Banking cases

1. Sec 83, RA 337 Violation of Director, Officer, Stockholders and related

interests (DOSRI) Law
a. Offender is a director or officer of any banking institution
b. Offender either directly or indirectly
1. Borrows any of the deposits or funds of such bank
2. Becomes a guarantor, indorser or surety for loans from such bank to
others
3. He becomes in any manner an obligor for money borrowed from bank
or loaned by it
4. Offender has performed any of such acts without the written approval
of the majority of the directors of the bank, excluding the offender, as
the director concerned
Go vs BSP- guaranteed/borrowed money from the bank where he is the
President and CEO.
Soriano vs People- Soriano, bank officer of RB of San Miguel (Bulacan)
acquires bank funds for his personal benefit (violative of DOSRI law)
REynoso vs CA and GCC- CCC acquired 30% equity etc. under DOSRI rules,
directors, officers and stockholders are prohibited from borrowing from their
company.
2. Conservatorship- Sec 29 of RA 265- BSP through MB is vested with exclusive
authority to assess evaluate and determine condition of any bank. If found to
be insolvent, can forbid to do business in Philippines. It shall designate a
conservator/receiver. Does not contemplate prior notice and hearing
3. Close now and hear later- police power of MB to protect depositors,
stockholders and general public
-

To set aside: a. appropriate pleading within 10 days, convincing proof,

arbitrary and bad faith
Cases of TSB and Producers

4. Duties of liquidator- prosecute and defend suits, foreclose mortgages for and
behalf of one bank
5. Examination by BSP appraises the soundness of the banks assets, quality
and character of management and determine institutions compliance with
laws, rules and regulations (CAMELS, governance et.al.)
Case of BF vs MB (Cases 14 and 5)
Audit is a detailed inspection of a banks books, accounts, vouchers, ledgers,
etc
Test of insolvency realizable assets < liabilities

6. Leticia Miranda vs PDIC (check clearing then bank holiday situation)

-liquidation and receivership
-CMA through MB exclusive authority to assess, evaluate and determine
condition of any bank. IF insolvent, can forbid bank, NBFI, affiliates and
subsidiary to continue business and appoint a BSP official or other
competence person as receiver
- cashier check not assignment of funds
-under jurisdiction of liquidation court
-PDIC/BSP not liable to pay cashiers check, since government agencies
mandated by law to determine financial viability of banks and QB,
facilitation, receivership and liquidations of closed financial institutions upon
a factual determination of the latters insolvency
7. Phil. Veterans Case
-even if created by special law- shall still be covered by regulatory power the
BSP
-BSP can still liquidate PVB
8. RB of San Miguel vs MB, BSP and PDIC (bank holiday)
- A report of the head of the supervising or examining department is
necessary before MB ca issue closure order (RA 7653 Sec 30)
9. Koruga case
- BSP has jurisdiction over Korugas complaint
- Banks affected with public interest because they receive funds from the
general public in the form of deposits
10.Conservator cannot revoke previously perfected contract (FPIB/Producers vs
CA)
11.CB vs Odra et. al. (DRB case)- MB actions on insolvency final and executor
unless convincing proof of arbitrary and bad faith
12.Advocate for Truth in Lending Act- In a usurious loan with mortgage, the right
to foreclose the mortgage subsists, and this right can be exercised by the
creditor upon failure by the debtor to pay the debt due. The debt due is
considered as without the stipulated excessive interest, and a legal interest of
12% per annum will be added in place of the excessive interest (legal interest
now 6% per annum effective 1 July 2013 CB Circular 799)
13.BSP vs Banks et.al- bank closure exercise of police power by the MB. It is final
and executor except arbitrary and bad faith

14.Foreign deposits (Intengan case)- not 1405 but 6426 applies. It cannot look
into deposit unless there is written permission
15.Garnishment-deposit, though strictly confidential under RA 1405, can be
garnished to insure satisfaction of a judgment (China Bank vs. Ortega)
16.Liquidation- 2 part proceeding, annulment of deed of mortgage and damages
included case lodged with liquidation court (Ballesteros vs. Canaman)
17.PDIC vs. BIR- tax cannot be imposed to banks under liquidator; tax clearance
not prerequisite to approval of the project distribution of the assets of a bank
under liquidation by the PDIC
18.GSIS vs CA- 1405- to protect depositors (general rule) except in some cases
-

6426- to encourage deposits from foreign currency lenders and investors

19.China Bank vs. Gotianuy (father-daughter rift)

- Foreign currency absolutely confidential in nature and exempt from
attachment garnishment and other process/order of court except where
even if in different name, funds were unlawfully taken and undisputably
deposited with China Bank (established facts)
20.In waiving 1405, Marquez vs. Desierto:
-account clearly identified
-due to a case pending
-bank personnel and account holder must be notified
-owner only of the account identified in the pending case
21.Salvacion vs CB- FCDU not subject to any court action, garnishment
22.Deposits with banks/NBFI in RP. Investments in banks by Government et.al.
-absolutely confidential in nature
-except upon written permission of depositor, impeachment, order of court,
subject matter of litigation
-Bangayan vs. RCBC
-BSB vs. Sally Go (if theres doubt, in favor of depositor)
23.JV Ejercito case- unexplained wealth, bribery or dereliction of duty, should be
exempted from bank secrecy since public office is a public trust
24.Erap case- even if alias, 1405 will apply to protect private person of Eraps
privacy of opening the account

25.AMLA cases

-Glasgow-action for civil forfeiture may be separately and independently

prosecuted and resolved
-Green & Ross- CA can issue freeze order for 6 months within 24 hrs (same
with First Pacific Network)
Philippine Banking Laws Focus
1.
2.
3.
4.

General Banking Act of 2000

New Central Bank Act
Truth in Lending Act
Secrecy of Bank Deposit

Secrecy of Bank Deposit- RA 1405

-

An act prohibiting disclosure of deposits

Encourage the people to deposit their money in banking institutions
Discourage private hoarding of money
Protect people and banking officials from undue pressures from
government agencies and private individuals to make disclosures

What is the extent of the laws coverage?

-

All deposits of whatever nature

Investments in bonds issued by the government

Covered transactions (in relation to AMLA)- transactions in excess of P500,000 in

one single transactions
-confidential in nature
-may not be examined/inquired
Except:
a. Written permission
b. Impeachment
c. Order of competent courts in cases of bribery or dereliction of duty of public
officials
d. AMLA cases
e. Unexplained wealth
f. Report of independent auditor
g. Examination general/special authorized by MB w/reasonable ground to
believe that a bank fraud or serious irregularity has been committed
*Foreign account tax compliance act (FATCA)- will be stricter (Global tax compliance
law)
In order to ensure that the intended purpose is achieved Sec (3) illegal to disclose
(Malicious reporting)

-if violated, imprisonment of not more than 5 yrs or not more than P20,000 or both
If US$ currency involved- Bank Secrecy Law does not apply (GSIS vs CA). It should
be the foreign currency deposit act (FCDA) RA No. 6426
RA 1405- milder
RA 6426- more restrictive
Against foreign currency:
-No writ of garnishment
-no tax or any process of court (Northcott case)
RA 6426 as amended- foreign accounts
-absolutely confidential
-no instance that can be examined
Only exception- written permission of depositor (Carmen Intengan case)
Law relaxed- China Bank vs. CA and Salvacion Gotianuy
Truth in Lending Act RA No 3765
-inform borrowers of finance or charges
-prevent fraud
Any creditor must furnish borrower a clear statement in writing
a.
b.
c.
d.

Cash price of the service to be acquired

Amounts of downpayment
Cash price and downpayment
Charges in connection with the transaction but not incident to the extension
of credit
e. Total amount to be financed
f. Finance or charges
g. Percentage that the finance bears
Penalty- P100 or in amount equal to 3x the finance charged required by such
creditor in connection with such transaction, whichever is greater
Willful violation- P1000 or more
-entity exempted are government or its agency/political subdivision
New Central Bank Act RA No. 7653 (Sirs trivia- RA 3765- Old Central Bank Act)

Established the Bangko Sentral ng Pilipinas as the Central Monetary

Authority that will focus on money, banking and credit (MBC)
Shall enjoy fiscal and administrative autonomy
P50B fully subscribed Government
P10B fully paid

BSPs primary responsibility

-price stability (inflation, law of supply and demand)
Deposit- bank with interest
Deposit substitute- high networth individuals
Bank-deposit from public
Quasi-bank- deposit substitutes
-payment and settlement that is efficient
-banking/stable financial system
-monetary stability and tradability of peso
BSPs powers exercised by the Monetary Board
Monetary Board comprised of:
-

7 members
Presidential appointees
6 years term
Governor- Chairman
Member of cabinet- Sec of Finance
5 members from private sector and serve full time
All except the Governor will not be subject for confirmation of Commission
on Appointment
May be reappointed by the President but not more than once.

Qualifications of Members of MB
-natural-born citizen of the Phil

-at least 35 years

-40 years for Governor
- of good moral character
-unquestionable integrity, probity and patriotism
-with recognized competence in social & economic discipline (Sec 8)
Qualifications are continuing requirement
-if former Filipino-no more
- estafa cases- no more
What are disqualifications?
1. Director, officer, employee, consultant, lawyer, agent or stockholder of any
bank, quasi-bank or any other institutions
2. MB from private sector shall not hold any other public office
3. Multilateral banking on financial institution
Vacancies- appointment of new members complete unexpired period of the term of
member concerned
Grounds for removal of MB
-

Disqualified
Physically or mentally incapacitated
Guilty of acts of fraud
No longer possesses qualifications specified in Sec 8

Does BSP have power to conduct examination of non-bank entities?- yes, bank,
NBFI, subsidiaries and affiliates
-no restraining order or injunction
Not absolute- except arbitrary and made in bad faith
Inadequate liquidity of banks- BSP can conservatorship
Sec 29- in a state of continuing inability or unwillingness to maintain or condition of
liquidity, BSP can appoint a conservator-to take charge of assets, liabilities and
management
Conservatorship- under authority and powers of MB who shall oversee every aspect
of banks operation and affairs

Conservator- person appointed by the MB vested with the exclusive power and
authority to take over and oversee the operation and affairs of the bank
-overrule or revoke actions of previous management of BOD of bank or QB
Minimum qualifications- competent and knowledgeable in bank operations and
management
Maximum period for conservatorship- not exceed 1 yr
Conservator salary- 2/3 of president of institutions salary in 12 equal monthly
payments
Bank pays remuneration- will conservator receive if terminated before end of 1 yr
period- depends, if can operate on its own- ok; if not=then no.
Conservatorship- intended to provide MB to determine if can still operate on its own,
continuance in business would involve probable loss
Receivership- provisional remedy
-Authority of bank, BOD, SM own its properties and effect are suspended
-receiver
-PDIC
-injunction, to restrain bank officers from intermedding in or way
Liquidation- settling of all indebtedness of bank
Bank assets in hands of receiver order of garnishment?
-in custodial egis
-exempt from any order of garnishment, levy, attachment or execution.
Grounds by which a bank is for liquidation
-unable to pay its liabilities as they become due in ordinary course of business
-financial panic in the banking community
-insufficient realizable assets as det. By BSP to meet its liabilities
-cannot continue in business without involving improbable losses
-violated cease and desist order
Conservatorship not precondition before receivership?

Action of MB shall be final and executory and may not be restrained or set aside of
court unless- petition for certiorari excess of jurisdiction, grave abuse of discretion
Sanctions: admin, civil, criminal
Civil- fines, suspension, revocation
Acts prohibited
-refusal to make reports or permit examination
-willfully making of false/misleading statement
-willful violation
Resignation/termination- shall not exempt from administrative or criminal sanction
MB can suspend a bank director or officer pending investigation- Yes, whenever
warranted by circumstances, preventively suspend pending investigation
Exclusive issue power of currency of BSP within territory of the Phil
General Banking Act of 2000/RA No 8791
-vital role of banks
-sustained development of natural economy
-fiduciary nature of banking that requires high standards of integrity and
performance
BSP exercise supervisory powers
-overseeing to ascertain laws
-issuance of rules, conducts, establishment standards of operations
-conduct examinations
-regular investigation
-inquiring into solvency and liquidity of the institution
-prompt corrective action (PCA)
*not limited to banks; it also applies to QB, trust entities and other financial
institutions
First secure an authority from BSP. In fact SEC shall not register unless accompanied
by a certificate of authority

MB- det. Person or entity in Bank/QB

Basic condition (stock corporation)
1.
2.
3.
4.
5.

20 or more
Funds obtained public
Minimum capital requirement
Not allowed to acquire our shares
No, not more than 6 yrs

Foreign ownership- 40%;Foreign Bank Liberalization (100%)

Corporate stockholdings- same family or group
Stockholdings of family group considered as related interest- up to fourth degree
5-15 directors- 2 independent, i.e., other than officer or employee of bank,
subsidiary and affiliate
Foreigner can be elected of BOD
Fit and Proper Rule= MB to prescribe, pass upon and review qualifications and
disqualifications of individuals elected or appointed as bank directors or officers and
disqualify those found unfit
MB may disqualify, suspend or remove any bank director or officer who commits or
omits or act which render him unfit for the position after due notice to the BOD of
the bank- integrity, experience, education, training and competence
MB may not interfere to benefits but may regulate payment by bank to its directors
and officers of compensation, allowance, fees
MB may interfere in operations if:
-comptrollership/conservatorship
-unsafe/unsound manner
-unsatisfactory financial position
No appointive or elective public official
Exception: if incident to financial assistance
Banking days and hours- 6 hrs a day; 5 days a week but can operate during
weekends and holidays for 3 hrs with prior approval/inform MB
Strikes and lockouts in a bank- BSP to report to Labor Arbiter and latter will assume
jurisdiction if not settled in 7 dayss

Commercial bank (all except investment house and power to invest in non-allied
enterprises vs. Universal bank (all))
Restriction of Bank exposure to DOSRI?
-

Not borrow, guarantee, endorser or surety

No, it can be written approval of majority of all directors of bank excluding directors
concerned
Exception to exception not required fringe benefit plan
Purpose of the rule- upon terms not less favorable to the bank than those offered to
others
Sanction- vacant
-penal provisions of NCBA
Prohibition to act as insurer (Sec 54)
Prohibited transactions (Sec 55.1)
Conducting business in an unsafe or unsound manner
Sec 30- under receivership/ unsafe
Cessation
1. Voluntary/involuntary liquidation
2. Receivership
Refuses to turn over to receivers
Tampers with bank records
Appropriates-receivers of permits or cases, pays etc
RA 9160 as amended AMLA- dynamic
Purposes
1. Integrity and confidentiality
2. Not money laundering site
3. Corporation instrumental investigation
Money laundering- source of money came from illegal source
Unlawful activities- 34 unlawful activities or predicate crimes

Money laundering
-

Transacting
Transferring, disposing of
Concealing or disguising
Attempt or comprising to commit ML
Aiding, abetting
Facilitating
Failed to report to AMLC

Other Prohibited Acts

1. Failure to keep records
2. Malicious reporting
3. Breach of confidentiality

Safe Harbor provision- no admin, civil or crim case shall lie against any person for
having made a covered or suspicious report
AMLC- BSP, IC, and SEC- require and receive CTR and STR from covered persons
DOJ- civil forfeiture
Authority to freeze order- CA order effective immediately; shall not exceed 6
months
Authority to inquire- bank inquiry
CA within 24 hours
Civil forfeiture- initiated by AMLC through OSG
equal value principle
Covered persons- banks, non-banks, QB, supervised or regulated by BSP, SEC, IC,
jewelry dealers, company service providers, lawyers, accountants, doctors,
manages clients money
Obligation of CP
1. Customer identification
2. Record keeping 5 years
3. Reporting of CTR and STR
CTR- in excess of P500,000 in 1 banking day
STR- regardless of amount, no underlying legal, not properly identified
Malicious reporting- malice bad faith

ML independently of prosecution of the unlawful activity

AMLA provided state with 3 extraordinary remedies to prevent L
Freeze order judicial prerogative
Breach of confidentiality