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2007-2010 BANKING LAWS BAR QUESTIONS 2007 X. (5%) Name at least five (5) predicate crimes to money laundering. Any five of the following are predicate crimes to money laundering: 1. (1) Kidnapping for ransom under Article 267 of Act No. 3815, otherwise known as the Revised Penal Code, as amended; 2. (2) Sections 3, 4, 5, 7, 8 and 9 of Article Two of Republic Act No. 6425, as amended, otherwise known as the Dangerous Drugs Act of 1972; 3. (3) Section 3 paragraphs B, C, E, G, H and I of Republic Act No. 3019, as amended, otherwise known as the Anti-Graft and Corrupt Practices Act; 4. (4) Plunder under Republic Act No. 7080, as amended; 5. (5) Robbery and extortion under Articles 294, 295, 296, 299, 300, 301 and 302 of the Revised Penal Code, as amended; 6. (6) Jueteng and Masiao punished as illegal gambling under Presidential Decree No. 1602; 7. (7) Piracy on the high seas under the Revised Penal Code, as amended and Presidential Decree No. 532; 8. (8) Qualified theft under Article 310 of the Revised Penal Code, as amended; 9. (9) Swindling under Article 315 of the Revised Penal Code, as amended; 10. (10) Smuggling under Republic Act Nos. 455 and 1937; 11. (11) Violations under Republic Act No. 8792, otherwise known as the Electronic Commerce Act of 2000; 12. (12) Hijacking and other violations under Republic Act No. 6235; destructive arson and murder, as defined under the Revised Penal Code, as amended, including those perpetrated by terrorists against non-combatant persons and similar targets; 13. (13) Fraudulent practices and other violations under Republic Act No. 8799, otherwise known as the Securities Regulation Code of 2000; 14. (14) Felonies or offenses of a similar nature that are punishable under the penal laws of other countries. 2009 True/False If the Ombudsman is convinced that there is a violation of law after investigating a complaint alleging illicit bank deposits of a public officer, the Ombudsman may order the bank concerned to allow in camera inspection of bank records and documents. False. The Bank Secrecy Law prohibits the inspection of a bank account unless the permission of the account holder is obtained, or upon lawful order of the court or when the deposit is the subject of litigation. Investigation by the Ombudsman is not considered as a pending litigation to allow the examination of the bank records and documents (Marquez v. Desierto, 359 SCRA 772, 2001) A bank under receivership can still grant new loans and accept new deposits. False. During the receivership, the assets and properties of the corporation are being gathered for conversion into cash in preparation for distribution to creditors. Granting new loans and accepting new deposits would constitute doing business for the bank in

the ordinary course of business which is contrary to the purpose and nature of a receivership proceeding. VIII. Maharlikang Pilipino Banking Corporation (MPBC) operates several branches of Maharlikang Pilipino Rural Bank in Eastern Visayas. Almost all the branch managers are close relatives of the members of the Board of Directors of the corporation. Many undeserving relatives of the branch managers were granted loans. In time, the branches could not settle their obligations to depositors and creditors. Receiving reports of these irregularities, the Supervising and Examining Department (SED) of the Monetary Board prepared a detailed report (SED Report) specifying the facts and the chronology of events relative to the problems that beset MPBC rural bank branches. The report concluded that the bank branches were unable to pay their liabilities as they fell due, and could not possibly continue in business without incurring substantial losses to its depositors and creditors. May the Monetary Board order the closure of the MPBC rural banks relying only on the SED Report, without need of an examination? Explain. (3%) Yes, Upon receipt of the report of the SED, the Monetary Board is authorized to take any of the actions enumerated under Sec. 30, RA 7653, otherwise known as the New Central Bank Act, leading to the receivership and liquidation of a bank or quasi-bank. There is no requirement that an examination be first conducted before a banking institution may be placed under receivership (Rural Bank of Buhi v. CA, 162 SCRA 288, 1988) If MPBC hires you as lawyer because the Monetary Board has forbidden it from carrying on its business due to its imminent insolvency, what action will you institute to question the Monetary Boards order? Explain. (3%) The order of the MB may be questioned on a petition for certiorari on the ground that the action taken was in excess of jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction. The petition of certiorari may only be filed by the stockholders of record representing the majority of the capital stock within 10 days from receipt by the board of directors of MPBC of the order directing receivership, liquidation or conservatorship (Sec. 30, par. 2, R.A. 7653) 2010 I. Briefly describe the following types of banks: (2% each) A. universal bank A universal bank is a commercial bank with two additional powers, namely: 1) the power of an investment house and 2) the power to invest in non-allied enterprises (Sec. 23, GBL of 2000) B. commercial bank A commercial bank is a bank that can: 1) accept drafts; 2) issue letters of credit; 3)discount and negotiate promissory notes, drafts, bills of exchange, and other evidence of debt; 4)accept or create demand deposits; 5) receive other types of deposits, as well as deposit substitutes; 6)buy and sell foreign exchange, as well as gold or silver bullion; 7) acquire marketable bonds and other debt securities; and 8) extend credit, subject to such rules promulgated by the Monetary Board (Sec. 29 of

GBL) C. thrift bank A thrift bank is one established as a savings and mortgage bank, a stock savings and loan association, or a private development bank, for the purpose of: 1)accumulating the savings of depositors and investing them in outlets determined by the Monetary Board as necessary in the furtherance of national economic objectives; 2)providing short term working capital, medium and long-term financing, to businesses engaged in agriculture, services, industry and housing and 3) chosen market and constituencies specially for small and medium enterprises and individuals. D. rural bank A rural bank is one established to provide credit facilities to farmers and merchants or their cooperatives and, in general, to the people of the rural communities (Sec. 3, RA 7353, The Rural Banks Act of 1992) E. cooperative bank A cooperative bank is organized under the Cooperative Code to provide financial and credit services to cooperatives. It may perform any or all the services offered by a rural bank, including the operation of a Foreign Currency Deposit Unit subject to certain conditions (Sec. 100, RA 6938, The Cooperative Code of the Philippines). II. A. How do you characterize the legal relationship between a commercial bank and its safety deposit box client? (2%) The relationship between a commercial bank and its safety deposit box client is that of a bailee and a bailor, the bailment being for hire and mutual benefit (Sia v. CA, 222 S 24 (1993); CA Agro-Industrial Development Corp v. CA, 219 SCRA 426, 1993) ALTERNATIVE ANSWER: The legal relationship of the bank and its safety deposit box client is that of lessor and lessee. B. Is a stipulation in the contract for the use of a safety deposit box relieving the bank of liability in connection with the use thereof valid? The stipulation relieving the bank of liability in connection with the use of the safety deposit box is void as it is against law and public policy (CA AgroIndustrial Development Corp. v CA supra) C. Differentiate bank deposits from deposit substitutes.(2%) Bank deposits are funds obtained by a bank from the public which are relent by such bank to its own borrowers. Deposits substitutes are alternative forms of obtaining funds from the public, other than deposits, through the issuance, endorsement, or acceptance of debt instruments for the own account of the borrower, 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 (Sec. 95, RA No. 7653, The New Central Bank Act) D. Why are banks required to maintain reserves against their deposits and deposit substitutes? State one of three purposes for these reserves.

Any one of the following four (4) purposes for requiring banks to maintain reserves against their deposits and deposit substitutes will suffice: a. One of the purposes of the requirement to maintain bank reserves is to control the volume of money created by the credit operations of the banking system (Sec. 94 of NCBA) b. It is to enable the banks to answer any withdrawal; c. To help Government to finance its operation; d. To help the Government control money supply. XIV When OCCIDENTAL Bank folded up due to insolvency, Manuel had the following separate deposits in his name: P200,000 in savings deposit; P250,000 in time deposit; P50,000 in a current account; P1 million in a trust account; and P3 million in money market placement. Under the Philippine Deposit Insurance Corporation Act, how much could Manuel recover? Explain. Manuel can recover P500,000.00, because this is the total of his savings deposit, time deposit and current account (Sec. 4(g) of RA 3591, as amended) . The trust account and the money market placements are not included in the insured deposits (Sec. 4(f) of RA 3591). 2011 (14) Under the Anti-Money Laundering Law, a covered institution is required to maintain a system of verifying the true identity of their clients as well as persons purporting to act on behalf of (A) those doing business with such clients. (B) unknown principals. (C) the covered institution. (D) such clients. (34) A bank can be placed under receivership when, if allowed to continue in business, its depositors or creditors would incur (A) probable losses (B) inevitable losses (C) possible losses (D) a slight chance of losses (68) May a publicly listed universal bank own 100% of the voting stocks in another universal bank and in a commercial bank? (A) Yes, if with the permission of the Bangko Sentral ng Pilipinas. (B) No, since it has no power to invest in equities. (C) Yes, as there is no prohibition on it. (D) No, since under the law, the 100% ownership on voting stocks must be in either bank only.