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Banking Laws Maria Zarah Villanueva - Castro BANKING LAW (R.A. 8791) General Banking Law: Sec. 3 of the General Banking Law provides that: "Banks" shall refer to entities engaged in the lending of funds obtained in the form of deposits. Sec. 8 of the General Banking Law provides that: The Monetary Board may authorize the organization of a bank or quasi-bank subject to the following conditions: 8.1 That the entity is a stock corporation; 8.2 That its funds are obtained from the public, which shall mean twenty (20) or more persons; and 8.3 That the minimum capital requirements prescribed by the Monetary Board for each category of banks are satisfied. No new commercial bank shall be established within three (3) years from the effectivity of this Act. In the exercise of the authority granted herein, the Monetary Board shall take into consideration their capability in terms of their financial resources and technical expertise and integrity. The bank licensing process shall incorporate an assessment of the banks ownership structure, directors and senior management, its operating plan and internal controls as well as its projected financial condition and capital base. *To be registered as bank, it must be a stock corporation. *Banks must obtain funds from the public. Minimum number of depositor is 20 persons. Nature of Business: Sec. 2 of the General Banking Law states that: 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. Consequences: 1. Sec. 9 of the General Banking Law provides that: The Monetary Board may prescribe rules and regulations on the types of stock a bank may issue, including the terms thereof and rights appurtenant thereto to determine compliance with laws and regulations governing capital and equity structure of banks; Provided, That banks shall issue par value stocks only. Bank must be an open corporation Reason: Vital to industry The word bank cannot be used if such person or entity is not engaged in banking business. It is subject to heavy and close supervision and/or regulation by the Bangko Sentral ng Pilipinas. Banks must observe highest degree of diligence. Sec. 22 of the General Banking Law states that: The banking industry is hereby declared as indispensable to the national interest and, notwithstanding the provisions of any law to the contrary, any strike or lockout involving banks, if unsettled after seven (7) calendar days shall be reported by the Bangko Sentral to the Secretary of Labor who may assume jurisdiction over the dispute or decide it or certify the same to the National Labor Relations Commission for compulsory arbitration. However, the President of the Philippines may at any time intervene and assume jurisdiction over such labor dispute in order to settle or terminate the same.
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*In DBP v CA, the SC held that while an innocent mortgagee is not expected to conduct an exhaustive investigation on the history of the mortgagors title, in case of a banking institution, it must exercise due diligence before entering into said contract, and cannot rely upon on what is or is not annotated on the title. Cases: China Banking v Lagon; Citibank v Cabangongan Authority to incorporate and operate: Sec. 14 of the General Banking Law states that: The Securities and Exchange Commission shall not register the articles of incorporation of any bank, or any amendment thereto, unless accompanied by a certificate of authority issued by the Monetary Board, under its seal. Such 1
Other functions of the Bangko Sentral: A. Emergency Loan Sec. 84 of the New Central Bank Act states that: 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 10
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