GENERAL CONCEPTS

GOVERNING LAW
Banks are governed by:
RA 8791 or the General Banking Law of
2000
RA 337 or the General Banking Act of
1949
RA 7653 or the New Central Bank Act
RA 7353 for Rural Banks
RA 7906 for Thrift Banks
AUTHORITY TO OPERATE
INCORPORATION STAGE: A banking or quasibanking corporation must be incorporated with
the authority from the BSP. Articles of
Incorporation filed in the SEC must be
accompanied by a favorable recommendation
from the BSP.

Stable, efficient and globally competitive

One of public interest as it is intertwined
with public welfare.
Subject to reasonable regulation under
police power of the state

UTMOST DILIGENCE
The
banking
business
requires
utmost
diligence in the handling of deposits.
In every case, the depositor expects the bank
to treat his account with the utmost fidelity,
regardless of the amount deposited in the
account.
Transactions must be recorded accurately to
the last centavo
Transactions must be done as promptly as
possible
It is the duty of the bank to exercise the
highest degree of diligence in handling
deposits.

OPERATION:
An entity that is performing
banking or quasi banking functions cannot
operate without a certificate of authority from STRIKES AND LOCKOUTS
the BSP.
Because of the indispensable nature of banking
The GBL states that:
to national interest, any strike or lockout
SEC. 64. Unauthorized Advertisement or unsettled for 7 calendar days shall be reported
Business Representation. - No person, by the BSP to the Secretary of Labor.
association or corporation unless duly
The Secretary of Labor then may:
authorized to engage in the business of a
Assume jurisdiction over the dispute
bank, quasi-bank, trust entity, or savings
Certify the dispute to the NLRC for
and loan association as defined in this
compulsory arbitration.
act, or other banking laws, shall advertise
The President of the Philippines may at
or hold itself out as being engaged in the
any
time
intervene
or
assume
business of such bank, quasi-bank, trust
jurisdiction
over
such
labor
dispute
for
entity,
or
association,
or
use
in
its
speedy
termination
and
settlement.
connection with its business title, the wor
or words bank, banking, banker,
quasi-bank, quasi-banking, trust Classification of Banks (CUT-RICO-NQU)
corporation, trust company, or words 1. Universal Banks large commercial banks
that
can
do
both
commercial
and
of similar import or transact in any
investment
banking
manner the business of any such bank,
1. powers authorized for a commercial
corporation or association.
bank
2. powers of an investment house
BANKS: Refers to entities engaged in the
3. power to invest in non-allied
lending of funds obtained in the form of
enterprises
deposits.
It is founded to facilitate the
borrowing, lending, and safekeeping of money
2. Commercial banks (KB) general powers
and to deal in notes, bills, and credits.
incident of corporation and can perform
Must be stock corporations
commercial banking
Its funds are obtained from the public (deposits Does not have the power to invest in nonof 20 or more persons)
allied enterprises
- powers of commercial banks: (A BREAD)
BANKING BUSINESS:
accepting drafts; issuing letters of credit;
The very business of a bank is to have a place discounting PM; drafts, BoE, and other
where deposits are received and paid out and evideces of debt; accepting creating demand
where money is loaned on security.
deposits; deposit substitutes; gold or silver
If the institution performs such basic functions, bullion; marketable bonds and debt securities;
even if it is referred to by a different name, it and extending credit
is still considered as a bank.
3. Rural banks banks that promote rural
QUASI-BANKS: Entities
engaged
in
the development
borrowing of funds through the issuance, They can extend loan or advances to
endorsement or assignment with recourse or primarily meet the normal credit needs of
acceptance of deposit substitutes for the farmers, fishermen and their families
purposes of re-lending or purchasing of Can also deposit in private banks more than
receivables and other obligations.
the amount prescribed by Single Borrowers
Quasi-banks do not accept deposits.
Limit in case there are no government banks
Rural Banks Act (RA 7353)
NATURE OF BUSINESS:
- designed to make needed credit available
Fiduciary in nature
and readily accessible in the rural areas on
Requires high standards of integrity and reasonable terms
performance

- primary purpose is to meet the normal credit

needs of farmers, fishermen, or farm families
4. Thrift banks encourages the industry,
frugality and accumulation of savings of the
public
To make it within easy reach to the people
the credit facilities at reasonable cost
Includes:
(1) savings and mortgage bank,
(2) stock savings and loan associations and
(3) private development banks
- include savings and mortgage banks, private
devt. banks, and stock savings and loans
associations.
- Providing short-term working capital, medium
and long term financing to business engaged
in agriculture, services, industry, and housing
Thrift Banks Act (RA 7906); GBL suppletory
5. Cooperative banks organized by
cooperatives to provide financial and credit
services to cooperatives
Cooperative Code (RA 6938)
Membership of a cooperative bank shall
include ONLY cooperative and federations of
cooperatives
- one organized by, the majority shares of
which is owned and controlled by, cooperatives
primarily to provide financial and credit
services to cooperatives
- cooperative bank shall include cooperative
rural banks
- Membership shall include ONLY cooperatives
and federations of cooperatives
6. Islamic Banks promote socio-economic
development in autonomous region by
performing banking and investment function
based on Islamic concept of banking
Islamic Bank RA 6848
(Al-Amanh Islamic Investment Bank of the
Philippines) - in Zamboanga City
Subject to the principles and rulings of
Islamic Sharia
7. Others banks:
Philippine Veterans Bank created to provide
government depository to veterans for
appreciation of grateful nation (RA 3518)
Land bank of the Philippines finance
distribution of estate to resale to small
landholders (RA 3844)
Development Bank of Philippines provide
credit facilities for development in agriculture,
commerce and industry
DBP was previously named as Rehabilitation
Finance Corporation (RFC)
private commercial bank owned by veterans Land Bank of the Philippines finance the
acquisition and distribution of agricultural
estates fro division and resale to small
landholders as well as the purchase of the
landholding by the agricultural lessee
- Development Bank of the Philippines was
created as Rehabilitation Finance Corp. (RFC);
took over the functions of Agricultural
Industrial Bank I.
8. Non-stock savings and loan associations
nonstock, non-profit corporation engage in
accumulation of savings of its members and
loans to meet its members needs

- using such accumulations for loans to

members for home building or personal
finance.
Confines exclusive membership and cannot
transact business with the general public
9. Quasi-banks refer to entities engaged in
the borrowing of funds through the issuance,
endorsement or assignment with recourse or
acceptance of deposit substitutes for purposes
of relending or purchasing of receivables and
other obligations
"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.
10. Offshore Banks deals with transaction
with foreign currencies in receiving funds from
external sources and utilization of such
Governed by PD 1034
Authority to Engage in
Quasi-Banking Functions

Banking

and

V. Classification of Banks (CUT RICO)

Sec. 3.2. Banks shall be classified into:
(a) Universal banks;
(b) Commercial banks;
(c) Thrift banks, composed of:
(i) Savings and mortgage banks;
(ii)
Stock
savings
and
loan
associations; and
(iii) Private development banks, as
defined in the Republic Act No. 7906
(hereafter the Thrift Banks Act);
(d) Rural banks, as defined in Republic
Act No. 73S3 (hereafter the "Rural Banks
Act");
(e) Cooperative banks, as defined in
Republic Act No 6938 (hereafter the
"Cooperative Code");
(f) Islamic banks as defined in Republic
Act No. 6848, otherwise known as the
Charter of Al Amanah Islamic Investment
Bank of the Philippines; and
(g) Other classifications of banks as
determined by the Monetary Board of the
Bangko Sentral ng Pilipinas.
A. Business Name
- Only a bank that is granted universal/
commercial banking authority may represent
itself to the public as such in connection with
its business name
- Thrift Banks: allowed to use and adopt any
name, provide the ff words are affixed: A thrift
bank, Saving bank, A Private Development
Bank, or A stick Savings and Loan Association
- Rural or Commercial Banks: allowed to use
and adopt any name, provide the ff words are
affixed: Rural or Coop, A Cooperative Bank, or
A Rural Bank.
o The size of the letters of such phrase
shall be at least of the size of the business
name when shown on letterheads, billboards,
and other advertising materials
B. Foreign Banks Mode of Entry

- governed by Foreign Banks Liberalization Act

RA 7721 to create a more competitive
environment and encourage greater foreign
participation
1) acquiring, purchasing or owning up to 60%
of the voting stock of an existing domestic
bank
2) investing in up to 60% of voting stock of a
new banking subsidiary incorp under Philippine
Law
3) Establishing branches with full banking
authority
MB may revoke license 1) FB is insolvent 2)
imminent danger of insolvency 3) continuance
in business will involve probable loss to
transacting business with
RA 10574 SEC. 4. No rural bank shall be operated
without a Certificate of Authority from the Monetary
BoardoftheBangkoSentralngPilipinas.Ruralbanksshall
be organized in the form of stock corporations. No less
thanforty percent (40%) of thevotingstocks of a rural
bank shall be owned by citizens of the Philippines or
corporations or associations organizedunder the laws of
the Philippines at least sixty percent (60%) of whose
capital is owned by such citizens. NonFilipino citizens
mayown,acquireorpurchaseuptosixtypercent(60%)of
the voting stocks in a rural bank. The percentage of
foreignowned voting stocks shall be determined by the
citizenshipoftheindividualorcorporatestockholdersof
theruralbank.Uponconsultationwiththeruralbanksin
the area, duly established cooperatives and corporations
primarily organized to hold equities in rural banks may
organize a rural bank and/or subscribe to the shares of
stockofanyruralbank:
VI. Authority to Engage in Banking and
Quasi-Banking (QB) Functions
No person or entity shall engage in baking
operations without authority from Bangko
Sentral
Universal or commercials banks may engage
in quasi-banking functions
Under Corporation Code: No articles of
incorporation or amendment of banks shall be
given unless accompanied by recommendation
of appropriate government agency (MB)
The determination whether the person or
entity is performing banking or quasi-banking
functions without authority of BSP shall be
determined by MB o MB may examine the
books and records to achieve this purpose
The department head and examiners can
administer oaths and compel presentation of
books, documents or records
BSP can examine a bank or an enterprise
that is wholly or majority-owned by the bank o
This can only be done when BSP is examining
bank
SEC shall not register articles of incorporation
of bank unless it is accompanied by authority
of MB
SEC shall not register by-laws of bank unless
accompanied by authority of BSP Service of
summons upon banks o May be made on the
president,
managing
partner,
general
manager, corporate secretary, treasurer, inhouse counsel (domestic) o Upon resident
agent or BSP (foreign bank)

As long as institute loans out money to its

customers and collect the interest and charges
a commission to lender and banker, it is a bank
Investment company engages primarily in
the investing or trading of securities and is not
a bank Bank name
Only universal and commercial banks may
represent itself to the public as such in
connection with its business name
Thrift banks can be allowed to have a
business name of its own provided that A thrift
bank, savings bank or private development
bank shall be added
Above rule is also available to Rural/Coop
A. Authority from Bangko Sentral
- No person shall engage in banking operations
or QB functions WITHOUT authority from the
Bangko Sentral
- No articles of incorporation or amendment to
articles of incorporation of banks, banking and
quasi-banking institutions, building and loan
associations, trust companies and other
financial intermediaries, insurance companies,
public utilities, educational institutions, and
other corporations governed by special laws
shall be accepted or approved by the
Commission
unless
accompanied
by
a
favorable recommendation of the appropriate
government agency to the effect that such
articles or amendment is in accordance with
law. (Sec. 17 of BP 68)
The
Securities
and
Exchange
Commission shall not accept for filing the bylaws or any amendment thereto of any bank,
banking
institution,
building
and
loan
association,
trust
company,
insurance
company, public utility, educational institution
or other special corporations governed by
special laws, unless accompanied by a
certificate of the appropriate government
agency to the effect that such by-laws or
amendments are in accordance with law. (Sec.
46 of BP 68)
B. Whether a person or entity is performing
banking or quasi-banking functions W/O the BS
authority shall be decided by the Monetary
Board by examining and investigating the
books and records of such person or entity.
Upon issuance of authority, may commence to
engage in functions until authority is
suspended, revoked or annulled by BS.
C. The dept head and the examiners of the
supervising and examining dept shall:
1. administer oath to any such person or entity
2. compel presentation of books, records, and
documents a. failure to do so would subject
such to appropriate sanctions
D. BS shall, when examining a bank, have the
authority to examine an enterprise which is
wholly or majority-owned by the bank.
E. Certificate of Authority to Register
- The SEC shall not register the articles of corp
or any amendment unless accompanied by a
certificate of authority issued by the MB, under
its seal. The MB shall be satisfied from the
evidence submitted to it: (RPC)
o All requirements of law have been complied
with

o Public interest and economic conditions

justify the authorization
o The amount of capital as well as the integrity
of the organizers reasonable assure the safety
of deposits and the public interest
- The SEC shall not register the by-laws of any
bank or any amendment unless accompanied
by a certificate of authority issued by the MB,
under its seal.
DEPOSIT FUNCTIONS
BASIC FUNCTIONS OF A BANK
1. Acceptance of deposits from the public
2. Lending the funds obtained from deposits
VOLUNTARY
CREDITOR

DEBTOR
RELATIONSHIP
The contract between the Bank and Depositor
is a Contract of Loan. However, unlike
contracts of simple loan, bank deposits are
subject to special rules provided for by law and
BSP regulations.
Know Your Customer Standards a BSP
instructed all banks to adopt this which
provides for customer acceptance policies and
procedures so as to help the bank in identifying
their depositors. Factors to be considered are
the following:
Customers Background
Country of Origin
Public or High Profile Position, business
activities and other risk indicators
Manual of Regulations for Banks (X262.1)
3 specimen signatures of their customers and
for proper documents of identification is
required and even ID photos so as to help the
bank in identifying their depositors.
CAPACITY OF A DEPOSITOR
A party who enters into a contract must have
the capacity to act under Article 37 of the Civil
Code. Article 38 and 39 provides for
restrictions and modifications of the capacity
to act of a persons. An incapacitated person
are generally not allowed to open an account
with the bank.
A. Minors
Presidential Decree 734
Section 1. Minors who are at least 7 years old,
able to read and write, have sufficient
discretion and are not otherwise disqualified by
any other incapacity, are hereby vested with
special capacity and power in their own rights
and in their own names, to make savings or
time deposits with and withdraw the same as
well as receive interest thereon from banking
institutions, without the assistance of their
parents or guardian, the provisions of the
existing laws to the contrary notwithstanding.
Parents may nevertheless deposit for their
minor children and guardian for their wards.
Thrift banks Act of 1995
o Section 22. Minors as Depositors Minors in
their own right and in their own names may
make deposits and withdraw the same and
receive dividends and interest: Provided,
however, that, if any guardian shall give
notice in writing to any thrift bank not to
make payments of deposits, dividends or
interest to the minor of whom he is a
guardian, then such payment shall be made
only to the guardian.
B. Married Woman

Married women are allowed to open bank

accounts without the assistance of their
husband
Republic Act No. 7192 Section 5. Equality in
Capacity to Act. Women of legal age =,
regardless of civil status, shall have the
capacity to act and enter into contracts which
shall in every respect ne equal to that of men
under the similar circumstances.
C. Corporations
Juridical Persons are likewise capacitated to
open bank accounts. With respect to
corporations, the opening of an account in its
behalf is in fact a requirement before its life
commences.
Procedure: Filing and Approval of the Articles of
Incorporation to the SEC Certificate of
Incorporation
Note: Attached to the Articles of Incorporations
is a bank certificate covering the deposits.
BANK AS A DEBTOR
The bank has no duty to preserve the amount
deposited. The money receive by the bank is
not for safety keeping purposes. Money
deposited now belongs to the bank and it can
use it for any other legal purpose as it may
deem fit.
DEGREE OF DILIGENCE
All banks must observe Extensive due
diligence or meticulous care with respect to its
deposit functions. Diligence of a good father of
a family is enough for other commercial bank
functions.
Deposit
- Money placed with some other entity. It is a
credit for the party who placed it and it may be
taken back (withdrawn), transferred to some
other party, or used for purchase. It is often
used with respect to banks.
KINDS OF DEPOSITS
A. Demand deposit
- All those liabilities of banks that are
denominated in Philippine currency and are
subject to payment in legal tender upon
demand by presentation of checks.
- As a general rule, only Universal and
Commercial Banks may create or accept
demand deposits because by their nature, they
are allowed or empowered to do so.
- Popularly known as Checking Accounts
- Withdrawn by the use of a check.
B. Savings Account
- It has an investment feature because savings
accounts are normally opened for the purpose
of earning interest.
- Can be opened by all types of banks.
However, Cooperative banks are expressly
authorized to open savings accounts for
safekeeping or custody with no participation in
profit or losses except unless authorized by the
account holders to be invested.
- Withdrawn by the use of withdrawal slips,
non-passbook withrawals, or ATM provided that
such is authorized by the BSP
C. Negotiable order of Withdrawal (NOW)
Accounts

- Interest bearing accounts that combine the

payable on demand feature of checks and
investment feature of savings accounts.
D. Time Deposits
- A deposit, the payment of which generally
cannot be legally required within a specified
number of days.
- Sec. X231 of the Manual of Regulations for
Banks states that no time deposit shall be
accepted for a term of less than thirty days
Depositing Funds
Process:
In the case of PBCOM vs Court of Appeals, the
Supreme Court described the process of
depositing in a bank:
in the ordinary and usual course of banking
operations, current account deposits are
accepted by the bank on the basis of deposit
slips prepared and signed by the depositor, or
the latters agent or representative, who
indicates therein the current account number
to which the deposit is to be credited, the
name of the depositor or current account
holder, the date of the deposits, and the
amount of the deposit either in cash or checks.
The deposit slips are prepared in duplicate by
the depositor. The original of the deposit slip is
retained by the bank, while the duplicate copy
is returned or given to the depositor.
Direct Credit:
The bank may directly credit the account of the
depositor whenever the bank is obligated to
pay an amount to the same depositor under a
separate agreement or contract.
Proof of Deposit:
Deposit slips serve as proof that an amount
was deposited in an account.
Withdrawal of Funds
- When cash is deposited in the account, the
depositor can withdraw the amount at any
time provided that he complies with the
prescribed procedure.
- Can be done through electronic instructions
provided that there is an agreement to that
effect;
ATM or Cash card
- Through a Combo Plan wherein the
depositor maintains a saving account and a
checking account with the same bank and
agree that funds may be automatically
transferred from the savings account if the
balance of the checking account is not
sufficient to cover checks that were drawn on
the same account.
Kinds of Accounts
A. Joint Account
- Whenever 2 or more persons open an
account, the same may be an and/or account
or an and account. If the joint account is an
and/or account, any one of the depositors
may withdraw funds therefrom and the
signature of one is enough to authorize the
bank to allow such withdrawal. If it is an and
account. The depositors are joint creditors of
the bank and the signatures of all depositors
are necessary to allow withdrawal.
B. Anonymous Account

- Accounts under fictitious name

- Prohbited by law. (Circular no. 251 and sec.
9(a) of RA 9160.)
- Banks must employ a system to establish the
identity of the depositor and require atleast 3
specimen signatures from the depositor.
- Exception to the rule is provided for in the
Foreigncy Currency Deposit Act which allows
the opening of numbered accounts
C. Survivorship Agreement
- In case of death of one of the depositors in a
joint account, it is presumed that the
depositors own the account share and sharealike.
- The purpose of a Survivorship Agreement is
to avoid the inconvenience to the depositors of
settling the estate of the deceased depositor
by agreeing that the balance shall be
transferred to the survivor upon the death of
one of them.
D. Deceased Depositor
- If a depositor dies, the heirs cannot withdraw
the balance of the account unless the estate of
the deceased is settled.
Unclaimed Balances
- Deposits that have become dormant or a
period of 10 years may be escheated in favor
of the government.
- The bank is required to report to the
Treasurer of the Philippines the existence of
such deposits. The Treasure in turn, will inform
the Solicitor General who will initiate the
proper escheat proceedings in Court.
- However, Notice to the depositor is an
indispensable requirement prior to the escheat
proceedings.
- Under the Unclaimed Balances Law, prior
notice must be given to the depositor and if
said depositor asserts ownership to the
account, the bank is no longer obligated to
include said account to be escheated in favor
of the government.
Deposit Insurance
Philippine Deposit Insurance Corporation
(PDIC)

Created in 1963

Republic Act 3591

DEPOSIT INSURANCE
governed by RA 3591, latest revision by RA
9576 in June 1, 2009
serves as a safety net for depositors for risk
of losing their deposit
Insured deposit amount due to any bona fide
depositor for legitimate deposits in an insured
bank net of any obligation of the depositor to
the insure bank as of date of closure, but shall
not exceed 500k.

RISK insured against

The RISK involved here is the

- closure and takeover of the bank by the

Monetary Board
- pursuant to Section 30 of the New Central
Bank Act, that the PDIC shall take charge of the
bank assets and liabilities of a bank upon
findings of the following:
1.
The bank is unable to pay its liabilities as they
become due in the ordinary course of
business; or
2.
The bank has insufficient realizable assets, as
determined by the Bangko Sentral, to meet
its liabilities; or
3.
The bank cannot continue in business without
involving
probable
losses
to
its
depositors or creditors; or
4.
The bank 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

Php 500,000 - Maximum insurance

coverage per depositor
o Effective June 1, 2009 (RA 9576
which amended RA 3591)
o All
deposit
accounts
by
a
depositor in a closed bank
maintained in the same right and
capacity shall be added together.
o Includes foreign currency deposits

Excess of Php 500,000 - treated as

ordinary unsecured credits
o will depend on claims after
liquidation
of
the
banking
institution, should there be any
remaining assets
o to be filed with the Liquidator of
the closed bank

CASE
PDIC vs Citibank N. A.
G.R. No. 170290, April 11, 2012
(Summary by: Dan Lomeda)
Inter-branch transfers between
parent and subsidiary branches of
banks are not covered by the Deposit
Insurance. These do not qualify
under the term deposits as defined
by the law, as they are mere
transfers of money only.

The Monetary Board may summarily and

without need for prior hearing forbid
the institution from doing business in
the Philippines
Closure and Takeover
PDIC will initiate this upon report of the
head of the supervising or examining
department of the Bangko Sentral
qualifications laid out above
Monetary Board
under BSP; composed of 7 members
appointed by the President (co-terminus)
may summarily and without need for prior
hearing forbid the institution from doing
business in the Philippines and designate PDIC
as receiver of the banking institution.

CASE
PDIC vs Philippine Countryside
Rural Bank, Inc.
G.R. No. 176438, January 24, 2011
(Summary by: Dane Malate)
an examination of banks requires
the prior consent of the Monetary
Board, whereas an investigation
based on an examination report,
does not.

Covered Banks
ALL banks and banking institutions
engaged in receiving deposits.
Banks cannot refuse to be covered by
the deposit insurance.
It is the bank, not the depositor, who is
obliged to pay the prescribed insurance
assessment or premium to the PDIC.

Maximum Insurance Coverage

Deposits Covered
Deposit - unpaid balance of money or
its equivalent received by a bank in the
usual course of business (Sec. 3 RA
3591, as amended)
Deposits covered
o Savings
o Time deposits
o NOW
(Negotiable
Order
Withdrawal) accounts
o Checking accounts
o and other similar deposits

of

PDIC includes such deposits falling

under the following:
o deposits of all commercial banks,
savings and mortgage banks,
rural banks, private development
banks, cooperative banks, savings
and loan associations
o deposits in branches and agencies
in the Philippines of foreign banks
and
all
other
corporations
authorized to perform banking
functions in the Philippines
o deposits in Philippine banks with
branches outside the country,
subject to the approval of the
Board of Directors.

Deposits NOT covered

RA 9576 elaborates the following as NOT

being covered by the Deposit Insurance:
o Investment products such as
bonds
and
securities,
trust
accounts,
and
other
similar
instruments;
o Deposit accounts or transactions
which are unfunded, or that are
fictitious or fraudulent;
o Deposits accounts or transactions
constituting, and/or emanating
from, unsafe and unsound
banking
practices,
as
determined by the Corporation, in
consultation with the BSP, after
due notice and hearing, and
publication of a cease and desist
order issued by the Corporation
against such deposit accounts or
transactions; and
o Deposits that are determined to
be the proceeds of an unlawful
activity
as
defined
under
Republic Act 9160, as amended.

Q: Compute for the total deposit as of

December 31, 2013 using the given
below.
Note: Interest rates used here are for
computational purposes only, banks apply
smaller interest rates in actual practice. Legal
interest rates are to be applied only in cases of
loan and forebearance, where no interest rates
have been mentioned.
Principal: Php100,000
Date of initial deposit: January 1,
2013
Legal Interest:
Prior to July 1, 2013: 12%
After July 1, 2013: 6%
Computation
(Simple
Interest
Method):
Interest at 12%: P100,000 x 12% x 6/12
= P6,000
Deposit as of June 30, 2013: P100,000 +
P6,000 = P106,000
Interest at 6%: P100,000 x 6% x 6/12 =
P3,000
Deposit as of December 31, 2013:
P106,000 + P3,000 = P109,000 (Ans)

Filing of Claims
Filing of claim for Deposit Insurance by
depositor within 2 years from actual
takeover of the bank.
Notice to be published in newspaper of
general circulation when filing may be
initiated.
Failure on the part of the depositor to
file a claim will be a bar to recovery from
PDIC, but he may still file a claim in the
liquidation proceedings.
PDIC to pay depositor 6 months from
the filing of the claim, else he may be
held criminally liable for failure.

Computation
Method):

(Compound

Interest

Computation of Claims
o Insured Amount =
o Deposit* + Interests - Unpaid
obligations - WHT

*Deposit accounts of the depositor having the

same right and capacity in all branches for the
same bank should be added.

Interest computation
Nacar v Gallery Frames
G.R. No. 189971, August 13, 2013
(Summary by: Odette Jumao-as)
the interest due shall itself earn
legal interest from the time it is
judicially demanded. In the absence
of stipulation, the rate of interest
shall be 6% per annum to be
computed from default. (effective
as of July 1, 2013)

Interest computation

Computation of Claims
1.

Q: MML Bank was forced to close because its

building was destroyed by fire. Ms. OJ, one
of its depositors filed an insurance claim
with the PDIC. Will her claim prosper?
A: No, claim will not prosper. Destruction of
a banks building due to fire is not a risk
insured against by the PDIC deposit
insurance. The only risk insured against by
the PDIC is closure and takeover under
Section 30 of the New Central Bank Act.

2.

Q: BIP bank was closed by the Monetary Board

and the PDIC took over its properties on July
10, 2009. At that time, Mr. M had 3
accounts in BIP bank.
o Savings Account: Php 400,000
o Checking Account: Php 200,000
o Time Deposit: Php 100,000
Assuming that the same amounts are
already adjusted (accrued interests are
included and Mr. M has no other pending
obligations to the bank), how much is the
effective insurance coverage of Mr. M?
A: The insurance coverage will the
maximum coverage of Php 500,000. All
the deposits belonging to Mr. M will be
added together. Although his total deposits
amount to Php 700,000, the law provides
ceiling of Php 500,000 for deposit
insurance. Mr. M may however file for claim
for the excess of Php 500,000 in the
liquidation proceedings, as this will form
part of the unsecured credit.
3.

Q: The following accounts are maintained in

the closed SBC Bank by Mr. X, Mr. Y and Mr.
Z:

Savings account under the

name of X and Y:
Php 600,000

Time

deposit under the

name of Y and/or Z:
Php 700,000
How much is the effective insurance
coverage of each with the PDIC?
A: A joint account like the above shown is
considered shared equally among the codepositors unless otherwise expressly
stipulated.
The savings account can only be insured up
to the maximum coverage of Php 500,000
(not the full amount of Php 600,000).
Hence, Mr. X can claim for his portion of the
share of deposit insurance Php 250,000.
As for the time deposit, the same maximum
coverage of Php500,000 can only be
claimed. Hence, Mr. Y and Z can claim up to
Php 250,000 each.
In summary,
Mr. X gets Php 250,000
Mr. Y gets Php 500,000 (Php 250,000
each from the savings and the time
deposit)
Mr. Z gets Php 250,000
4.

Q: In the previous case, if Mr. X also has a

separate Savings account worth Php
350,000, how much is he entitled to claim
for Deposit Insurance now?

A: Mr. X is entitled to claim Php

600,000 (Php 250,000 from joint account
and the whole Php 350,000 from his own
savings account. Note that the joint
accounts are considered insured separately
by the PDIC, being an account separate and
does not share the same right and capacity
as that of individual deposit accounts.)

Splitting of Deposit
Elements:
o Existence of source account/s in a
bank
with
a
balance
or
aggregate balance of more
than the maximum deposit
insurance claim;
o There is a break up and
transfer of said account/s into
two or more existing or new
accounts in the name of another
person/s or entity/entities;
o The
transferees
have
no
Beneficial Ownership over the
transferred funds; and
o Transfer occurred within 120
days immediately preceding or
during a bank-declared bank
holiday, or immediately preceding
bank closure (as issued by the
Monetary Board of the BSP).

When all of the elements are

present, Deposit Splitting is deemed to
exist.
Deposit Splitting shall be subject to
restrictions and conditions imposed by
law.

Law on Secrecy of Bank Deposits

(Republic Act 1405)
Purpose:
1. To encourage deposit in banking
institutions; and
2. To discourage private hoarding so that
banks may lend such funds and assist in
the economic development of the
country.
Deposits Covered:
1. All deposits of whatever nature with
banks or banking institutions found in
the Philippines; or
2. Investments in bonds issued by the
Philippine government, its branches, and
institutions. (Sec. 2, R.A. 1405)
Definitions:
DEPOSITS
refer to money or funds placed with a
bank that can be withdrawn on the
depositors order or demand, such as
deposit accounts in the form of savings,
current and time deposits.
Investments in Government Bonds

refer to investments in bonds issued by

the Government of the Philippines, its
political
subdivisions
and
its
instrumentalities.
Government bonds are debt securities
which are unconditional obligations of
the State, and backed by its full taxing
power.
Government bonds include treasury
bills, treasury notes, retail treasury
bonds, dollar linked peso notes, and
other risk-free bonds.
Prohibited Acts:
1. Examination/inquiry/lookingintoall
deposits of whatever nature withbanks
or banking institutions in the Philippines
(including investment in bonds issued by
the government) by any person,
government official or office (Sec. 2)
2. Disclosure by any official or employee of
any
banking
institution
to
any
authorized person of any information
concerning said deposit (Sec. 3)
Exceptions
Under RA 1405:
1. Upon written consent of the depositor.
(Sec. 2)
2. In cases of impeachment. (Sec. 2)
3. Upon order of competent court in cases
of bribery or dereliction of duty of public
officials. (Sec. 2)
4. In cases where the money deposited or
invested is the subject matter of the
litigation. (Sec. 2)
5. Anti-Graft and corrupt Practices Act
upon order of competent court or
tribunal in cases involving unexplained
wealth under RA 3019
6. NIRC Commissioner may inquire into
the bank deposits of a) decedent to
determine gorss estate b) taxpayer filed
for compromise of tax liab.
7. Human Security Act justices of CA
designated as a special court to handle
anti-terrorism
cases;
authorize
to
examine accnts of a) person charged
with or suspected of crime of terrorism
or conspiracy to commit terrorism b)
judicially declared and outlawed terrorist
c) member of such
8. AMLA upon order of competent court in
cases involving AMLL (pc) a) Kidnapping
for
ransom;
b)
Violations
of
comprehensive drugs act c) Hijacking
and other violations d) Destructive arson
and murder under RPC e) felonies or
offenses of similar nature f) terrorism
and conspiracy to commit terrorism

Are Trust Funds Covered by the term

deposit?
Ejercito v Sandiganbayan
Issue:
Whether or not a Trust Account is
covered by the term deposit as used
in R.A. 1405;
Whether or Not Plunder is covered by
the exception;
1) YES.
The money deposited under the trust
agreement is intended not merely to
remain with the bank but to be invested

by it elsewhere. To hold that this type of

account is not protected by R.A. 1405
would encourage private hoarding of
funds that could otherwise be invested
by banks in other ventures, contrary to
the policy behind the law. (Ejercito v.
Sandiganbayan, G.R. No. 15729495,
Nov. 30, 2006)
2.)Yes
Cases of unexplained wealth are similar
to cases of bribery or dereliction of duty
and no reason is seen why these two
classes of cases cannot be excepted
from the rule making bank deposits
confidential.
The crime of bribery and the overt acts
constitutive of plunder are crimes
committed by public officers, noble idea
that a public office is a public trust and
any person who enters upon its
discharge does so with the full
knowledge that his life, so far as
relevant to his duty, is open to public
scrutiny applies with equal force.
Other Exceptions:
Anti- Graft and Corrupt Practices
Act
Upon the order of a competent court or
tribunal in cases involving unexplained
wealth under the Anti Graft and Corrupt
Practices Act. (RA 3019)
National Internal Revenue Code
The Commissioner of Internal Revenue may
inquire into bank deposits of:
1. A decedent to determine his gross
estate;
2. Any taxpayer who has filed an
application for compromise of his tax
liability by reason of financial incapacity
to
pay
his
tax.
Because
the
Commissioner will have to examine and
inquire into the bank deposits of the tax
payer
Anti-Money Laundering Act
1. Inquiry or examination by the AntiMoney Laundering Council upon
order of any competent court in
cases of violation of the Anti-Money
Laundering Law, if there is probable
cause
that
the
deposits
or
investments are related to an
unlawful
activity or a money
laundering offense.
2. But in certain cases, the requirement
of a prior order can be dispensed
with. In cases mentioned under Sec.
2 of R.A. 10167
Foreign Currency Deposit Act
New Central Bank Act
In-Camera
inspection
by
the
Ombudsman
Human Security Act
Garnishment
Does Garnishment of a bank deposit
violate the law?
NO.
The prohibition against examination does not
preclude its being garnished for satisfaction of
judgment. The disclosure is purely incidental to
the execution process and it was not the
intention of the legislature to place bank

deposits beyond the reach of judgment

creditor. (PCIB v. CA, G.R. No. 84526, Jan. 28,
1991)
Can
Foreign
Currency
Deposits
be
subjected to Garnishment?
General Rule:
Foreign currency deposits shall be exempt from
attachment, garnishment, or any other order or
process of any court, legislative body,
government agency or any administrative body
whatsoever. (Sec 8. R.A. 6426)
EXCEPTION:
The application of Section 8 of R.A. 6426
depends on the extent of its justice.
The garnishment of a foreign currency deposit
should be allowed to prevent injustice and for
equitable grounds, otherwise, it would negate
Article 10 of the New Civil Code which provides
that in case of doubt in the interpretation or
application of laws, it is presumed that the
lawmaking body intended right and justice to
prevail. (Salvacion vs. Central Bank of the
Philippines, G.R. 94723, August 21, 1997)
Penalty
The penalty of imprisonment of not more than
5 years or a fine of not more than 20,000pesos
or both, in the discretion of the court shall be
imposed upon any official or employee of a
banking institution who, upon conviction, was
found to have violated R.A. 1405.
FOREIGN CURRENCY DEPOSITS: RA 6426
SECTION 2. Authority to Deposit Foreign
Currencies. Any person, natural or juridical,
may, in accordance with the provisions of this
Act, deposit with such Philippine banks in good
standing, as may, upon application, be
designated by the Central Bank for the
purpose,
foreign
currencies
which
are
acceptable as part of the international reserve,
except those which are required by the Central
Bank to be surrendered in accordance with the
provisions of Republic Act Numbered Two
hundred sixty-five.

SECTION 4. Foreign Currency Cover

Requirements. Except as the Monetary
Board, by a unanimous vote of all
incumbent members, may otherwise
prescribe or allow, the depository banks
shall maintain at all times a one hundred
percent foreign currency cover for their
deposit liabilities, of which cover at least
fifteen percent shall be in the form of
foreign currency deposit with the Central
Bank, and the balance in the form of
foreign currency deposits or of foreign
currency loans or securities, which loans or
securities shall be of short term maturities
and readily marketable. Such foreign
currency loans may include loans to
domestic enterprises which are exportoriented or registered with the Board of
Investments, subject to the limitations to
be prescribed by the Monetary Board on
such loans. The foreign currency cover

shall be in the same currency as that of the

corresponding foreign currency deposit
liability. The Central Bank may pay interest
on the foreign currency deposit, and if
requested shall exchange the foreign
currency notes and coins into foreign
currency instruments
drawn
on its
depository banks.
Section 2. All deposits of whatever nature
with banks or banking institutions in the
Philippines including investments in bonds
issued by the Government of the Philippines,
its
political
subdivisions
and
its
instrumentalities, are hereby considered as of
an absolutely confidential nature and may not
be examined, inquired or looked into by any
person, government official, bureau or office,
except upon written permission of the
depositor, or in cases of impeachment, or upon
order of a competent court in cases of bribery
or dereliction of duty of public officials, or in
cases where the money deposited or invested
is the subject matter of the litigation.
Anti-Money Laundering
(AMLA) R.A. 9160

Act

of

2001

Laundered Money
These are primarily proceeds (generally
cash) from criminal or illegal acts.
Money that originated from illegitimate
sources.
Money Laundering
From the word Laundry which means
the act to clean and or sanitize.
To conceal the money obtained from
criminal or illegitimate activities to make
it appear legitimate.
Transform or convert into other assets.
Purpose of AMLA?
Enacted in 2001
Monitors transactions
Inquiries into deposits
Traces the origin of the act
Common criminal or illegitimate acts.
Graft and corrupt practices
Plunder
Drug related transactions
Kidnapping for ransom
Robbery, Theft, Estafa
Special law that is penal
Prosecution for the violation of the act;
As well as prosecution for the criminal or
illegal act.
AMLA
1.01 Deterrence Function
It is meant to stop not only the practice of
money laundering in all its stages but more
importantly the crimes that generated the
proceeds that are being laundered.
Process of Money Laundering

1
2

Placement Stage: The proceeds of the

crime are deposited in a financial
institution.
Layering Stage: The proceeds are
moved, usually through a series of
transactions which may involve different
entities, assets and jurisdictions so as to
sever any audit trail to make the tracing
of the source harder
Integration Stage: The criminal resumes
control of proceeds.

AMLA is designed to facilitate early

detection.
The fight against anti-money laundering
has pragmatic economic justification.
1.02 The Offense
Under Section 4 of the Anti-Money Laundering
Act of 2001 as amended enumerates the acts
that constitute the offense of Money
Laundering.
Sec. 4 of AMLA states that Money laundering
is committed by any person who, knowing that
any
monetary
instrument
or
property
represents, involves, or relates to the proceeds
of any unlawful activity
Transacts said monetary instrument or
property
Converts, transfers, dispose of, moves,
acquires, possesses or uses said monetary
instrument or property
Conceals or disguises the true nature, source,
location, disposition, movement or ownership
of or rights with respect to said monetary
instrument or property.
(4) Attempts or conspires to commit money
laundering offenses referred to in 1, 2 or 3
from the previous slide.
(5) aids, abets, assists in or counsels the
commission of the money laundering offenses
referred to in pars 1 2 or 3 from the previous
slide.
(6) Performs or fails to perform any act as a
result of which he facilitates the offenses
referred to in pars 1, 2, or 3 from the previous
slide.
1.03 Related Terms
Monetary instrument
Coins or currency of legal tender of the
Philippines/other country.
Drafts, checks and notes
Securities or negotiable instruments.
Other similar instruments where title
thereto
passes
to
another
by
endorsement, assignment or delivery.
Offender
Any person who commits a money
laundering offense
Person
Natural/Juridical Person
Proceeds
Amount derived or realized from an
unlawful activity.
Transaction
any act establishing any right or
obligation or giving rise to any

contractual or legal relationship between

parties thereto.
1.04 Covered Persons
Banks, non-banks, quasi-banks, trust
entities, foreign exchange dealers,
pawnshops,
money
changers,
remittance and transfer companies and
other similar entities and all other
persons and their subsidiaries and
affiliates supervised or regulated by the
BSP.
Insurance Companies, regulated by
Insurance Commission.
Securities dealers, brokers, salesmen
and other similar persons managing
securities or rendering services as
investment agent, advisor or consultant.
Investment companies (trust fund,
mutual fund etc)
Entities administering or dealing in
currency, commodities or financial
derivatives based on cash and valuable
objects supervised by the Securities and
Exchange Commission.
Jewelry Dealers in precious metals and
precious stones.
Persons who provide for the ff: services:
o Managing of client money and assets
o Management of banks, savings or
securities account
o Organization of contributions for the
creation or operation of companies
o Creation, operation or management of
juridical persons or arrangements and
buying and selling entities.
Excluded Persons
Lawyers
and
accountants
acting
as
independent legal professionals in relation to
information concerning their clients or where
disclosure of information would compromise
client confidences or the attorney-client
relationship.
Jurisdiction, Covered & Suspicious Transactions,
Unlawful Activities and Prevention
1.05 Jurisdiction
Generally, the Regional Trial Courts have
jurisdiction to try cases all cases on money
laundering.
Except those committed by Public Officers and
Private Persons who are in conspiracy with
such public officers , in this case Sandigan
Bayan shall have Jurisdiction.
Legal Basis: Section 5, Anti-Money Laundering
Act of 2001 (RA 9160) as amended
1.06 Covered & Suspicious Transactions
Covered Transaction as defined by the AMLA:
Transaction in cash or other equivalent
monetary instrument 1
Involving a total amount in excess of Five
hundred thousand pesos (P500,000.00);
Within one (1) banking day
Suspicious Transactions

Transactions with covered institutions

Regardless of the amounts involved
Where any of the following circumstances
exist:

There is no underlying legal or trade or

obligation.
Client is not properly identified.
The amount involved is not commensurate
with the business or financial capacity of the
client.
Taking into account all known circumstances
it maybe perceived that the clients
transaction is structured in order to avoid
being the subject of reporting requirements
under the act.
Any
circumstances
relating
to
the
transaction which is observed to deviate
from the profile of the client and/or clients
past transactions with covered institution.
The transaction is in any way related to an
unlawful activity or offense under this Act
that is about to be, is being or has been
committed.
Any transaction that is similar or analogous
to any of the foregoing.

1.07 Unlawful Activity

Unlawful Activity refers to:
Any act or omission or series or combination
thereof
Involving or having direct relation to the
following:
Kidnapping for ransom under Article 267
of Act. No. 3815
The
following
acts
under
The
Comprehensive Dangerous Drugs Act.
(Sections
4,5,6,8,9,10,11,12,13,14,15,
and 16)
Importation of Dangerous Drugs and/or
Controlled Precursors and Essential
Chemicals
Sale,
Trading,
Administration,
Dispensation, Delivery, Distribution and
Transportation of Dangerous Drugs
and/or
Controlled
Precursors
and
Essential Chemicals.
Manufacture of Dangerous Drugs and/or
Controlled Precursors and Essential
Chemicals.
Illegal Chemical Diversion of Controlled
Precursors and Essential Chemicals.
Manufacture or Delivery of Equipment,
Instrument,
Apparatus,
and
Other
Paraphernalia for Dangerous Drugs
and/or
Controlled
Precursors
and
Essential Chemicals.
Possession of Dangerous Drugs
Possession of Equipment, Instrument,
Apparatus and Other Paraphernalia for
Dangerous Drugs
Possession of Dangerous Drugs During
Parties, Social Gatherings or Meetings
Possession of Equipment, Instrument,
Apparatus and Other Paraphernalia for
Dangerous Drugs During Parties, Social
Gatherings or Meetings.
10.) Use of Dangerous Drugs.

11.) Cultivation or Culture of Plants Classified

as Dangerous Drugs or are Sources Thereof.
3. The following Acts under the Anti-Graft and
Corrupt Practices Act.:
(Section 3 paragraphs B, C, E, G, H and I )
Directly or indirectly requesting or
receiving any
gift,
present,
share,
percentage, or benefit, for himself or for
any other person, in connection with any
contract
or
transaction
between
the
Government and any other part, wherein the
public officer in his official capacity has to
intervene under the law.
Directly or indirectly requesting or
receiving any gift, present or other
pecuniary or material benefit, for himself
or for another, from any person for whom
the public officer, in any manner or capacity,
has secured or obtained, or will secure or
obtain, any Government permit or license, in
consideration for the help given or to be given
3. Causing any undue injury to any party,
including the Government, or giving any
private party any unwarranted
benefits, advantage or preference in the
discharge
of his official administrative or
judicial functions through manifest partiality,
evident
bad
faith
or
gross
inexcusable negligence.
4. Entering, on behalf of the Government,
into any contract or transaction
manifestly and grossly disadvantageous
to the same, whether or not the public
officer profited or will profit thereby.
5. Directly or indirectly having financing
or pecuniary interest in any business,
contract or transaction in connection
with which he intervenes or takes part in his
official capacity, or in which he is
prohibited by the Constitution or by any law
from having any interest.
6.
Directly
or
indirectly
becoming
interested, for personal gain, or having a
material interest in any transaction
or act requiring the approval of a board,
panel or group of which he is a
member, and which exercises discretion in
such approval, even if he votes against
the same or does not participate in the
action of the board, committee, panel or
group.
4.) Plunder under Republic Act No. 7080, as
amended
5.) Robbery and extortion under Articles 294,
295, 296, 299, 300, 301 and 302 of the
Revised Penal Code, as amended;
6.) Jueteng and Masiao punished as illegal
gambling underP.D. 1602;
7.) Piracy on the high seas under the Revised
Penal Code, as amended and
Presidential
Decree No. 532.;
8.) Qualified theft under Article 310 of the
Revised Penal Code, as amended;
9.) Swindling under Article 315 of the Revised
Penal Code;
10.) Smuggling under Republic Act Nos. 455
and 1937;
11.) Violations under Republic Act No. 8792,
otherwise known as the Electronic Commerce
Act of 2000

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
noncombatant persons and similar targets;
13.) Fraudulent practices and other violations
under Republic Act No. 8799, otherwise known
as the Securities Regulation Code of 2000;
14.) Felonies or offenses of a similar nature
that are punishable under the penal laws of
other countries.
1.08 Prevention
Other than identifying the criminal acts
involved in money laundering the Anti-Money
Laundering Act also contains provisions aimed
at preventing the commission of the same.
Preventive measures under the AMLA
Customer Identification
Record Keeping
Reporting of Covered and Serious Transactions
THE ANTI-MONEY LAUNDERING COUNCIL
Rule 1.11
Governs the AMLC
The governor of the Bangko Sentral ng
Pilipinas as the chairman.
Functions of the AMLC
To Require and ReceiveTo Issue To
Institute To Cause To Investigate To
Implement To Receive To Develop To
Enlist To Impose
Secrecy of Bank Deposits
Rule 1.10
Republic Act 8791
The AMLC may inquire into or examine any
particular deposit
or investment, including
related accounts, with any banking institution
upon order of any competent court.
Exemptions
In the process of reporting or discovering
suspicious transactions to the AMLC , Some
institutions and their officers are not be held
liable for the violation of RA 8791.
Ex Parte
Latin that mean from one party
Two types of examination by the AMLC
- May inquire into or examine any particular
deposit or investment, including related
accounts, with any banking institution or non
bank financial institution upon order of any
competent court based on ex parte application.
With court of appeals order

Activities defined in section 3, 2 and 12

- Felonies or offenses of a nature similar to
those mentioned in section 3, 2 and 12 which
are punishable under the penal laws of other
countries
Without court of appeals order
Freezing of monetary instrument or
property
Rule 1.11
A person whose account has been frozen may
file a motion to lift the freeze order and the
court must resolve this motion before the
expiration of the 20 day original freeze order.
No court shall issue a temporary restraining
order or a writ of injunction against any freeze
order, except the supreme court.
Forfeiture and penalty provisions
Rule 1.12
Forfeiture provisions
Civil forfeiture:
When there is a covered
transaction made , and the court has in a
petition filed for the purpose ordered seizure of
any monetary instrument or property.
Claim on forfeited assets The offender or any
person claiming an interest herein may apply
by a verified petition for a declaration that the
same legitimately belongs to him.
Payment in lieu of forfeiture This provision
shall apply in both civil and criminal forfeiture
wherein the convicted offender to pay an
amount equal to the value of said monetary
instrument.
Penalties
For crimes regarding money laundering
For failure to keep records
Malicious reporting
Breach of confidentiality
Prohibition against political harassment
This act shall not be used for political
persecution or harassment or as an instrument
to hamper competition in trade and commerce

MISSING: HUMN SECURITY ACT OF 2007,

TERRORISM FINANCING PRE VENTION &
SUPPRESSION ACT OF 2012, BSP CIRC. NO 799,
SERIES OF 2013