DEBTOR RELATIONSHIP
1. The bank can make use as its own the money deposited. Said
amount is not being held in trust for the depositor nor is it being
kept for safekeeping. (Tang Tiong Tick v American Apothecaries,
65 Phil 414)
2. Third persons who may have a right to the money deposited cannot
hold the bank responsible unless there is a court order or
garnishment. The duty of the bank is to its creditor-depositor and
not to third persons. If a third person has a valid right over the
money deposited, he must prove the same before a court of
competent jurisdiction.
3. a. The officers of the bank cannot be held liable for estafa if they
are authorized the use of the money deposited by the depositor.
There would be no liability for estafa under Articles 315 (1)(b) of
the Revised Penal Code(RPC) even if the bank failed to return the
amount deposited.
CONSEQUENCES OF CREDITOR
DEBTOR RELATIONSHIP
3.b. If an employee who is entrusted with possession of the
money deposited takes the same money, the crime committed by
the employee is Qualified Theft.
4. The bank has the right to compensation. The relationship
between a bank and its depositor is that of creditor and debtor – a
bank has the right to set-off the deposits in its hands for the
payment of a depositor’s indebtedness (Equitable PCI Bank v. Ng
Sheung Ngor, 541 SCRA 223).
5. No breach of trust on the part of the bank in case of failure to
honor its obligations (deposits). A bank’s failure to honor a
deposit is failure to pay its obligation as debtor and not a breach
of trust arising from the depository’s failure to return the subject
matter of deposit (Serrano v. CA, 96 SCRA 96).
KIND OF DEPOSITS
1. Demand deposits refer to all those liabilities of banks which are
denominated in Philippine currency and are subject to payment in
legal tender upon demand by presentation of checks subject to the
following rules:
a. Generally, only a universal bank or commercial bank can accept
or create demand deposits. Other banks cannot accept demand
deposits except upon prior approval of the Monetary Board (Sec. 33,
GBL).
Demand deposits are deposits subject to withdrawal either by check
or through the automated tellering machines. They are otherwise
known as current or checking accounts. (Miravite, J. (2013), Bar
Review Materials in Commercial Law). They are non-interest
bearing except upon special arrangement (Ignacio, L. (2016),
Banking & Allied Laws). But is not prohibited by the BSP to earn
KIND OF DEPOSITS
2. Savings account. Savings deposits are interest-bearing deposits which are
withdrawable either upon presentation of a properly accomplished withdrawal
slip together with the corresponding passbook or through the automated
tellering machines.
a. Banks are prohibited from issuing/accepting withdrawal slips or any
other similar instruments designed to effect withdrawals of savings deposits
without requiring the depositors concerned to present their passbooks and
accomplishing the necessary withdrawal slips, except for bank authorized by
the BSP to adopt the no passbook withdrawal system (Sec. X214, Manual of
Regulations for Banks, or MORB).
b. The requirement of presentation of passbooks is usually included in the
terms and conditions printed in the passbooks. A bank is negligent if it allows
the withdrawal without requiring the presentation of a passbook (Sundiang, Sr.,
(2014) Reviewer on Commercial Law, p. 317).
KIND OF DEPOSITS
3. Negotiable Order of Withdrawal Accounts (NOW) are interest-
bearing deposit accounts that combine the payable on demand
feature of checks and investment feature of savings accounts
(Sundiang, Sr., (2014) Reviewer on Commercial Law, p. 317).
NOW Accounts are withdrawable by means of Negotiable
Orders of Withdrawal (Miravite, J. (2013), Bar Review Materials
in Commercial Law).
Net worth means the total and unimpaired paid-in capital including
paid in surplus, retained earnings and undivided profit, net valuation of
reserves and other adjustments as may be required by the BSP (Section 24,
GBL).
GRANT OF LOAN AND SECURITY
REQUIREMENTS
DOSRI ACCOUNTS
Restrictions (not a total prohibition) are imposed on borrowings
and security arrangement by Directors, Officers and Stockholders
of the bank directors, officers, stockholders and their Related
Interests (hence, the term DOSRI)
• By Deposit Account:
a. Single Account
b. Joint Account
c. Account “By”. “In Trust For” (ITF) or “For the Account of” (FAD) another person
d. By Currency:
e. Philippine Peso
f. Foreign currencies considered as part of BSP’s International reserves
Philippine Deposit Insurance
Corporation Act (RA 3591, as
amended)
DEPOSITS NOT COVERED BY INSURANCE:
1. The amount in excess of insured deposit of P500,000.00
2. Deposit that is payable in a place outside of the Philippines
3. Investment products such as bonds and securities, trust accounts
and other similar instruments
4. Deposit accounts or transactions which are fictitious or
fraudulent
5. Deposit accounts or transactions constituting, and/or emanating
from unsafe and unsound banking practice/s as determined by
PDIC’s Board after notice and hearing and publication of cease
and desist order
6. Deposits that are determined to be the proceeds of unlawful
activity as defined under RA No 9160 (AMLA Law)
Philippine Deposit Insurance
Corporation Act (RA 3591, as
amended)
7. Deposit accounts that resulted from splitting of deposits
8. Money placements by the head office of a foreign bank in its
branch in the Phil because there is only one entity
AMLA
SAFETY DEPOSIT BOX