BSP briefer on the Anti-Money Laundering Act of 2001 other countries

February 21, 2012 4. How is money laundered through the financial system?
A Bangko Sentral ng Pilipinas briefer on the Anti-Money Placement involves initial placement or introduction of the illegal funds
Laundering Act of 2001 into the financial system. Financial institutions are usually used at this
1. What is money laundering? point.
Money laundering is an act or series or combination of acts whereby Layering involves a series of financial transactions during which the
proceeds of an unlawful activity, whether in cash, property or other assets, dirty money is passed through a series of procedures, putting layer upon
are converted, concealed or disguised to make them appear to have layer of persons and financial activities into the laundering process. Ex.
originated from legitimate sources. One way of laundering money is wire transfers, use of shell corporations, etc.
through the financial system. Republic Act No. 9160, otherwise known Integration the money is once again made available to the criminal
as the Anti-Money Laundering Act of 2001 (AMLA), as amended, defined with the occupational and geographic origin obscured or concealed. The
money laundering as a scheme whereby proceeds of an unlawful activity laundered funds are now integrated back into the legitimate economy
are transacted or attempted to be transacted, thereby making them through the purchase of properties, businesses and other investments.
appear to have originated from legitimate sources. 5. Why is Money Laundering a problem?
2. What has the Philippine government done to curb money Money laundering allows criminals to preserve and enjoy the proceeds of
laundering? their crimes, thus providing them with the incentives and the means to
The government enacted Republic Act (R.A.) No. 9160 (The Anti-Money continue their illegal activities. At the same time, it provides them the
Laundering Act of 2001), which took effect on 17 October 2001. Certain opportunity to appear in public like legitimate entrepreneurs. Organized
provisions of AMLA were amended by R.A. No. 9194 (An Act Amending crime, through money laundering, is known to have the capacity to
R.A. 9160) effective 23 March 2003. It has also issued the Revised destabilize governments and undermine their financial systems. It is thus
Implementing Rules and Regulations (RIRR) implementing R.A. No. 9160, a threat to national security.
as amended. 6. What are the salient features of the law?
3. What are considered unlawful activities under the AMLA, as It criminalizes money laundering, meaning it makes money laundering a
amended? crime, and provides penalties for its commission, including hefty fines and
There are 14 unlawful activities or predicate crimes covered by the AMLA. imprisonment.
These are, in the order enumerated in the law: It states clearly the determination of the government to prevent the
Kidnapping for ransom Philippines from becoming a haven for money laundering, while ensuring
Drug offenses to preserve the integrity and confidentiality of good bank accounts.
Graft and corrupt practices It creates an Anti-Money Laundering Council (AMLC) that is tasked to
Plunder oversee the implementation of the law and to act as a financial
Robbery and extortion intelligence unit to receive and analyze covered and suspicious
Jueteng and masiao transaction reports.
Piracy on the high seas It establishes the rules and the administration process for the prevention,
Qualified theft detection and prosecution of money laundering activities.
Swindling It relaxes the bank deposit secrecy laws authorizing the AMLC and the
Smuggling Bangko Sentral ng Pilipinas access to deposit and investment accounts in
Electronic Commerce crimes specific circumstances.
Hijacking, destructive arson and murder, including those perpetrated It requires covered institutions to report covered and suspicious
against non-combatant persons (terrorist acts) transactions and to cooperate with the government in prosecuting
Securities fraud offenders. It also requires them to know their customers and to safely
Felonies or offenses of a similar nature punishable under penal laws of keep all records of their transactions.
 It carries provisions to protect innocent parties by providing penalties for 8. What are the covered institutions?
causing the disclosure to the public of confidential information contained Banks, offshore banking units, quasi-banks, trust entities, non-stock
in the covered and suspicious transactions. savings and loan associations, pawnshops, and all other institutions,
It establishes procedures for international cooperation and assistance in including their subsidiaries and affiliates supervised and/or regulated by
the apprehension and prosecution of money laundering suspects. the Bangko Sentral ng Pilipinas (BSP)
7. What is the Anti-Money Laundering Council (AMLC)? What are Insurance companies, holding companies and all other institutions
its powers? supervised or regulated by the Insurance Commission (IC)
The AMLC is the Philippines financial intelligence unit, which is tasked to Securities dealers, brokers, pre-need companies, foreign exchange
implement the AMLA. It is composed of the Governor of the Bangko corporations, investment houses, trading advisers, as well as other
Sentral ng Pilipinas (BSP) as Chairman & the Commissioner of the entities supervised or regulated by the Securities and Exchange
Insurance Commission (IC) and the Chairman of the Securities and Commission (SEC)
Exchange Commission (SEC) as members. The AMLC is authorized to: 9. What are the Customer Identification Requirements KYC
Require and receive covered or suspicious transaction reports from (Know Your Customer Rule)?
covered institutions. Covered institutions shall:
Issue orders to determine the true identity of the owner of any monetary Establish and record the true identity of their clients based on official
instrument or property that is the subject of a covered or suspicious documents.
transaction report, and to request the assistance of a foreign country if the In case of individual clients, maintain a system of verifying the true
Council believes it is necessary. identity of their clients.
Institute civil forfeiture and all other remedial proceedings through the In case of corporate clients, require a system verifying their legal
Office of the Solicitor General. existence and organizational structure, as well as the authority and
Cause the filing of complaints with the Department of Justice or the identification of all persons purporting to act in their behalf.
Ombudsman for the prosecution of money laundering offenses. Establish appropriate systems and methods based on internationally
Investigate suspicious transactions, covered transactions deemed compliant standards and adequate internal controls for verifying and
suspicious, money laundering activities and other violations of the AMLA. recording the true and full identify of their customers.
Secure the order of the Court of Appeals to freeze any monetary 10. What are the Record-Keeping Requirements?
instrument or property alleged to be the proceeds of unlawful activity. All covered institutions shall:
Implement such measures as may be necessary and justified to Maintain and safely store all records of all their transactions for five years
counteract money laundering. from the transaction dates;
Receive and take action on any request from foreign countries for Ensure that said records/files contain the full and true identity of the
assistance in their own anti-money laundering operations. owners or holders of the accounts involved in the covered transactions
Develop educational programs to make the public aware of the pernicious and all other identification documents;
effects of money laundering and how they can participate in bringing the Undertake the necessary adequate measures to ensure the confidentiality
offenders to the fold of the law. of such files;
Enlist the assistance of any branch of government for the prevention, Prepare and maintain documentation, in accordance with client
detection and investigation of money laundering offenses and the identification requirements, on their customer accounts, relationships and
prosecution of offenders. In this connection, the AMLC can require transactions such that any account, relationship or transaction can be so
intelligence agencies of the government to divulge any information that reconstructed as to enable the AMLC and/or the courts to establish an
will facilitate the work of the Council in going after money launderers. audit trail for money laundering;
Impose administrative sanctions on those who violate the law, and the Maintain and safely store all records of existing and new accounts and of
rules, regulations, orders and resolutions issued in connection with the new transactions for 5 years from October 17, 2001 or from the dates of
enforcement of the law. the accounts or transactions, whichever is later;
 Anent closed accounts, preserve and safely store the records on customer sent to AMLC at the 5th Floor EDPC Building, Bangko Sentral ng Pilipinas
identification, account files and business correspondence for at least 5 Complex, Manila, Philippines. All pawnshops should coordinate with the
years from the dates they were closed; AMLC thru tel. nos. 523-4421, 521-5662 or 302-3979 on reporting
If a money laundering case based on any record kept by the covered requirements, procedures and deadlines.
institution has been filed in court, retain said files until it is confirmed that 15. Are there sanctions for failure to report covered or suspicious
the case has been finally resolved or terminated by the court; and transactions and non-compliance with R.A. 9160, as amended?
Retain records as originals in such forms as are admissible in court Sanctions/penalties shall be imposed on pawnshops that will fail to comply
11. What are covered transactions? with the provisions of R.A. 9160, as amended.
Transaction in cash or other equivalent monetary instruments involving a 16. What are the sanctions for failure to report covered or
total amount in excess of P500,000.00 within one business day. suspicious transactions?
12. What are suspicious transactions? Any person, required to report covered and suspicious transactions failed
Transactions, regardless of the amount involved, where the following to do so will be subjected to penalty of 6 months to 4 years imprisonment
circumstances exist: or a fine of not less than P100,000.00 but not more than P500,000.00, or
a. there is no underlying legal or trade obligation, purpose or economic both.
justification; 17. Are there confidentiality restrictions on the reporting of
b.the client is not properly identified; covered transaction and/or suspicious transaction?
c. the amount involved is not commensurate with the business or financial When reporting covered transactions or suspicious transactions to the
capacity of the client; AMLC, covered institutions and their officers and employees, are
d. taking into account all known circumstances, it may be perceived that prohibited from communicating, directly or indirectly, in any manner or by
the clients transaction is structured in order to avoid being the subject of any means, to any person, entity, the media, the fact that a covered or
reporting requirements under the Act; suspicious transaction report was made, the contents thereof, or any other
e. any circumstance relating to the transaction which is observed to information in relation thereto. Neither may such reporting be published or
deviate from the profile of the client and/or the clients past transactions aired in any manner or form by the mass media, electronic mail, or other
with the covered institution; similar devices. In case of violation thereof, the concerned officer, and
f. the transaction is in any way related to an unlawful activity or offense employee, of the covered institution, or media shall be held criminally
under this Act that is about to be, is being or has been committed; or liable.
g. any transaction that is similar or analogous to the foregoing. 18. What are the other offenses punishable under the AMLA, as
13. What are the reporting requirements? amended?
Covered institutions shall report to the AMLC all covered transactions and a. Failure to keep records is committed by any responsible official or
suspicious transactions within five working days from occurrence thereof, employee of a covered institution who fails to maintain and safely store all
unless the Supervision Authority (the Bangko Sentral ng Pilipinas, the records of transactions for 5 years from the dates the transactions were
Securities and Exchange Commission, or the Insurance Commission) made or when the accounts were closed. The penalty is 6 months to 1
prescribes a longer period not exceeding ten working days. Should a year imprisonment or a fine of not less than P100,000.00 but not more
transaction be determined to be both a covered transaction and a than P500,000.00, or both.
suspicious transaction, it shall be reported as suspicious transaction. b. Malicious reporting is committed by any person who, with malice or in
14. How is reporting done? bad faith, reports or files a completely unwarranted or false information
The reports on covered and/or suspicious transactions shall be regarding a money laundering transaction against any person. The penalty
accomplished in the prescribed formats and submitted within five business is 6 months to 4 years imprisonment and a fine of not less than
days from occurrence of the transactions in a secured manner to the AMLC P100,000.00 but not more than P500,000.00. The offender is not entitled
in electronic form, either via diskettes, leased lines, or through internet to the benefits of the Probation Law.
facilities. The corresponding hard copy for suspicious transactions shall be c. Breach of Confidentiality. For this offense, the penalty is 3 to 8 years
imprisonment and a fine of not less than P500,000.00 but not more than other similar monetary instruments or property supervised or regulated by
P1 million. In case the prohibited information is reported by media, the the Securities and Exchange Commission (SEC);
responsible reporter, writer, president, publisher, manager, and editor-in- (4) jewelry dealers in precious metals, who, as a business, trade in
chief are held criminally liable. precious metals, for transactions in excess of One million pesos
d. Administrative offenses. The AMLC, after due investigation, can impose (P1,000,000.00);
fines from P100,000.00 to P500,000.00 on officers and employees of (5) jewelry dealers in precious stones, who, as a business, trade in
covered institutions or any person who violates the provisions of the precious stones, for transactions in excess of One million pesos
AMLA, as amended, the Implementing Rules and Regulations, and orders (P1,000,000.00);
and resolutions issued pursuant thereto. (6) company service providers which, as a business, provide any of the
following services to third parties: (i) acting as a formation agent of
juridical persons; (ii) acting as (or arranging for another person to act as) a
Republic Act No. 10365 director or corporate secretary of a company, a partner of a partnership,
February 15, 2013 or a similar position in relation to other juridical persons; (iii) providing a
H. No. 6565 registered office, business address or accommodation, correspondence or
S. No. 3123 administrative address for a company, a partnership or any other legal
Republic of the PhilippinesCongress of the PhilippinesMetro person or arrangement; and (iv) acting as (or arranging for another person
ManilaFifteenth CongressThird Regular Session to act as) a nominee shareholder for another person; and
Begun and held in Metro Manila, on Monday, the twenty-third day of July, (7) persons who provide any of the following services:
two thousand twelve. (i) managing of client money, securities or other assets;
[REPUBLIC ACT NO. 10365] (ii) management of bank, savings or securities accounts;
AN ACT FURTHER STRENGTHENING THE ANTI-MONEY LAUNDERING (iii) organization of contributions for the creation, operation or
LAW, AMENDING FOR THE PURPOSE REPUBLIC ACT NO. 9160, management of companies; and
OTHERWISE KNOWN AS THE ANTI-MONEY LAUNDERING ACT OF (iv) creation, operation or management of juridical persons or
2001, AS AMENDED arrangements, and buying and selling business entities.
Be it enacted by the Senate and House of Representatives of the Notwithstanding the foregoing, the term covered persons shall exclude
Philippines in Congress assembled: lawyers and accountants acting as independent legal professionals in
SECTION 1. Section 3(a) of Republic Act No. 9160, as amended, is hereby relation to information concerning their clients or where disclosure of
amended to read as follows: information would compromise client confidences or the attorney-client
(a) Covered persons, natural or juridical, refer to: relationship: Provided, That these lawyers and accountants are authorized
(1) banks, non-banks, quasi-banks, trust entities, foreign exchange to practice in the Philippines and shall continue to be subject to the
dealers, pawnshops, money changers, remittance and transfer companies provisions of their respective codes of conduct and/or professional
and other similar entities and all other persons and their subsidiaries and responsibility or any of its amendments.
affiliates supervised or regulated by the Bangko Sentral ng Pilipinas (BSP); SEC. 2. Section 3(i) of the same Act is hereby amended to read as follows:
(2) insurance companies, pre-need companies and all other persons (i) Unlawful activity refers to any act or omission or series or
supervised or regulated by the Insurance Commission (IC); combination thereof involving or having direct relation to the following:
(3) (i) securities dealers, brokers, salesmen, investment houses and other (1) Kidnapping for ransom under Article 267 of Act No. 3815, otherwise
similar persons managing securities or rendering services as investment known as the Revised Penal Code, as amended;
agent, advisor, or consultant, (ii) mutual funds, close-end investment (2) Sections 4, 5, 6, 8, 9, 10, 11, 12, 13, 14, 15 and 16 of Republic Act No.
companies, common trust funds, and other similar persons, and (iii) other 9165, otherwise known as the Comprehensive Dangerous Drugs Act of
entities administering or otherwise dealing in currency, commodities or 2002;
financial derivatives based thereon, valuable objects, cash substitutes and (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; (23) Violations of Section 27(c), (e), (f), (g) and (i), of Republic Act No.
(4) Plunder under Republic Act No. 7080, as amended; 9147, otherwise known as the Wildlife Resources Conservation and
(5) Robbery and extortion under Articles 294, 295, 296, 299, 300, 301 Protection Act;
and 302 of the Revised Penal Code, as amended; (24) Violation of Section 7(b) of Republic Act No. 9072, otherwise known
(6) Jueteng and Masiao punished as illegal gambling under Presidential as the National Caves and Cave Resources Management Protection Act;
Decree No. 1602; (25) Violation of Republic Act No. 6539, otherwise known as the Anti-
(7) Piracy on the high seas under the Revised Penal Code, as amended Carnapping Act of 2002, as amended;
and Presidential Decree No. 532; (26) Violations of Sections 1, 3 and 5 of Presidential Decree No. 1866, as
(8) Qualified theft under Article 310 of the Revised Penal Code, as amended, otherwise known as the decree Codifying the Laws on
amended; Illegal/Unlawful Possession, Manufacture, Dealing In, Acquisition or
(9) Swindling under Article 315 and Other Forms of Swindling under Disposition of Firearms, Ammunition or Explosives;
Article 316 of the Revised Penal Code, as amended; (27) Violation of Presidential Decree No. 1612, otherwise known as the
(10) Smuggling under Republic Act Nos. 455 and 1937; Anti-Fencing Law;
(11) Violations of Republic Act No. 8792, otherwise known as the (28) Violation of Section 6 of Republic Act No. 8042, otherwise known as
Electronic Commerce Act of 2000; the Migrant Workers and Overseas Filipinos Act of 1995, as amended by
(12) Hijacking and other violations under Republic Act No. 6235; Republic Act No. 10022;
destructive arson and murder, as defined under the Revised Penal Code, (29) Violation of Republic Act No. 8293, otherwise known as the
as amended; Intellectual Property Code of the Philippines;
(13) Terrorism and conspiracy to commit terrorism as defined and (30) Violation of Section 4 of Republic Act No. 9995, otherwise known as
penalized under Sections 3 and 4 of Republic Act No. 9372; the Anti-Photo and Video Voyeurism Act of 2009;
(14) Financing of terrorism under Section 4 and offenses punishable (31) Violation of Section 4 of Republic Act No. 9775, otherwise known as
under Sections 5, 6, 7 and 8 of Republic Act No. 10168, otherwise known the Anti-Child Pornography Act of 2009;
as the Terrorism Financing Prevention and Suppression Act of 2012: (32) Violations of Sections 5, 7, 8, 9, 10(c), (d) and (e), 11, 12 and 14 of
(15) Bribery under Articles 210, 211 and 211-A of the Revised Penal Republic Act No. 7610, otherwise known as the Special Protection of
Code, as amended, and Corruption of Public Officers under Article 212 of Children Against Abuse, Exploitation and Discrimination;
the Revised Penal Code, as amended; (33) Fraudulent practices and other violations under Republic Act No.
(16) Frauds and Illegal Exactions and Transactions under Articles 213, 8799, otherwise known as the Securities Regulation Code of 2000; and
214, 215 and 216 of the Revised Penal Code, as amended; (34) Felonies or offenses of a similar nature that are punishable under the
(17) Malversation of Public Funds and Property under Articles 217 and penal laws of other countries.
222 of the Revised Penal Code, as amended; SEC. 3. Section 3 of the same Act shall have new paragraphs (j) and (k).
(18) Forgeries and Counterfeiting under Articles 163, 166, 167, 168, 169 (j) Precious metals shall mean gold, silver, platinum, palladium, rhodium,
and 176 of the Revised Penal Code, as amended; ruthenium, iridium and osmium. These include alloys of precious metals,
(19) Violations of Sections 4 to 6 of Republic Act No. 9208, otherwise solders and plating chemicals such as rhodium and palladium plating
known as the Anti-Trafficking in Persons Act of 2003; solutions and potassium gold cyanide and potassium silver cyanide and
(20) Violations of Sections 78 to 79 of Chapter IV, of Presidential Decree silver cyanide in salt solution.
No. 705, otherwise known as the Revised Forestry Code of the Philippines, (k) Precious stones shall mean diamond, ruby, emerald, sapphire, opal,
as amended; amethyst, beryl, topaz, and garnet that are used in jewelry making,
(21) Violations of Sections 86 to 106 of Chapter VI, of Republic Act No. including those formerly classified as semi-precious stones.
8550, otherwise known as the Philippine Fisheries Code of 1998; SEC. 4. Section 4 of the same Act is hereby amended to read as follows:
(22) Violations of Sections 101 to 107, and 110 of Republic Act No. 7942, SEC. 4. Money Laundering Offense. Money laundering is committed by
otherwise known as the Philippine Mining Act of 1995; any person who, knowing that any monetary instrument or property
represents, involves, or relates to the proceeds of any unlawful activity: transaction, in a form to be prescribed by the AMLC. The AMLC may also
(a) transacts said monetary instrument or property; require the Land Registration Authority and all its Registries of Deeds to
(b) converts, transfers, disposes of, moves, acquires, possesses or uses submit copies of relevant documents of all real estate transactions.
said monetary instrument or property; SEC. 7. Section 9(c), paragraphs 1 and 4 of the same Act are hereby
(c) conceals or disguises the true nature, source, location, disposition, amended to read as follows:
movement or ownership of or rights with respect to said monetary SEC. 9. Prevention of Money Laundering; Customer Identification
instrument or property; Requirements and Record Keeping.
(d) attempts or conspires to commit money laundering offenses referred (a) x x x
to in paragraphs (a), (b) or (c); (b) x x x
(e) aids, abets, assists in or counsels the commission of the money (c) Reporting of Covered and Suspicious Transactions. Covered persons
laundering offenses referred to in paragraphs (a), (b) or (c) above; and shall report to the AMLC all covered transactions and suspicious
(f) performs or fails to perform any act as a result of which he facilitates transactions within five (5) working days from occurrence thereof, unless
the offense of money laundering referred to in paragraphs (a), (b) or (c) the AMLC prescribes a different period not exceeding fifteen (15) working
above. days.
Money laundering is also committed by any covered person who, Lawyers and accountants acting as independent legal professionals are
knowing that a covered or suspicious transaction is required under this Act not required to report covered and suspicious transactions if the relevant
to be reported to the Anti-Money Laundering Council (AMLC), fails to do information was obtained in circumstances where they are subject to
so. professional secrecy or legal professional privilege.
SEC. 5. Section 6(a) of the same Act is hereby amended to read as follows: x x x
SEC. 6. Prosecution of Money Laundering. x x x
(a) Any person may be charged with and convicted of both the offense of When reporting covered or suspicious transactions to the AMLC, covered
money laundering and the unlawful activity as herein defined. persons and their officers and employees are prohibited from
(b) The prosecution of any offense or violation under this Act shall communicating, directly or indirectly, in any manner or by any means, to
proceed independently of any proceeding relating to the unlawful activity. any person or entity, the media, the fact that a covered or suspicious
SEC. 6. Section 7 of the same Act is hereby amended to read as follows: transaction has been reported or is about to be reported, the contents of
SEC. 7. Creation of Anti-Money Laundering Council (AMLC). The Anti- the report, or any other information in relation thereto. Neither may such
Money Laundering Council is hereby created and shall be composed of the reporting be published or aired in any manner or form by the mass
Governor of the Bangko Sentral ng Pilipinas as Chairman, the media, electronic mail, or other similar devices. In case of violation
Commissioner of the Insurance Commission and the Chairman of the thereof, the concerned officer and employee of the covered person and
Securities and Exchange Commission, as members. The AMLC shall act media shall be held criminally liable.
unanimously in the discharge of its functions as defined hereunder: SEC. 8. Section 10 of the same Act, as amended by Republic Act No.
x x x 10167, is hereby amended to read as follows:
(6) to apply before the Court of Appeals, ex parte, for the freezing of any SEC. 10. Freezing of Monetary Instrument or Property. Upon a verified
monetary instrument or property alleged to be laundered, proceeds from, ex parte petition by the AMLC and after determination that probable cause
or instrumentalities used in or intended for use in any unlawful activity as exists that any monetary instrument or property is in any way related to
defined in Section 3(i) hereof; an unlawful activity as defined in Section 3(i) hereof, the Court of Appeals
x x x may issue a freeze order which shall be effective immediately, and which
(12) to require the Land Registration Authority and all its Registries of shall not exceed six (6) months depending upon the circumstances of the
Deeds to submit to the AMLC, reports on all real estate transactions case: Provided, That if there is no case filed against a person whose
involving an amount in excess of Five hundred thousand pesos account has been frozen within the period determined by the court, the
(P500,000.00) within fifteen (15) days from the date of registration of the freeze order shall be deemed ipso facto lifted: Provided, further, That this
new rule shall not apply to pending cases in the courts. In any case, the (c) Payment in Lieu of Forfeiture. Where the court has issued an order
court should act on the petition to freeze within twenty-four (24) hours of forfeiture of the monetary instrument or property subject of a money
from filing of the petition. If the application is filed a day before a laundering offense defined under Section 4, and said order cannot be
nonworking day, the computation of the twenty-four (24)-hour period shall enforced because any particular monetary instrument or property cannot,
exclude the nonworking days. with due diligence, be located, or it has been substantially altered,
A person whose account has been frozen may file a motion to lift the destroyed, diminished in value or otherwise rendered worthless by any act
freeze order and the court must resolve this motion before the expiration or omission, directly or indirectly, attributable to the offender, or it has
of the freeze order. been concealed, removed, converted, or otherwise transferred to prevent
No court shall issue a temporary restraining order or a writ of injunction the same from being found or to avoid forfeiture thereof, or it is located
against any freeze order, except the Supreme Court. outside the Philippines or has been placed or brought outside the
SEC. 9. Section 12 of the same Act is hereby amended to read as follows: jurisdiction of the court, or it has been commingled with other monetary
(a) Civil Forfeiture. Upon determination by the AMLC that probable instruments or property belonging to either the offender himself or a third
cause exists that any monetary instrument or property is in any way person or entity, thereby rendering the same difficult to identify or be
related to an unlawful activity as defined in Section 3(i) or a money segregated for purposes of forfeiture, the court may, instead of enforcing
laundering offense under Section 4 hereof, the AMLC shall file with the the order of forfeiture of the monetary instrument or property or part
appropriate court through the Office of the Solicitor General, a verified ex thereof or interest therein, accordingly order the convicted offender to pay
parte petition for forfeiture, and the Rules of Court on Civil Forfeiture shall an amount equal to the value of said monetary instrument or property.
apply. This provision shall apply in both civil and criminal forfeiture.
The forfeiture shall include those other monetary instrument or property SEC. 10. Section 14 of the same Act, as amended, is hereby further
having an equivalent value to that of the monetary instrument or property amended to read as follows:
found to be related in any way to an unlawful activity or a money SEC. 14. Penal Provisions. (a) Penalties for the Crime of Money
laundering offense, when with due diligence, the former cannot be Laundering. The penalty of imprisonment ranging from seven (7) to
located, or it has been substantially altered, destroyed, diminished in fourteen (14) years and a fine of not less than Three million Philippine
value or otherwise rendered worthless by any act or omission, or it has pesos (Php3,000,000.00) but not more than twice the value of the
been concealed, removed, converted, or otherwise transferred, or it is monetary instrument or property involved in the offense, shall be imposed
located outside the Philippines or has been placed or brought outside the upon a person convicted under Section 4(a), (b), (c) and (d) of this Act.
jurisdiction of the court, or it has been commingled with other monetary The penalty of imprisonment from four (4) to seven (7) years and a fine
instrument or property belonging to either the offender himself or a third of not less than One million five hundred thousand Philippine pesos
person or entity, thereby rendering the same difficult to identify or be (Php1,500,000.00) but not more than Three million Philippine pesos
segregated for purposes of forfeiture. (Php3,000,000.00), shall be imposed upon a person convicted under
(b) Claim on Forfeited Assets. Where the court has issued an order of Section 4(e) and (f) of this Act.
forfeiture of the monetary instrument or property in a criminal prosecution The penalty of imprisonment from six (6) months to four (4) years or a
for any money laundering offense defined under Section 4 of this Act, the fine of not less than One hundred thousand Philippine pesos
offender or any other person claiming an interest therein may apply, by (Php100,000.00) but not more than Five hundred thousand Philippine
verified petition, for a declaration that the same legitimately belongs to pesos (Php500,000.00), or both, shall be imposed on a person convicted
him and for segregation or exclusion of the monetary instrument or under the last paragraph of Section 4 of this Act.
property corresponding thereto. The verified petition shall be filed with the (b) x x x
court which rendered the judgment of forfeiture, within fifteen (15) days (c) x x x
from the date of the finality of the order of forfeiture, in default of which (d) x x x
the said order shall become final and executor. This provision shall apply (e) The penalty of imprisonment ranging from four (4) to seven (7) years
in both civil and criminal forfeiture. and a fine corresponding to not more than two hundred percent (200%) of
the value of the monetary instrument or property laundered shall be SEC. 13. Separability Clause. If any provision of this Act is declared
imposed upon the covered person, its directors, officers or pesonnel who unconstitutional, the same shall not affect the validity and effectivity of
knowingly participated in the commission of the crime of money the other provisions hereof.
laundering. SEC. 14. Repealing Clause. All laws, decrees, orders, and issuances or
(f) Imposition of Administrative Sanctions. The imposition of the portions thereof, which are inconsistent with the provisions of this Act, are
administrative sanctions shall be without prejudice to the filing of criminal hereby repealed, amended or modified accordingly.
charges against the persons responsible for the violation. SEC. 15. Effectivity. This Act shall take effect fifteen (15) days following
After due notice and hearing, the AMLC shall, at its discretion, impose its publication in at least two (2) national newspapers of general
sanctions, including monetary penalties, warning or reprimand, upon any circulation.
covered person, its directors, officers, employees or any other person for Approved,
the violation of this Act, its implementing rules and regulations, or for
failure or refusal to comply with AMLC orders, resolutions and other
issuances. Such monetary penalties shall be in amounts as may be REPUBLIC ACT No. 7653
determined by the AMLC to be appropriate, which shall not be more than THE NEW CENTRAL BANK ACT
Five hundred thousand Philippine pesos (P500,000.00) per violation. CHAPTER I ESTABLISHMENT AND ORGANIZATION OF THE
The AMLC may promulgate rules on fines and penalties taking into BANGKO SENTRAL NG PILIPINAS
consideration the attendant circumstances, such as the nature and gravity ARTICLE ICREATION, RESPONSIBILITIES AND CORPORATE POWERS
of the violation or irregularity. OF THE BANGKO SENTRAL
(g) The provision of this law shall not be construed or implemented in a Section 1. Declaration of Policy. - The State shall maintain a
manner that will discriminate against certain customer types, such as central monetary authority that shall function and operate as an
politically-exposed persons, as well as their relatives, or against a certain independent and accountable body corporate in the discharge of its
religion, race or ethnic origin, or such other attributes or profiles when mandated responsibilities concerning money, banking and credit. In line
used as the only basis to deny these persons access to the services with this policy, and considering its unique functions and responsibilities,
provided by the covered persons. Whenever a bank, or quasi-bank, the central monetary authority established under this Act, while being a
financial institution or whenever any person or entity commits said government-owned corporation, shall enjoy fiscal and administrative
discriminatory act, the person or persons responsible for such violation autonomy.
shall be subject to sanctions as may be deemed appropriate by their Section 2. Creation of the Bangko Sentral. - There is hereby
respective regulators. established an independent central monetary authority, which shall be a
SEC. 11. New sections are hereby inserted after Section 19 of the same body corporate known as the Bangko Sentral ng Pilipinas, hereafter
Act, as amended, to read as follows: referred to as the Bangko Sentral.
SEC. 20. Non-intervention in the Bureau of Internal Revenue (BIR) The capital of the Bangko Sentral shall be Fifty billion pesos
Operations. Nothing contained in this Act nor in related antecedent laws (P50,000,000,000), to be fully subscribed by the Government of the
or existing agreements shall be construed to allow the AMLC to participate Republic, hereafter referred to as the Government, Ten billion pesos
in any manner in the operations of the BIR. (P10,000,000,000) of which shall be fully paid for by the Government upon
SEC. 21. The authority to inquire into or examine the main account and the effectivity of this Act and the balance to be paid for within a period of
the related accounts shall comply with the requirements of Article III, two (2) years from the effectivity of this Act in such manner and form as
Sections 2 and 3 of the 1987 Constitution, which are hereby incorporated the Government, through the Secretary of Finance and the Secretary of
by reference. Likewise, the constitutional injunction against ex post facto Budget and Management, may thereafter determine.
laws and bills of attainder shall be respected in the implementation of this Section 3. Responsibility and Primary Objective. - The Bangko
Act. Sentral shall provide policy directions in the areas of money, banking, and
SEC. 12. The succeeding sections are hereby renumbered accordingly. credit. It shall have supervision over the operations of banks and exercise
such regulatory powers as provided in this Act and other pertinent laws (b) a member of the Cabinet to be designated by the President of the
over the operations of finance companies and non-bank financial Philippines. Whenever the designated Cabinet Member is unable to attend
institutions performing quasi-banking functions, hereafter referred to as a meeting of the Board, he shall designate an Undersecretary in his
quasi-banks, and institutions performing similar functions. Department to attend as his alternate; and
The primary objective of the Bangko Sentral is to maintain price (c) five (5) members who shall come from the private sector, all of whom
stability conducive to a balanced and sustainable growth of the economy. shall serve full-time: Provided, however, That of the members first
It shall also promote and maintain monetary stability and the convertibility appointed under the provisions of this subsection, three (3) shall have a
of the peso. term of six (6) years, and the other two (2), three (3) years.
Section 4. Place of Business. - The Bangko Sentral shall have its No member of the Monetary Board may be reappointed more than
principal place of business in Metro Manila, but may maintain branches, once.
agencies and correspondents in such other places as the proper conduct Section 7. Vacancies. - Any vacancy in the Monetary Board
of its business may require. created by the death, resignation, or removal of any member shall be
Section 5. Corporate Powers. - The Bangko Sentral is hereby filled by the appointment of a new member to complete the unexpired
authorized to adopt, alter, and use a corporate seal which shall be period of the term of the member concerned.
judicially noticed; to enter into contracts; to lease or own real and Section 8. Qualifications. - The members of the Monetary Board
personal property, and to sell or otherwise dispose of the same; to sue and must be natural-born citizens of the Philippines, at least thirty-five (35)
be sued; and otherwise to do and perform any and all things that may be years of age, with the exception of the Governor who should at least be
necessary or proper to carry out the purposes of this Act. forty (40) years of age, of good moral character, of unquestionable
The Bangko Sentral may acquire and hold such assets and incur integrity, of known probity and patriotism, and with recognized
such liabilities in connection with its operations authorized by the competence in social and economic disciplines.
provisions of this Act, or as are essential to the proper conduct of such Section 9. Disqualifications. - In addition to the disqualifications
operations. imposed by Republic Act No. 6713, a member of the Monetary Board is
The Bangko Sentral may compromise, condone or release, in whole disqualified from being a director, officer, employee, consultant, lawyer,
or in part, any claim of or settled liability to the Bangko Sentral, regardless agent or stockholder of any bank, quasi-bank or any other institution
of the amount involved, under such terms and conditions as may be which is subject to supervision or examination by the Bangko Sentral, in
prescribed by the Monetary Board to protect the interests of the Bangko which case such member shall resign from, and divest himself of any and
Sentral. all interests in such institution before assumption of office as member of
ARTICLE IITHE MONETARY BOARD the Monetary Board.
Section 6. Composition of the Monetary Board. - The powers and The members of the Monetary Board coming from the private
functions of the Bangko Sentral shall be exercised by the Bangko Sentral sector shall not hold any other public office or public employment during
Monetary Board, hereafter referred to as the Monetary Board, composed of their tenure.
seven (7) members appointed by the President of the Philippines for a No person shall be a member of the Monetary Board if he has been
term of six (6) years. connected directly with any multilateral banking or financial institution or
The seven (7) members are: has a substantial interest in any private bank in the Philippines, within one
(a) the Governor of the Bangko Sentral, who shall be the Chairman of the (1) year prior to his appointment; likewise, no member of the Monetary
Monetary Board. The Governor of the Bangko Sentral shall be head of a Board shall be employed in any such institution within two (2) years after
department and his appointment shall be subject to confirmation by the the expiration of his term except when he serves as an official
Commission on Appointments. Whenever the Governor is unable to attend representative of the Philippine Government to such institution.
a meeting of the Board, he shall designate a Deputy Governor to act as his Section 10. Removal. - The President may remove any member of
alternate: Provided, That in such event, the Monetary Board shall the Monetary Board for any of the following reasons:
designate one of its members as acting Chairman; (a) If the member is subsequently disqualified under the provisions of
Section 8 of this Act; or issued shall be reported to the President and the Congress within fifteen
(b) If he is physically or mentally incapacitated that he cannot properly (15) days from the date of their issuance;
discharge his duties and responsibilities and such incapacity has lasted for (b) direct the management, operations, and administration of the Bangko
more than six (6) months; or Sentral, reorganize its personnel, and issue such rules and regulations as
(c) If the member is guilty of acts or operations which are of fraudulent or it may deem necessary or convenient for this purpose. The legal units of
illegal character or which are manifestly opposed to the aims and interests the Bangko Sentral shall be under the exclusive supervision and control of
of the Bangko Sentral; or the Monetary Board;
(d) If the member no longer possesses the qualifications specified in (c) establish a human resource management system which shall govern
Section 8 of this Act. the selection, hiring, appointment, transfer, promotion, or dismissal of all
Section 11. Meetings. - The Monetary Board shall meet at least personnel. Such system shall aim to establish professionalism and
once a week. The Board may be called to a meeting by the Governor of excellence at all levels of the Bangko Sentral in accordance with sound
the Bangko Sentral or by two (2) other members of the Board. principles of management.
The presence of four (4) members shall constitute a quorum: A compensation structure, based on job evaluation studies and
Provided, That in all cases the Governor or his duly designated alternate wage surveys and subject to the Board's approval, shall be instituted as an
shall be among the four (4). integral component of the Bangko Sentral's human resource development
Unless otherwise provided in this Act, all decisions of the Monetary program: Provided, That the Monetary Board shall make its own system
Board shall require the concurrence of at least four (4) members. conform as closely as possible with the principles provided for under
The Bangko Sentral shall maintain and preserve a complete record Republic Act No. 6758: Provided, however, That compensation and wage
of the proceedings and deliberations of the Monetary Board, including the structure of employees whose positions fall under salary grade 19 and
tapes and transcripts of the stenographic notes, either in their original below shall be in accordance with the rates prescribed under Republic Act
form or in microfilm. No. 6758.
Section 12. Attendance of the Deputy Governors. - The Deputy On the recommendation of the Governor, appoint, fix the
Governors may attend the meetings of the Monetary Board with the right remunerations and other emoluments, and remove personnel of the
to be heard. Bangko Sentral, subject to pertinent civil service laws: Provided, That the
Section 13. Salary. - The salary of the Governor and the members Monetary Board shall have exclusive and final authority to promote,
of the Monetary Board from the private sector shall be fixed by the transfer, assign, or reassign personnel of the Bangko Sentral and these
President of the Philippines at a sum commensurate to the importance personnel actions are deemed made in the interest of the service and not
and responsibility attached to the position. disciplinary: Provided, further, That the Monetary Board may delegate
Section 14. Withdrawal of Persons Having a Personal Interest. - In such authority to the Governor under such guidelines as it may determine.
addition to the requirements of Republic Act No. 6713, any member of the (d) adopt an annual budget for and authorize such expenditures by the
Monetary Board with personal or pecuniary interest in any matter in the Bangko Sentral as are in the interest of the effective administration and
agenda of the Monetary Board shall disclose his interest to the Board and operations of the Bangko Sentral in accordance with applicable laws and
shall retire from the meeting when the matter is taken up. The decision regulations; and
taken on the matter shall be made public. The minutes shall reflect the (e) indemnify its members and other officials of the Bangko Sentral,
disclosure made and the retirement of the member concerned from the including personnel of the departments performing supervision and
meeting. examination functions against all costs and expenses reasonably incurred
Section 15. Exercise of Authority. - In the exercise of its authority, by such persons in connection with any civil or criminal action, suit or
the Monetary Board shall: proceedings to which he may be, or is, made a party by reason of the
(a) issue rules and regulations it considers necessary for the effective performance of his functions or duties, unless he is finally adjudged in
discharge of the responsibilities and exercise of the powers vested upon such action or proceeding to be liable for negligence or misconduct.
the Monetary Board and the Bangko Sentral. The rules and regulations In the event of a settlement or compromise, indemnification shall
be provided only in connection with such matters covered by the Monetary Board;
settlement as to which the Bangko Sentral is advised by external counsel (c) direct and supervise the operations and internal administration of the
that the person to be indemnified did not commit any negligence or Bangko Sentral. The Governor may delegate certain of his administrative
misconduct. responsibilities to other officers or may assign specific tasks or
The costs and expenses incurred in defending the aforementioned responsibilities to any full-time member of the Monetary Board without
action, suit or proceeding may be paid by the Bangko Sentral in advance additional remuneration or allowance whenever he may deem fit or
of the final disposition of such action, suit or proceeding upon receipt of an subject to such rules and regulations as the Monetary Board may
undertaking by or on behalf of the member, officer, or employee to repay prescribe;
the amount advanced should it ultimately be determined by the Monetary (d) appoint and fix the remunerations and other emoluments of personnel
Board that he is not entitled to be indemnified as provided in this below the rank of a department head in accordance with the position and
subsection. compensation plans approved by the Monetary Board, as well as to
Section 16. Responsibility. - Members of the Monetary Board, impose disciplinary measures upon personnel of the Bangko Sentral,
officials, examiners, and employees of the Bangko Sentral who willfully subject to the provisions of Section 15(c) of this Act: Provided, That
violate this Act or who are guilty of negligence, abuses or acts of removal of personnel shall be with the approval of the Monetary Board;
malfeasance or misfeasance or fail to exercise extraordinary diligence in (e) render opinions, decisions, or rulings, which shall be final and
the performance of his duties shall be held liable for any loss or injury executory until reversed or modified by the Monetary Board, on matters
suffered by the Bangko Sentral or other banking institutions as a result of regarding application or enforcement of laws pertaining to institutions
such violation, negligence, abuse, malfeasance, misfeasance or failure to supervised by the Bangko Sentral and laws pertaining to quasi-banks, as
exercise extraordinary diligence. well as regulations, policies or instructions issued by the Monetary Board,
Similar responsibility shall apply to members, officers, and and the implementation thereof; and
employees of the Bangko Sentral for: (1) the disclosure of any information (f) exercise such other powers as may be vested in him by the Monetary
of a confidential nature, or any information on the discussions or Board.
resolutions of the Monetary Board, or about the confidential operations of Section 18. Representation of the Monetary Board and the
the Bangko Sentral, unless the disclosure is in connection with the Bangko Sentral. - The Governor of the Bangko Sentral shall be the
performance of official functions with the Bangko Sentral, or is with prior principal representative of the Monetary Board and of the Bangko Sentral
authorization of the Monetary Board or the Governor; or (2) the use of and, in such capacity and in accordance with the instructions of the
such information for personal gain or to the detriment of the Government, Monetary Board, he shall be empowered to:
the Bangko Sentral or third parties: Provided, however, That any data or (a) represent the Monetary Board and the Bangko Sentral in all dealings
information required to be submitted to the President and/or the Congress, with other offices, agencies and instrumentalities of the Government and
or to be published under the provisions of this Act shall not be considered all other persons or entities, public or private, whether domestic, foreign
confidential. or international;
ARTICLE IIITHE GOVERNOR AND DEPUTY GOVERNORS OF THE (b) sign contracts entered into by the Bangko Sentral, notes and securities
BANGKO SENTRAL issued by the Bangko Sentral, all reports, balance sheets, profit and loss
Section 17. Powers and Duties of the Governor. - The Governor statements, correspondence and other documents of the Bangko Sentral.
shall be the chief executive officer of the Bangko Sentral. His powers and The signature of the Governor may be in facsimile whenever
duties shall be to: appropriate;
(a) prepare the agenda for the meetings of the Monetary Board and to (c) represent the Bangko Sentral, either personally or through counsel,
submit for the consideration of the Board the policies and measures which including private counsel, as may be authorized by the Monetary Board, in
he believes to be necessary to carry out the purposes and provisions of any legal proceedings, action or specialized legal studies; and
this Act; (d) delegate his power to represent the Bangko Sentral, as provided in
(b) execute and administer the policies and measures approved by the subsections (a), (b) and (c) of this section, to other officers upon his own
responsibility: Provided, however, That in order to preserve the integrity Monetary Board in the formulation and implementation of its policies. Such
and the prestige of his office, the Governor of the Bangko Sentral may data shall include, among others, forecasts of the balance of payments of
choose not to participate in preliminary discussions with any multilateral the Philippines, statistics on the monthly movement of the monetary
banking or financial institution on any negotiations for the Government aggregates and of prices and other statistical series and economic studies
within or outside the Philippines. During the negotiations, he may instead useful for the formulation and analysis of monetary, banking, credit and
be represented by a permanent negotiator. exchange policies.
Section 19. Authority of the Governor in Emergencies. - In case of Section 23. Authority to Obtain Data and Information. - The
emergencies where time is sufficient to call a meeting of the Monetary Bangko Sentral shall have the authority to request from government
Board, the Governor of the Bangko Sentral, with the concurrence of two offices and instrumentalities, or government-owned or controlled
(2) other members of the Monetary Board, may decide any matter or take corporations, any data which it may require for the proper discharge of its
any action within the authority of the Board. functions and responsibilities. The Bangko Sentral through the Governor or
The Governor shall submit a report to the President and Congress in his absence, a duly authorized representative shall have the power to
within seventy-two (72) hours after the action has been taken. issue a subpoena for the production of the books and records for the
At the soonest possible time, the Governor shall call a meeting of aforesaid purpose. Those who refuse the subpoena without justifiable
the Monetary Board to submit his action for ratification. cause, or who refuse to supply the bank with data requested or required,
Section 20. Outside Interests of the Governor and the Full-time shall be subject to punishment for contempt in accordance with the
Members of the Board. - The Governor of the Bangko Sentral and the full- provisions of the Rules of Court.
time members of the Board shall limit their professional activities to those Data on individual firms, other than banks, gathered by the
pertaining directly to their positions with the Bangko Sentral. Accordingly, Department of Economic Research and other departments or units of the
they may not accept any other employment, whether public or private, Bangko Sentral shall not be made available to any person or entity outside
remunerated or ad honorem, with the exception of positions in of the Bangko Sentral whether public or private except under order of the
eleemosynary, civic, cultural or religious organizations or whenever, by court or under such conditions as may be prescribed by the Monetary
designation of the President, the Governor or the full-time member is Board: Provided, however, That the collective data on firms may be
tasked to represent the interest of the Government or other government released to interested persons or entities: Provided, finally, That in the
agencies in matters connected with or affecting the economy or the case of data on banks, the provisions of Section 27 of this Act shall apply.
financial system of the country. Section 24. Training of Technical Personnel. - The Bangko Sentral
Section 21. Deputy Governors. - The Governor of the Bangko shall promote and sponsor the training of technical personnel in the field
Sentral, with the approval of the Monetary Board, shall appoint not more of money and banking. Toward this end, the Bangko Sentral is hereby
than three (3) Deputy Governors who shall perform duties as may be authorized to defray the costs of study, at home or abroad, of qualified
assigned to them by the Governor and the Board. employees of the Bangko Sentral, of promising university graduates or of
In the absence of the Governor, a Deputy Governor designated by any other qualified persons who shall be determined by proper
the Governor shall act as chief executive of the Bangko Sentral and shall competitive examinations. The Monetary Board shall prescribe rules and
exercise the powers and perform the duties of the Governor. Whenever regulations to govern the training program of the Bangko Sentral.
the Government is unable to attend meetings of government boards or Section 25. Supervision and Examination. - The Bangko Sentral
councils in which he is an ex officio member pursuant to provisions of shall have supervision over, and conduct periodic or special examinations
special laws, a Deputy Governor as may be designated by the Governor of, banking institutions and quasi-banks, including their subsidiaries and
shall be vested with authority to participate and exercise the right to vote affiliates engaged in allied activities.
in such meetings. For purposes of this section, a subsidiary means a corporation
ARTICLE IVOPERATIONS OF THE BANGKO SENTRAL more than fifty percent (50%) of the voting stock of which is owned by a
Section 22. Research and Statistics. - The Bangko Sentral shall bank or quasi-bank and an affiliate means a corporation the voting stock
prepare data and conduct economic research for the guidance of the of which, to the extent of fifty percent (50%) or less, is owned by a bank or
quasi-bank or which is related or linked to such institution or intermediary Section 27. Prohibitions. - In addition to the prohibitions found in
through common stockholders or such other factors as may be determined Republic Act Nos. 3019 and 6713, personnel of the Bangko Sentral are
by the Monetary Board. hereby prohibited from:
The department heads and the examiners of the supervising (a) being an officer, director, lawyer or agent, employee, consultant or
and/or examining departments are hereby authorized to administer oaths stockholder, directly or indirectly, of any institution subject to supervision
to any director, officer, or employee of any institution under their or examination by the Bangko Sentral, except non-stock savings and loan
respective supervision or subject to their examination and to compel the associations and provident funds organized exclusively for employees of
presentation of all books, documents, papers or records necessary in their the Bangko Sentral, and except as otherwise provided in this Act;
judgment to ascertain the facts relative to the true condition of any (b) directly or indirectly requesting or receiving any gift, present or
institution as well as the books and records of persons and entities relative pecuniary or material benefit for himself or another, from any institution
to or in connection with the operations, activities or transactions of the subject to supervision or examination by the Bangko Sentral;
institution under examination, subject to the provision of existing laws (c) revealing in any manner, except under orders of the court, the
protecting or safeguarding the secrecy or confidentiality of bank deposits Congress or any government office or agency authorized by law, or under
as well as investments of private persons, natural or juridical, in debt such conditions as may be prescribed by the Monetary Board, information
instruments issued by the Government. relating to the condition or business of any institution. This prohibition
No restraining order or injunction shall be issued by the court shall not be held to apply to the giving of information to the Monetary
enjoining the Bangko Sentral from examining any institution subject to Board or the Governor of the Bangko Sentral, or to any person authorized
supervision or examination by the Bangko Sentral, unless there is by either of them, in writing, to receive such information; and
convincing proof that the action of the Bangko Sentral is plainly arbitrary (d) borrowing from any institution subject to supervision or examination by
and made in bad faith and the petitioner or plaintiff files with the clerk or the Bangko Sentral shall be prohibited unless said borrowings are
judge of the court in which the action is pending a bond executed in favor adequately secured, fully disclosed to the Monetary Board, and shall be
of the Bangko Sentral, in an amount to be fixed by the court. The subject to such further rules and regulations as the Monetary Board may
provisions of Rule 58 of the New Rules of Court insofar as they are prescribe: Provided, however, That personnel of the supervising and
applicable and not inconsistent with the provisions of this section shall examining departments are prohibited from borrowing from a bank under
govern the issuance and dissolution of the restraining order or injunction their supervision or examination.
contemplated in this section. Section 28. Examination and Fees. - The supervising and
Section 26. Bank Deposits and Investments. - Any director, officer examining department head, personally or by deputy, shall examine the
or stockholder who, together with his related interest, contracts a loan or books of every banking institution once in every twelve (12) months, and
any form of financial accommodation from: (1) his bank; or (2) from a at such other times as the Monetary Board by an affirmative vote of five
bank (a) which is a subsidiary of a bank holding company of which both his (5) members, may deem expedient and to make a report on the same to
bank and the lending bank are subsidiaries or (b) in which a controlling the Monetary Board: Provided, That there shall be an interval of at least
proportion of the shares is owned by the same interest that owns a twelve (12) months between annual examinations.
controlling proportion of the shares of his bank, in excess of five percent The bank concerned shall afford to the head of the appropriate
(5%) of the capital and surplus of the bank, or in the maximum amount supervising and examining departments and to his authorized deputies
permitted by law, whichever is lower, shall be required by the lending full opportunity to examine its books, cash and available assets and
bank to waive the secrecy of his deposits of whatever nature in all banks general condition at any time during banking hours when requested to do
in the Philippines. Any information obtained from an examination of his so by the Bangko Sentral: Provided, however, That none of the reports and
deposits shall be held strictly confidential and may be used by the other papers relative to such examinations shall be open to inspection by
examiners only in connection with their supervisory and examination the public except insofar as such publicity is incidental to the proceedings
responsibility or by the Bangko Sentral in an appropriate legal action it has hereinafter authorized or is necessary for the prosecution of violations in
initiated involving the deposit account. connection with the business of such institutions.
 Banking and quasi-banking institutions which are subject to conservator or of its own findings, determine that the continuance in
examination by the Bangko Sentral shall pay to the Bangko Sentral, within business of the institution would involve probable loss to its depositors or
the first thirty (30) days of each year, an annual fee in an amount equal to creditors, in which case the provisions of Section 30 shall apply.
a percentage as may be prescribed by the Monetary Board of its average Section 30. Proceedings in Receivership and Liquidation. -
total assets during the preceding year as shown on its end-of-month Whenever, upon report of the head of the supervising or examining
balance sheets, after deducting cash on hand and amounts due from department, the Monetary Board finds that a bank or quasi-bank:
banks, including the Bangko Sentral and banks abroad. (a) is unable to pay its liabilities as they become due in the ordinary
Section 29. Appointment of Conservator. - Whenever, on the course of business: Provided, That this shall not include inability to pay
basis of a report submitted by the appropriate supervising or examining caused by extraordinary demands induced by financial panic in the
department, the Monetary Board finds that a bank or a quasi-bank is in a banking community;
state of continuing inability or unwillingness to maintain a condition of (b) has insufficient realizable assets, as determined by the Bangko Sentral,
liquidity deemed adequate to protect the interest of depositors and to meet its liabilities; or
creditors, the Monetary Board may appoint a conservator with such (c) cannot continue in business without involving probable losses to its
powers as the Monetary Board shall deem necessary to take charge of the depositors or creditors; or
assets, liabilities, and the management thereof, reorganize the (d) has willfully violated a cease and desist order under Section 37 that
management, collect all monies and debts due said institution, and has become final, involving acts or transactions which amount to fraud or
exercise all powers necessary to restore its viability. The conservator shall a dissipation of the assets of the institution; in which cases, the Monetary
report and be responsible to the Monetary Board and shall have the power Board may summarily and without need for prior hearing forbid the
to overrule or revoke the actions of the previous management and board institution from doing business in the Philippines and designate the
of directors of the bank or quasi-bank. Philippine Deposit Insurance Corporation as receiver of the banking
The conservator should be competent and knowledgeable in bank institution.
operations and management. The conservatorship shall not exceed one For a quasi-bank, any person of recognized competence in banking
(1) year. or finance may be designed as receiver.
The conservator shall receive remuneration to be fixed by the The receiver shall immediately gather and take charge of all the
Monetary Board in an amount not to exceed two-thirds (2/3) of the salary assets and liabilities of the institution, administer the same for the benefit
of the president of the institution in one (1) year, payable in twelve (12) of its creditors, and exercise the general powers of a receiver under the
equal monthly payments: Provided, That, if at any time within one-year Revised Rules of Court but shall not, with the exception of administrative
period, the conservatorship is terminated on the ground that the expenditures, pay or commit any act that will involve the transfer or
institution can operate on its own, the conservator shall receive the disposition of any asset of the institution: Provided, That the receiver may
balance of the remuneration which he would have received up to the end deposit or place the funds of the institution in non-speculative
of the year; but if the conservatorship is terminated on other grounds, the investments. The receiver shall determine as soon as possible, but not
conservator shall not be entitled to such remaining balance. The Monetary later than ninety (90) days from take over, whether the institution may be
Board may appoint a conservator connected with the Bangko Sentral, in rehabilitated or otherwise placed in such a condition so that it may be
which case he shall not be entitled to receive any remuneration or permitted to resume business with safety to its depositors and creditors
emolument from the Bangko Sentral during the conservatorship. The and the general public: Provided, That any determination for the
expenses attendant to the conservatorship shall be borne by the bank or resumption of business of the institution shall be subject to prior approval
quasi-bank concerned. of the Monetary Board.
The Monetary Board shall terminate the conservatorship when it is If the receiver determines that the institution cannot be
satisfied that the institution can continue to operate on its own and the rehabilitated or permitted to resume business in accordance with the next
conservatorship is no longer necessary. The conservatorship shall likewise preceding paragraph, the Monetary Board shall notify in writing the board
be terminated should the Monetary Board, on the basis of the report of the of directors of its findings and direct the receiver to proceed with the
liquidation of the institution. The receiver shall: credit as provided in the Civil Code.
(1) file ex parte with the proper regional trial court, and without Section 32. Disposition of Revenues and Earnings. - All revenues
requirement of prior notice or any other action, a petition for assistance in and earnings realized by the receiver in winding up the affairs and
the liquidation of the institution pursuant to a liquidation plan adopted by administering the assets of any bank or quasi-bank within the purview of
the Philippine Deposit Insurance Corporation for general application to all this Act shall be used to pay the costs, fees and expenses mentioned in
closed banks. In case of quasi-banks, the liquidation plan shall be adopted the preceding section, salaries of such personnel whose employment is
by the Monetary Board. Upon acquiring jurisdiction, the court shall, upon rendered necessary in the discharge of the liquidation together with other
motion by the receiver after due notice, adjudicate disputed claims additional expenses caused thereby. The balance of revenues and
against the institution, assist the enforcement of individual liabilities of the earnings, after the payment of all said expenses, shall form part of the
stockholders, directors and officers, and decide on other issues as may be assets available for payment to creditors.
material to implement the liquidation plan adopted. The receiver shall pay Section 33. Disposition of Banking Franchise. - The Bangko
the cost of the proceedings from the assets of the institution. Sentral may, if public interest so requires, award to an institution, upon
(2) convert the assets of the institutions to money, dispose of the same to such terms and conditions as the Monetary Board may approve, the
creditors and other parties, for the purpose of paying the debts of such banking franchise of a bank under liquidation to operate in the area where
institution in accordance with the rules on concurrence and preference of said bank or its branches were previously operating: Provided, That
credit under the Civil Code of the Philippines and he may, in the name of whatever proceeds may be realized from such award shall be subject to
the institution, and with the assistance of counsel as he may retain, the appropriate exclusive disposition of the Monetary Board.
institute such actions as may be necessary to collect and recover accounts Section 34. Refusal to Make Reports or Permit Examination. - Any
and assets of, or defend any action against, the institution. The assets of officer, owner, agent, manager, director or officer-in-charge of any
an institution under receivership or liquidation shall be deemed in custodia institution subject to the supervision or examination by the Bangko Sentral
legis in the hands of the receiver and shall, from the moment the within the purview of this Act who, being required in writing by the
institution was placed under such receivership or liquidation, be exempt Monetary Board or by the head of the supervising and examining
from any order of garnishment, levy, attachment, or execution. department willfully refuses to file the required report or permit any lawful
The actions of the Monetary Board taken under this section or examination into the affairs of such institution shall be punished by a fine
under Section 29 of this Act shall be final and executory, and may not be of not less than Fifty thousand pesos (P50,000) nor more than One
restrained or set aside by the court except on petition for certiorari on the hundred thousand pesos (P100,000) or by imprisonment of not less than
ground that the action taken was in excess of jurisdiction or with such one (1) year nor more than five (5) years, or both, in the discretion of the
grave abuse of discretion as to amount to lack or excess of jurisdiction. court.
The petition for certiorari may only be filed by the stockholders of record Section 35. False Statement. - The willful making of a false or
representing the majority of the capital stock within ten (10) days from misleading statement on a material fact to the Monetary Board or to the
receipt by the board of directors of the institution of the order directing examiners of the Bangko Sentral shall be punished by a fine of not less
receivership, liquidation or conservatorship. than One hundred thousand pesos (P100,000) nor more than Two hundred
The designation of a conservator under Section 29 of this Act or thousand pesos (P200,000), or by imprisonment of not more than (5)
the appointment of a receiver under this section shall be vested years, or both, at the discretion of the court.
exclusively with the Monetary Board. Furthermore, the designation of a Section 36. Proceedings Upon Violation of This Act and Other
conservator is not a precondition to the designation of a receiver. Banking Laws, Rules, Regulations, Orders or Instructions. - Whenever a
Section 31. Distribution of Assets. - In case of liquidation of a bank or quasi-bank, or whenever any person or entity willfully violates this
bank or quasi-bank, after payment of the cost of proceedings, including Act or other pertinent banking laws being enforced or implemented by the
reasonable expenses and fees of the receiver to be allowed by the court, Bangko Sentral or any order, instruction, rule or regulation issued by the
the receiver shall pay the debts of such institution, under order of the Monetary Board, the person or persons responsible for such violation shall
court, in accordance with the rules on concurrence and preference of unless otherwise provided in this Act be punished by a fine of not less than
Fifty thousand pesos (P50,000) nor more than Two hundred thousand reinstated in his position: Provided, further, That when the delay in the
pesos (P200,000) or by imprisonment of not less than two (2) years nor disposition of the case is due to the fault, negligence or petition of the
more than ten (10) years, or both, at the discretion of the court. director or officer, the period of delay shall not be counted in computing
Whenever a bank or quasi-bank persists in carrying on its business the period of suspension herein provided.
in an unlawful or unsafe manner, the Board may, without prejudice to the The above administrative sanctions need not be applied in the
penalties provided in the preceding paragraph of this section and the order of their severity.
administrative sanctions provided in Section 37 of this Act, take action Whether or not there is an administrative proceeding, if the
under Section 30 of this Act. institution and/or the directors and/or officers concerned continue with or
Section 37. Administrative Sanctions on Banks and Quasi-banks. - otherwise persist in the commission of the indicated practice or violation,
Without prejudice to the criminal sanctions against the culpable persons the Monetary Board may issue an order requiring the institution and/or the
provided in Sections 34, 35, and 36 of this Act, the Monetary Board may, directors and/or officers concerned to cease and desist from the indicated
at its discretion, impose upon any bank or quasi-bank, their directors practice or violation, and may further order that immediate action be
and/or officers, for any willful violation of its charter or by-laws, willful taken to correct the conditions resulting from such practice or violation.
delay in the submission of reports or publications thereof as required by The cease and desist order shall be immediately effective upon service on
law, rules and regulations; any refusal to permit examination into the the respondents.
affairs of the institution; any willful making of a false or misleading The respondents shall be afforded an opportunity to defend their
statement to the Board or the appropriate supervising and examining action in a hearing before the Monetary Board or any committee chaired
department or its examiners; any willful failure or refusal to comply with, by any Monetary Board member created for the purpose, upon request
or violation of, any banking law or any order, instruction or regulation made by the respondents within five (5) days from their receipt of the
issued by the Monetary Board, or any order, instruction or ruling by the order. If no such hearing is requested within said period, the order shall be
Governor; or any commission of irregularities, and/or conducting business final. If a hearing is conducted, all issues shall be determined on the basis
in an unsafe or unsound manner as may be determined by the Monetary of records, after which the Monetary Board may either reconsider or make
Board, the following administrative sanctions, whenever applicable: final its order.
(a) fines in amounts as may be determined by the Monetary Board to be The Governor is hereby authorized, at his discretion, to impose
appropriate, but in no case to exceed Thirty thousand pesos (P30,000) a upon banking institutions, for any failure to comply with the requirements
day for each violation, taking into consideration the attendant of law, Monetary Board regulations and policies, and/or instructions issued
circumstances, such as the nature and gravity of the violation or by the Monetary Board or by the Governor, fines not in excess of Ten
irregularity and the size of the bank or quasi-bank; thousand pesos (P10,000) a day for each violation, the imposition of which
(b) suspension of rediscounting privileges or access to Bangko Sentral shall be final and executory until reversed, modified or lifted by the
credit facilities; Monetary Board on appeal.
(c) suspension of lending or foreign exchange operations or authority to Section 38. Operating Departments of the Bangko Sentral. - The
accept new deposits or make new investments; Monetary Board shall, in accordance with its authority under this Act,
(d) suspension of interbank clearing privileges; and/or determine and provide for such operating departments and other offices,
(e) revocation of quasi-banking license. including a public information office, of the Bangko Sentral as it deems
Resignation or termination from office shall not exempt such convenient for the proper and efficient conduct of the operations and the
director or officer from administrative or criminal sanctions. accomplishment of the objectives of the Bangko Sentral. The functions
The Monetary Board may, whenever warranted by circumstances, and duties of such operating departments and other offices shall be
preventively suspend any director or officer of a bank or quasi-bank determined by the Monetary Board.
pending an investigation: Provided, That should the case be not finally ARTICLE VREPORTS AND PUBLICATIONS
decided by the Bangko Sentral within a period of one hundred twenty Section 39. Reports and Publications. - The Bangko Sentral shall
(120) days after the date of suspension, said director or officer shall be publish a general balance sheet showing the volume and composition of
its assets and liabilities as of the last working day of the month within system.
sixty (60) days after the end of each month except for the month of The Bangko Sentral shall publish another version of the annual
December, which shall be submitted within ninety (90) days after the end report in terms understandable to the layman.
hereof. Failure to comply with the reportorial requirements pursuant to this
The Monetary Board shall publish and submit the following reports article without justifiable reason as may be determined by the Monetary
to the President and to the Congress: Board shall cause the withholding of the salary of the personnel concerned
(a) not later than ninety (90) days after the end of each quarter, an until the requirements are complied with.
analysis of economic and financial developments, including the condition Section 41. Signatures on Statements. - The balance sheets and
of net international reserves and monetary aggregates; other financial statements of the Bangko Sentral shall be signed by the
(b) within ninety (90) days after the end of the year, the preceding year's officers responsible for their preparation, by the Governor, and by the
budget and profit and loss statement of the Bangko Sentral showing in auditor of the Bangko Sentral.
reasonable detail the result of its operations; ARTICLE VIPROFITS, LOSSES, AND SPECIAL ACCOUNTS
(c) one hundred twenty (120) days after the end of each semester, a Section 42. Fiscal Year. - The fiscal year of the Bangko Sentral
review of the state of the financial system; and shall begin on January first and end on December thirty-first of each year.
(d) as soon as practicable, abnormal movements in monetary aggregates Section 43. Computation of Profits and Losses. - Within the first
and the general price level, and, not later than seventy-two (72) hours thirty (30) days following the end of each year, the Bangko Sentral shall
after they are taken, remedial measures in response to such abnormal determine its net profits or losses. In the calculation of net profits, the
movements. Bangko Sentral shall make adequate allowance or establish adequate
Section 40. Annual Report. - Before the end of March of each reserves for bad and doubtful accounts.
year, the Bangko Sentral shall publish and submit to the President and the Section 44. Distribution of Net Profits. - Within the first sixty (60)
Congress an annual report on the condition of the Bangko Sentral days following the end of each fiscal year, the Monetary Board shall
including a review of the policies and measures adopted by the Monetary determine and carry out the distribution of the net profits, in accordance
Board during the past year and an analysis of the economic and financial with the following rule:
circumstances which gave rise to said policies and measures. Fifty percent (50%) of the net profits shall be carried to surplus and
The annual report shall also include a statement of the financial the remaining fifty percent (50%) shall revert back to the National
condition of the Bangko Sentral and a statistical appendix which shall Treasury, except as otherwise provided in the transitory provisions of this
present, as a minimum, the following data: Act.
(a) the monthly movement of monetary aggregates and their components; Section 45. Revaluation Profits and Losses. - Profits or losses
(b) the monthly movement of purchases and sales of foreign exchange arising from any revaluation of the Bangko Sentral's net assets or liabilities
and of the international reserves of the Bangko Sentral; in gold or foreign currencies with respect to the Philippine peso shall not
(c) the balance of payments of the Philippines; be included in the computation of the annual profits and losses of the
(d) monthly indices of consumer prices and of import and export prices; Bangko Sentral. Any profits or losses arising in this manner shall be offset
(e) the monthly movement, in summary form, of exports and imports, by by any amounts which, as a consequence of such revaluations, are owed
volume and value; by the Philippines to any international or regional intergovernmental
(f) the monthly movement of the accounts of the Bangko Sentral and of financial institution of which the Philippines is a member or are owed by
other banks; these institutions to the Philippines. Any remaining profit or loss shall be
(g) the principal data on government receipts and expenditures and on the carried in a special frozen account which shall be named "Revaluation of
status of the public debt, both domestic and foreign; and International Reserve" and the net balance of which shall appear either
(h) the texts of the major legal and administrative measures adopted by among the liabilities or among the assets of the Bangko Sentral,
the Government and the Monetary Board during the year which relate to depending on whether the revaluations have produced net profits or net
the functions or operations of the Bangko Sentral or of the financial losses.
 The Revaluation of International Reserve account shall be neither and coins issued or circulating in accordance with the provisions of this
credited nor debited for any purposes other than those specifically Act.
authorized in this section. Section 50. Exclusive Issue Power. - The Bangko Sentral shall
Section 46. Suspense Accounts. - Sections 43 and 43-A of have the sole power and authority to issue currency, within the territory of
Republic Act No. 265, as amended, creating the Monetary Adjustment the Philippines. No other person or entity, public or private, may put into
Account (MAA) and the Exchange Stabilization Adjustment Account circulation notes, coins or any other object or document which, in the
(ESAA), respectively, are hereby repealed. Amounts outstanding as of the opinion of the Monetary Board, might circulate as currency, nor reproduce
effective date of this Act based on these accounts shall continue to be for or imitate the facsimiles of Bangko Sentral notes without prior authority
the account of the Central Bank and shall be governed by the transitory from the Bangko Sentral.
provisions of this Act. The Monetary Board may issue such regulations as it may deem
The Revaluation of International Reserve (RIR) account as of the advisable in order to prevent the circulation of foreign currency or of
effective date of this Act of the Central Bank shall continue to be for the currency substitutes as well as to prevent the reproduction of facsimiles of
account of the same entity and shall be governed by the provisions of Bangko Sentral notes.
Section 44 of Republic Act No. 265, as amended, until otherwise provided The Bangko Sentral shall have the authority to investigate, make
for in accordance with the transitory provisions of this Act. arrests, conduct searches and seizures in accordance with law, for the
ARTICLE VIITHE AUDITOR purpose of maintaining the integrity of the currency.
Section 47. Appointment and Personnel. - The Chairman of the Violation of this provision or any regulation issued by the Bangko
Commission on Audit shall act as the ex officio auditor of the Bangko Sentral pursuant thereto shall constitute an offense punishable by
Sentral and, as such, he is empowered and authorized to appoint a imprisonment of not less than five (5) years but not more than ten (10)
representative who shall be the auditor of the Bangko Sentral and, in years. In case the Revised Penal Code provides for a greater penalty, then
accordance with law, fix his salary, and to appoint and fix salaries and that penalty shall be imposed.
number of personnel to assist said representative in his work. The salaries Section 51. Liability for Notes and Coins. - Notes and coins issued
and other emoluments shall be paid by the Commission. The auditor of the by the Bangko Sentral shall be liabilities of the Bangko Sentral and may be
Bangko Sentral and personnel under him may be removed only by the issued only against, and in amounts not exceeding, the assets of the
Chairman of the Commission. Bangko Sentral. Said notes and coins shall be a first and paramount lien
The representative of the Chairman of the Commission must be a on all assets of the Bangko Sentral.
certified public accountant with at least ten (10) years experience as such. The Bangko Sentral's holdings of its own notes and coins shall not
No relative of any member of the Monetary Board or the Chairman of the be considered as part of its currency issue and, accordingly, shall not form
Commission within the sixth degree of consanguinity or affinity shall be part of the assets or liabilities of the Bangko Sentral.
appointed such representative. Section 52. Legal Tender Power. - All notes and coins issued by
CHAPTER II THE BANGKO SENTRAL AND THE MEANS OF the Bangko Sentral shall be fully guaranteed by the Government of the
PAYMENT Republic of the Philippines and shall be legal tender in the Philippines for
ARTICLE ITHE UNIT OF MONETARY VALUE all debts, both public and private: Provided, however, That, unless
Section 48. The Peso. - The unit of monetary value in the otherwise fixed by the Monetary Board, coins shall be legal tender in
Philippines is the "peso," which is represented by the sign "P." amounts not exceeding Fifty pesos (P50.00) for denominations of Twenty-
The peso is divided into one hundred (100) equal parts called five centavos and above, and in amounts not exceeding Twenty pesos
"centavos," which are represented by the sign "c." (P20.00) for denominations of Ten centavos or less.
ARTICLE IIISSUE OF MEANS OF PAYMENT Section 53. Characteristics of the Currency. - The Monetary
A. CURRENCY Board, with the approval of the President of the Philippines, shall prescribe
Section 49. Definition of Currency. - The word "currency" is the denominations, dimensions, designs, inscriptions and other
hereby defined, for purposes of this Act, as meaning all Philippine notes characteristics of notes issued by the Bangko Sentral: Provided, however,
That said notes shall state that they are liabilities of the Bangko Sentral during the following year, or for such longer period as the Monetary Board
and are fully guaranteed by the Government of the Republic of the may determine, they may be exchanged at par and without charge in the
Philippines. Said notes shall bear the signatures, in facsimile, of the Bangko Sentral and by agents duly authorized by the Bangko Sentral for
President of the Philippines and of the Governor of the Bangko Sentral. this purpose. After the expiration of this latter period, the notes and coins
Similarly, the Monetary Board, with the approval of the President of which have not been exchanged shall cease to be a liability of the Bangko
the Philippines, shall prescribe the weight, fineness, designs, Sentral and shall be demonetized. The Bangko Sentral shall also
denominations and other characteristics of the coins issued by the Bangko demonetize all notes and coins which have been called in and replaced.
Sentral. In the minting of coins, the Monetary Board shall give full B. DEMAND DEPOSITS
consideration to the availability of suitable metals and to their relative Section 58. Definition. - For purposes of this Act, the term
prices and cost of minting. "demand deposits" means all those liabilities of the Bangko Sentral and of
Section 54. Printing of Notes and Mining of Coins. - The Monetary other banks which are denominated in Philippine currency and are subject
Board shall prescribe the amounts of notes and coins to be printed and to payment in legal tender upon demand by the presentation of checks.
minted, respectively, and the conditions to which the printing of notes and Section 59. Issue of Demand Deposits. - Only banks duly
the minting of coins shall be subject. The Monetary Board shall have the authorized to do so may accept funds or create liabilities payable in pesos
authority to contract institutions, mints or firms for such operations. upon demand by the presentation of checks, and such operations shall be
All expenses incurred in the printing of notes and the minting of subject to the control of the Monetary Board in accordance with the
coins shall be for the account of the Bangko Sentral. powers granted it with respect thereto under this Act.
Section 55. Interconvertibility of Currency. - The Bangko Sentral Section 60. Legal Character. - Checks representing demand
shall exchange, on demand and without charge, Philippine currency of any deposits do not have legal tender power and their acceptance in the
denomination for Philippine notes and coins of any other denomination payment of debts, both public and private, is at the option of the creditor:
requested. If for any reason the Bangko Sentral is temporarily unable to Provided, however, That a check which has been cleared and credited to
provide notes or coins of the denominations requested, it shall meet its the account of the creditor shall be equivalent to a delivery to the creditor
obligations by delivering notes and coins of the denominations which most of cash in an amount equal to the amount credited to his account.
nearly approximate those requested. CHAPTER III GUIDING PRINCIPLES OF MONETARY
Section 56. Replacement of Currency Unfit for Circulation. - The ADMINISTRATION BY THE BANGKO SENTRAL
Bangko Sentral shall withdraw from circulation and shall demonetize all ARTICLE IDOMESTIC MONETARY STABILIZATION
notes and coins which for any reason whatsoever are unfit for circulation Section 61. Guiding Principle. - The Monetary Board shall
and shall replace them by adequate notes and coins: Provided, however, endeavor to control any expansion or contraction in monetary aggregates
That the Bangko Sentral shall not replace notes and coins the which is prejudicial to the attainment or maintenance of price stability.
identification of which is impossible, coins which show signs of filing, Section 62. Power to Define Terms. - For purposes of this article
clipping or perforation, and notes which have lost more than two-fifths and of this Act, the Monetary Board shall formulate definitions of monetary
(2/5) of their surface or all of the signatures inscribed thereon. Notes and aggregates, credit and prices and shall make public such definitions and
coins in such mutilated conditions shall be withdrawn from circulation and any changes thereof.
demonetized without compensation to the bearer. Section 63. Action When Abnormal Movements Occur in the
Section 57. Retirement of Old Notes and Coins. - The Bangko Monetary Aggregates, Credit, or Price Level. - Whenever abnormal
Sentral may call in for replacement notes of any series or denomination movements in the monetary aggregates, in credit, or in prices endanger
which are more than five (5) years old and coins which are more than (10) the stability of the Philippine economy or important sectors thereof, the
years old. Monetary Board shall:
Notes and coins called in for replacement in accordance with this (a) take such remedial measures as are appropriate and within the powers
provision shall remain legal tender for a period of one (1) year from the granted to the Monetary Board and the Bangko Sentral under the
date of call. After this period, they shall cease to be legal tender but provisions of this Act; and
(b) submit to the President of the Philippines and the Congress, and make exchange assets and liabilities of other banks operating in the Philippines
public, a detailed report which shall include, as a minimum, a description and, insofar as they are known or can be estimated, the volume and
and analysis of: maturity of the foreign exchange assets and liabilities of all other persons
(1) the causes of the rise or fall of the monetary aggregates, of credit or of and entities in the Philippines.
prices; Section 66. Composition of the International Reserves. - The
(2) the extent to which the changes in the monetary aggregates, in credit, international reserves of the Bangko Sentral may include but shall not be
or in prices have been reflected in changes in the level of domestic output, limited to the following assets:
employment, wages and economic activity in general, and the nature and (a) gold; and
significance of any such changes; and (b) assets in foreign currencies in the form of: documents and instruments
(3) the measures which the Monetary Board has taken and the other customarily employed for the international transfer of funds; demand and
monetary, fiscal or administrative measures which it recommends to be time deposits in central banks, treasuries and commercial banks abroad;
adopted. foreign government securities; and foreign notes and coins.
Whenever the monetary aggregates, or the level of credit, The Monetary Board shall endeavor to hold the foreign exchange
increases or decreases by more than fifteen percent (15%), or the cost of resources of the Bangko Sentral in freely convertible currencies; moreover,
living index increases by more than ten percent (10%), in relation to the the Board shall give particular consideration to the prospects of continued
level existing at the end of the corresponding month of the preceding strength and convertibility of the currencies in which the reserve is
year, or even though any of these quantitative guidelines have not been maintained, as well as to the anticipated demands for such currencies.
reached when in its judgment the circumstances so warrant, the Monetary The Monetary Board shall issue regulations determining the other
Board shall submit the reports mentioned in this section, and shall state qualifications which foreign exchange assets must meet in order to be
therein whether, in the opinion of the Board, said changes in the monetary included in the international reserves of the Bangko Sentral.
aggregates, credit or cost of living represent a threat to the stability of the The Bangko Sentral shall be free to convert any of the assets in its
Philippine economy or of important sectors thereof. international reserves into other assets as described in subsections (a)
The Monetary Board shall continue to submit periodic reports to and (b) of this section.
the President of the Philippines and to Congress until it considers that the Section 67. Action When the International Stability of the Peso Is
monetary, credit or price disturbances have disappeared or have been Threatened. - Whenever the international reserve of the Bangko Sentral
adequately controlled. falls to a level which the Monetary Board considers inadequate to meet
ARTICLE IIINTERNATIONAL MONETARY STABILIZATION prospective net demands on the Bangko Sentral for foreign currencies, or
Section 64. International Monetary Stabilization. - The Bangko whenever the international reserve appears to be in imminent danger of
Sentral shall exercise its powers under this Act to preserve the falling to such a level, or whenever the international reserve is falling as a
international value of the peso and to maintain its convertibility into other result of payments or remittances abroad which, in the opinion of the
freely convertible currencies primarily for, although not necessarily limited Monetary Board, are contrary to the national welfare, the Monetary Board
to, current payments for foreign trade and invisibles. shall:
Section 65. International Reserves. - In order to maintain the (a) take such remedial measures as are appropriate and within the powers
international stability and convertibility of the Philippine peso, the Bangko granted to the Monetary Board and the Bangko Sentral under the
Sentral shall maintain international reserves adequate to meet any provisions of this Act; and
foreseeable net demands on the Bangko Sentral for foreign currencies. (b) submit to the President of the Philippines and to Congress a detailed
In judging the adequacy of the international reserves, the report which shall include, as a minimum, a description and analysis of:
Monetary Board shall be guided by the prospective receipts and payments (1) the nature and causes of the existing or imminent decline;
of foreign exchange by the Philippines. The Board shall give special (2) the remedial measures already taken or to be taken by the Monetary
attention to the volume and maturity of the Bangko Sentral's own Board;
liabilities in foreign currencies, to the volume and maturity of the foreign (3) the monetary, fiscal or administrative measures further proposed; and
(4) the character and extent of the cooperation required from other In order to maintain the convertibility of the peso, the Bangko
government agencies for the successful execution of the policies of the Sentral may, at the request of any banking institution operating in the
Monetary Board. Philippines, buy any quantity of foreign exchange offered, and sell any
If the resultant actions fail to check the deterioration of the reserve quantity of foreign exchange demanded, by such institution, provided that
position of the Bangko Sentral, or if the deterioration cannot be checked the foreign currencies so offered or demanded are freely convertible into
except by chronic restrictions on exchange and trade transactions or by gold or United States dollars. This requirement shall not apply to demands
sacrifice of the domestic objectives of a balanced and sustainable growth for foreign notes and coins.
of the economy, the Monetary Board shall propose to the President, with The Bangko Sentral shall effect its exchange transactions between
appropriate notice of the Congress, such additional action as it deems foreign currencies and the Philippine peso at the rates determined in
necessary to restore equilibrium in the international balance of payments accordance with the provisions of Section 74 of this Act.
of the Philippines. Section 71. Foreign Asset Position of the Bangko Sentral. - The
The Monetary Board shall submit periodic reports to the President Bangko Sentral shall endeavor to maintain at all times a net positive
and to Congress until the threat to the international monetary stability of foreign asset position so that its gross foreign exchange assets will always
the Philippines has disappeared. exceed its gross foreign liabilities. In the event that the equivalent amount
CHAPTER IV INSTRUMENTS OF BANGKO SENTRAL ACTION in pesos of the foreign exchange liabilities of the Bangko Sentral exceed
ARTICLE IGENERAL CRITERION twice the equivalent amount in pesos of the foreign exchange assets of
Section 68. Means of Action. - In order to achieve the primary the bank, the Bangko Sentral shall, within sixty (60) days from the date
objective of price stability, the Monetary Board shall rely on its moral the limit is exceeded, submit a report to the Congress stating the origin of
influence and the powers granted to it under this Act for the management these liabilities, and the manner in which they will be paid.
of monetary aggregates. Section 72. Emergency Restrictions on Exchange Operations. - In
ARTICLE IIOPERATIONS IN GOLD AND FOREIGN EXCHANGE order to achieve the primary objective of the Bangko Sentral as set forth
Section 69. Purchases and Sales of Gold. - The Bangko Sentral in Section 3 of this Act, or protect the international reserves of the Bangko
may buy and sell gold in any form, subject to such regulations as the Sentral in the imminence of, or during an exchange crisis, or in time of
Monetary Board may issue. national emergency and to give the Monetary Board and the Government
The purchases and sales of gold authorized by this section shall be time in which to take constructive measures to forestall, combat, or
made in the national currency at the prevailing international market price overcome such a crisis or emergency, the Monetary Board, with the
as determined by the Monetary Board. concurrence of at least five (5) of its members and with the approval of
Section 70. Purchases and Sales of Foreign Exchange. - The the President of the Philippines, may temporarily suspend or restrict sales
Bangko Sentral may buy and sell foreign notes and coins, and documents of exchange by the Bangko Sentral, and may subject all transactions in
and instruments of types customarily employed for the international gold and foreign exchange to license by the Bangko Sentral, and may
transfer of funds. The Bangko Sentral may engage in future exchange require that any foreign exchange thereafter obtained by any person
operations. residing or entity operating in the Philippines be delivered to the Bangko
The Bangko Sentral may engage in foreign exchange transactions Sentral or to any bank or agent designated by the Bangko Sentral for the
with the following entities or persons only: purpose, at the effective exchange rate or rates: Provided, however, That
(a) banking institutions operating in the Philippines; foreign currency deposits made under Republic Act No. 6426 shall be
(b) the Government, its political subdivisions and instrumentalities; exempt from these requirements.
(c) foreign or international financial institutions; Section 73. Acquisition of Inconvertible Currencies. - The Bangko
(d) foreign governments and their instrumentalities; and Sentral shall avoid the acquisition and holding of currencies which are not
(e) other entities or persons which the Monetary Board is hereby freely convertible, and may acquire such currencies in an amount
empowered to authorize as foreign exchange dealers, subject to such exceeding the minimum balance necessary to cover current demands for
rules and regulations as the Monetary Board shall prescribe. said currencies only when, and to the extent that, such acquisition is
considered by the Monetary Board to be in the national interest. The The Monetary Board may, whenever warranted, determine the net
Monetary Board shall determine the procedures which shall apply to the assets and net liabilities of banks and shall, in making such a
acquisition and disposition by the Bangko Sentral of foreign exchange determination, take into account the bank's networth, outstanding
which is not freely utilizable in the international market. liabilities, actual and contingent, or such other financial or performance
Section 74. Exchange Rates. - The Monetary Board shall ratios as may be appropriate under the circumstances. Any such
determine the exchange rate policy of the country. determination of net assets and net liabilities shall be applied in all banks
The Monetary Board shall determine the rates at which the Bangko uniformly and without discrimination.
Sentral shall buy and sell spot exchange, and shall establish deviation Section 77. Requirement of Balanced Currency Position. - The
limits from the effective exchange rate or rates as it may deem proper. Monetary Board may require the banks to maintain a balanced position
The Bangko Sentral shall not collect any additional commissions or between their assets and liabilities in Philippine pesos or in any other
charges of any sort, other than actual telegraphic or cable costs incurred currency or currencies in which they operate. The banks shall be granted a
by it. reasonable period of time in which to adjust their currency positions to any
The Monetary Board shall similarly determine the rates for other such requirement.
types of foreign exchange transactions by the Bangko Sentral, including The powers granted under this section shall be exercised only
purchases and sales of foreign notes and coins, but the margins between when special circumstances make such action necessary, in the opinion of
the effective exchange rates and the rates thus established may not the Monetary Board, and shall be applied to all banks alike and without
exceed the corresponding margins for spot exchange transactions by more discrimination.
than the additional costs or expenses involved in each type of Section 78. Regulation of Non-spot Exchange Transactions. - In
transactions. order to restrain the banks from taking speculative positions with respect
Section 75. Operations with Foreign Entities. - The Monetary to future fluctuations in foreign exchange rates, the Monetary Board may
Board may authorize the Bangko Sentral to grant loans to and receive issue such regulations governing bank purchases and sales of non-spot
loans from foreign banks and other foreign or international entities, both exchange as it may consider necessary for said purpose.
public and private, and may engage in such other operations with these Section 79. Other Exchange Profits and Losses. - The banks shall
entities as are in the national interest and are appropriate to its character bear the risks of non-compliance with the terms of the foreign exchange
as a central bank. The Bangko Sentral may also act as agent or documents and instruments which they buy and sell, and shall also bear
correspondent for such entities. any other typically commercial or banking risks, including exchange risks
Upon authority of the Monetary Board, the Bangko Sentral may not assumed by the Bangko Sentral under the provisions of the preceding
pledge any gold or other assets which it possesses as security against section.
loans which it receives from foreign or international entities. Section 80. Information on Exchange Operations. - The banks
ARTICLE IIIREGULATION OF FOREIGN EXCHANGE OPERATIONS OF shall report to the Bangko Sentral the volume and composition of their
THE BANKS purchases and sales of gold and foreign exchange each day, and must
Section 76. Foreign Exchange Holdings of the Banks. - In order furnish such additional information as the Bangko Sentral may request
that the Bangko Sentral may at all times have foreign exchange resources with reference to the movements in their accounts in foreign currencies.
sufficient to enable it to maintain the international stability and The Monetary Board may also require other persons and entities to
convertibility of the peso, or in order to promote the domestic investment report to it currently all transactions or operations in gold, in any shape or
of bank resources, the Monetary Board may require the banks to sell to form, and in foreign exchange whether entered into or undertaken by
the Bangko Sentral or to other banks all or part of their surplus holdings of them directly or through agents, or to submit such data as may be
foreign exchange. Such transfers may be required for all foreign currencies required on operations or activities giving rise to or in connection with or
or for only certain of such currencies, according to the decision of the relating to a gold or foreign exchange transaction. The Monetary Board
Monetary Board. The transfers shall be made at the rates established shall prescribe the forms on which such declarations must be made. The
under the provisions of Section 74 of this Act. accuracy of the declarations may be verified by the Bangko Sentral by
whatever inspection it may deem necessary. shall provide funds from non-inflationary sources: Provided, however, That
ARTICLE IVLOANS TO BANKING AND OTHER FINANCIAL the Monetary Board shall prescribe additional safeguards for disbursing
INSTITUTIONS these funds.
A. CREDIT POLICY (d) Advances. - The Bangko Sentral may grant advances against the
Section 81. Guiding Principles. - The rediscounts, discounts, loans following kinds of collaterals for fixed periods which, with the exception of
and advances which the Bangko Sentral is authorized to extend to banking advances against collateral named in clause (4) of the present subsection,
institutions under the provisions of the present article of this Act shall be shall not exceed one hundred eighty (180) days:
used to influence the volume of credit consistent with the objective of (1) gold coins or bullion;
price stability. (2) securities representing obligations of the Bangko Sentral or of other
B. NORMAL CREDIT OPERATIONS domestic institutions of recognized solvency;
Section 82. Authorized Types of Operations. - Subject to the (3) the credit instruments to which reference is made in subsection (a) of
principle stated in the preceding section of this Act, the Bangko Sentral this section;
may normally and regularly carry on the following credit operations with (4) the credit instruments to which reference is made in subsection (b) of
banking institutions operating in the Philippines: this section, for periods which shall not exceed three hundred sixty (360)
(a) Commercial credits. - The Bangko Sentral may rediscount, discount, days;
buy and sell bills, acceptances, promissory notes and other credit (5) utilized portions of advances in current amount covered by regular
instruments with maturities of not more than one hundred eighty (180) overdraft agreements related to operations included under subsections (a)
days from the date of their rediscount, discount or acquisition by the and (b) of this section, and certified as to amount and liquidity by the
Bangko Sentral and resulting from transactions related to: institution soliciting the advance;
(1) the importation, exportation, purchase or sale of readily saleable goods (6) negotiable treasury bills, certificates of indebtedness, notes and other
and products, or their transportation within the Philippines; or negotiable obligations of the Government maturing within three (3) years
(2) the storing of non-perishable goods and products which are duly from the date of the advance; and
insured and deposited, under conditions assuring their preservation, in (7) negotiable bonds issued by the Government of the Philippines, by
authorized bonded warehouses or in other places approved by the Philippine provincial, city or municipal governments, or by any Philippine
Monetary Board. Government instrumentality, and having maturities of not more than ten
(b) Production credits. - The Bangko Sentral may rediscount, discount, buy (10) years from the date of advance.
and sell bills, acceptances, promissory notes and other credit instruments The rediscounts, discounts, loans and advances made in accordance with
having maturities of not more than three hundred sixty (360) days from the provisions of this section may not be renewed or extended unless
the date of their rediscount, discount or acquisition by the Bangko Sentral extraordinary circumstances fully justify such renewal or extension.
and resulting from transactions related to the production or processing of Advances made against the collateral named in clauses (6) and (7)
agricultural, animal, mineral, or industrial products. Documents or of subsection (d) of this section may not exceed eighty percent (80%) of
instruments acquired in accordance with this subsection shall be secured the current market value of the collateral.
by a pledge of the respective crops or products: Provided, however, That C. SPECIAL CREDIT OPERATION
the crops or products need not be pledged to secure the documents if the Section 83. Loans for Liquidity Purposes. - The Bangko Sentral
original loan granted by the Bangko Sentral is secured by a lien or may extend loans and advances to banking institutions for a period of not
mortgage on real estate property seventy percent (70%) of the appraised more than seven (7) days without any collateral for the purpose of
value of which equals or exceeds the amount of the loan granted. providing liquidity to the banking system in times of need.
(c) Other credits. - Special credit instruments not otherwise rediscountable D. EMERGENCY CREDIT OPERATION
under the immediately preceding subsections (a) and (b) may be eligible Section 84. Emergency Loans and Advances. - In periods of
for rediscounting in accordance with rules and regulations which the national and/or local emergency or of imminent financial panic which
Bangko Sentral shall prescribe. Whenever necessary, the Bangko Sentral directly threaten monetary and banking stability, the Monetary Board
may, by a vote of at least five (5) of its members, authorize the Bangko the principal stockholders of the institution:
Sentral to grant extraordinary loans or advances to banking institutions (a) furnish an acceptable undertaking to indemnify and hold harmless
secured by assets as defined hereunder: Provided, That while such loans from suit a conservator whose appointment the Monetary Board may find
or advances are outstanding, the debtor institution shall not, except upon necessary at any time; and
prior authorization by the Monetary Board, expand the total volume of its (b) provide acceptable security which, in the judgment of the Monetary
loans or investments. Board, would be adequate to supplement, where necessary, the assets
The Monetary Board may, at its discretion, likewise authorize the tendered by the banking institution to collateralize the subsequent
Bangko Sentral to grant emergency loans or advances to banking tranche.
institutions, even during normal periods, for the purpose of assisting a In connection with the exercise of these powers, the prohibitions in
bank in a precarious financial condition or under serious financial Section 128 of this Act shall not apply insofar as it refers to acceptance as
pressures brought by unforeseen events, or events which, though collateral of shares and their acquisition as a result of foreclosure
foreseeable, could not be prevented by the bank concerned: Provided, proceedings, including the exercise of voting rights pertaining to said
however, That the Monetary Board has ascertained that the bank is not shares: Provided, however, That should the Bangko Sentral acquire any of
insolvent and has the assets defined hereunder to secure the advances: the shares it has accepted as collateral as a result of foreclosure
Provided, further, That a concurrent vote of at least five (5) members of proceedings, the Bangko Sentral shall dispose of said shares by public
the Monetary Board is obtained. bidding within one (1) year from the date of consolidation of title by the
The amount of any emergency loan or advance shall not exceed Bangko Sentral.
the sum of fifty percent (50%) of total deposits and deposit substitutes of Whenever a financial institution incurs an overdraft in its account
the banking institution and shall be disbursed in two (2) or more tranches. with the Bangko Sentral, the same shall be eliminated within the period
The amount of the first tranche shall be limited to twenty-five percent prescribed in Section 102 of this Act.
(25%) of the total deposit and deposit substitutes of the institution and E. CREDIT TERMS
shall be secured by government securities to the extent of their applicable Section 85. Interest and Rediscount. - The Bangko Sentral shall
loan values and other unencumbered first class collaterals which the collect interest and other appropriate charges on all loans and advances it
Monetary Board may approve: Provided, That if as determined by the extends, the closure, receivership or liquidations of the debtor-institution
Monetary Board, the circumstances surrounding the emergency warrant a notwithstanding. This provision shall apply prospectively.
loan or advance greater than the amount provided hereinabove, the The Monetary Board shall fix the interest and rediscount rates to
amount of the first tranche may exceed twenty-five percent (25%) of the be charged by the Bangko Sentral on its credit operations in accordance
bank's total deposit and deposit substitutes if the same is adequately with the character and term of the operation, but after due consideration
secured by applicable loan values of government securities and has been given to the credit needs of the market, the composition of the
unencumbered first class collaterals approved by the Monetary Board, and Bangko Sentral's portfolio, and the general requirements of the national
the principal stockholders of the institution furnish an acceptable monetary policy. Interest and rediscount rates shall be applied to all banks
undertaking to indemnify and hold harmless from suit a conservator of the same category uniformly and without discrimination.
whose appointment the Monetary Board may find necessary at any time. Section 86. Endorsement. - The documents rediscounted,
Prior to the release of the first tranche, the banking institution shall discounted, bought or accepted as collateral by the Bangko Sentral in the
submit to the Bangko Sentral a resolution of its board of directors course of the credit operations authorized in this article shall bear the
authorizing the Bangko Sentral to evaluate other assets of the banking endorsement of the institution from which they are received.
institution certified by its external auditor to be good and available for Section 87. Repayment of Credits. - Documents rediscounted,
collateral purposes should the release of the subsequent tranche be discounted or accepted as collateral by the Bangko Sentral must be
thereafter applied for. withdrawn by the borrowing institution on the dates of their maturities, or
The Monetary Board may, by a vote of at least five (5) of its upon liquidation of the obligations which they represent or to which they
members, authorize the release of a subsequent tranche on condition that relate whenever said obligations have been liquidated prior to their dates
of maturity. In order to provide the Bangko Sentral with effective instruments for open
Banks shall have the right at any time to withdraw any documents market operations, the Bangko Sentral may, subject to such rules and
which they have presented to the Bangko Sentral as collateral, upon regulations as the Monetary Board may prescribe and in accordance with
payment in full of the corresponding debt to the Bangko Sentral, including the principles stated in Section 90 of this Act, issue, place, buy and sell
interest charges. freely negotiable evidences of indebtedness of the Bangko Sentral:
Section 88. Other requirements. - The Monetary Board may Provided, That issuance of such certificates of indebtedness shall be made
prescribe, within the general powers granted to it under this Act, only in cases of extraordinary movement in price levels. Said evidences of
additional conditions which borrowing institutions must satisfy in order to indebtedness may be issued directly against the international reserve of
have access to the credit of the Bangko Sentral. These conditions may the Bangko Sentral or against the securities which it has acquired under
refer to the rates of interest charged by the banks, to the purposes for the provisions of Section 91 of this Act, or may be issued without relation
which their loans in general are destined, and to any other clearly to specific types of assets of the Bangko Sentral.
definable aspect of the credit policy of the bank. The Monetary Board shall determine the interest rates, maturities
Section 89. Provisional Advances to the National Government. - and other characteristics of said obligations of the Bangko Sentral, and
The Bangko Sentral may make direct provisional advances with or without may, if it deems it advisable, denominate the obligations in gold or foreign
interest to the National Government to finance expenditures authorized in currencies.
its annual appropriation: Provided, That said advances shall be repaid Subject to the principles stated in Section 90 of this Act, the
before the end of three (3) months extendible by another three (3) months evidences of indebtedness of the Bangko Sentral to which this section
as the Monetary Board may allow following the date the National refers may be acquired by the Bangko Sentral before their maturity, either
Government received such provisional advances and shall not, in their through purchases in the open market or through redemptions at par and
aggregate, exceed twenty percent (20%) of the average annual income of by lot if the Bangko Sentral has reserved the right to make such
the borrower for the last three (3) preceding fiscal years. redemptions. The evidences of indebtedness acquired or redeemed by the
ARTICLE VOPEN MARKET OPERATIONS FOR THE ACCOUNT OF THE Bangko Sentral shall not be included among its assets, and shall be
BANGKO SENTRAL immediately retired and cancelled.
Section 90. Principles of Open Market Operations. - The open ARTICLE VICOMPOSITION OF BANGKO SENTRAL'S PORTFOLIO
market purchases and sales of securities by the Bangko Sentral shall be Section 93. Review of the Bangko Sentral's Portfolio. - At least
made exclusively in accordance with its primary objective of achieving once every month the Monetary Board shall review the portfolio of the
price stability. Bangko Sentral in relation to its future credit policy.
Section 91. Purchases and Sales of Government Securities. - In In reviewing the Bangko Sentral's portfolio, the Monetary Board
order to achieve the objectives of the national monetary policy, the shall especially consider whether a sufficiently large part of the portfolio
Bangko Sentral may, in accordance with the principle stated in Section 90 consists of assets with early maturities, in order that a contraction in
of this Act and with such rules and regulations as may be prescribed by Bangko Sentral credit may be effected promptly whenever the national
the Monetary Board, buy and sell in the open market for its own account: monetary policy so requires.
(a) evidences of indebtedness issued directly by the Government of the ARTICLE VIIBANK RESERVES
Philippines or by its political subdivisions; and Section 94. Reserve Requirements. - In order to control the
(b) evidences of indebtedness issued by government instrumentalities and volume of money created by the credit operations of the banking system,
fully guaranteed by the Government. all banks operating in the Philippines shall be required to maintain
The evidences of indebtedness acquired under the provisions of reserves against their deposit liabilities: Provided, That the Monetary
this section must be freely negotiable and regularly serviced and must be Board may, at its discretion, also require all banks and/or quasi-banks to
available to the general public through banking institutions and local maintain reserves against funds held in trust and liabilities for deposit
government treasuries in denominations of a thousand pesos or more. substitutes as defined in this Act. The required reserves of each bank shall
Section 92. Issue and Negotiation of Bangko Sentral Obligations. - be proportional to the volume of its deposit liabilities and shall ordinarily
take the form of a deposit in the Bangko Sentral. Reserve requirements requirements for unused balances of overdraft lines.
shall be applied to all banks of the same category uniformly and without The powers of the Monetary Board to prescribe and modify reserve
discrimination. requirements against unused balances of overdraft lines shall be the same
Reserves against deposit substitutes, if imposed, shall be as its powers with respect to reserve requirements against demand
determined in the same manner as provided for reserve requirements deposits.
against regular bank deposits, with respect to the imposition, increase, Section 99. Increase in Reserve Requirements. - Whenever in the
and computation of reserves. opinion of the Monetary Board it becomes necessary to increase reserve
The Monetary Board may exempt from reserve requirements requirements against existing liabilities, the increase shall be made in a
deposits and deposit substitutes with remaining maturities of two (2) gradual manner and shall not exceed four percentage points in any thirty-
years or more, as well as interbank borrowings. day period. Banks and other affected financial institutions shall be notified
Since the requirement to maintain bank reserves is imposed reasonably in advance of the date on which such increase is to become
primarily to control the volume of money, the Bangko Sentral shall not pay effective.
interest on the reserves maintained with it unless the Monetary Board Section 100. Computation on Reserves. - The reserve position of
decides otherwise as warranted by circumstances. each bank or quasi-bank shall be calculated daily on the basis of the
Section 95. Definition of Deposit Substitutes. - The term "deposit amount, at the close of business for the day, of the institution's reserves
substitutes" is defined as an alternative form of obtaining funds from the and the amount of its liability accounts against which reserves are
public, other than deposits, through the issuance, endorsement, or required to be maintained: Provided, That with reference to holidays or
acceptance of debt instruments for the borrower's own account, for the non-banking days, the reserve position as calculated at the close of the
purpose of relending or purchasing of receivables and other obligations. business day immediately preceding such holidays and non-banking days
These instruments may include, but need not be limited to, bankers shall apply on such days.
acceptances, promissory notes, participations, certificates of assignment For the purpose of computing the reserve position of each bank or
and similar instruments with recourse, and repurchase agreements. The quasi-bank, its principal office in the Philippines and all its branches and
Monetary Board shall determine what specific instruments shall be agencies located therein shall be considered as a single unit.
considered as deposit substitutes for the purposes of Section 94 of this Section 101. Reserve Deficiencies. - Whenever the reserve
Act: Provided, however, That deposit substitutes of commercial, industrial position of any bank or quasi-bank, computed in the manner specified in
and other non-financial companies for the limited purpose of financing the preceding section of this Act, is below the required minimum, the bank
their own needs or the needs of their agents or dealers shall not be or quasi-bank shall pay the Bangko Sentral one-tenth of one percent (1/10
covered by the provisions of Section 94 of this Act. of 1%) per day on the amount of the deficiency or the prevailing ninety-
Section 96. Required Reserves Against Peso Deposits. - The one-day treasury bill rate plus three percentage points, whichever is
Monetary Board may fix and, when it deems necessary, alter the minimum higher: Provided, however, That banks and quasi-banks shall ordinarily be
reserve ratios to peso deposits, as well as to deposit substitutes, which permitted to offset any reserve deficiency occurring on one or more days
each bank and/or quasi-bank may maintain, and such ratio shall be of the week with any excess reserves which they may hold on other days
applied uniformly to all banks of the same category as well as to quasi- of the same week and shall be required to pay the penalty only on the
banks. average daily deficiency during the week. In cases of abuse, the Monetary
Section 97. Required Reserves Against Foreign Currency Board may deny any bank or quasi-bank the privilege of offsetting reserve
Deposits. - The Monetary Board is similarly authorized to prescribe and deficiencies in the aforesaid manner.
modify the minimum reserve ratios applicable to deposits denominated in If a bank or quasi-bank chronically has a reserve deficiency, the
foreign currencies. Monetary Board may limit or prohibit the making of new loans or
Section 98. Reserves Against Unused Balances of Overdraft investments by the institution and may require that part or all of the net
Lines. - In order to facilitate Bangko Sentral control over the volume of profits of the institution be assigned to surplus.
bank credit, the Monetary Board may establish minimum reserve The Monetary Board may modify or set aside the reserve
deficiency penalties provided in this section, for part or the entire period availability and cost of money are in accord with the needs of the
of a strike or lockout affecting a bank or a quasi-bank as defined in the Philippine economy and that bank credit is not granted for speculative
Labor Code, or of a national emergency affecting operations of banks or purposes prejudicial to the national interests. Regulations on bank
quasi-banks. The Monetary Board may also modify or set aside reserved operations shall be applied to all banks of the same category uniformly
deficiency penalties for rehabilitation program of a bank. and without discrimination.
Section 102. Interbank Settlement. - The Bangko Sentral shall Section 105. Margin Requirements Against Letters of Credit. - The
establish facilities for interbank clearing under such rules and regulations Monetary Board may at any time prescribe minimum cash margins for the
as the Monetary Board may prescribe: Provided, That the Bangko Sentral opening of letters of credit, and may relate the size of the required margin
may charge administrative and other fees for the maintenance of such to the nature of the transaction to be financed.
facilities. Section 106. Required Security Against Bank Loans. - In order to
The deposit reserves maintained by the banks in the Bangko promote liquidity and solvency of the banking system, the Monetary Board
Sentral in accordance with the provisions of Section 94 of this Act shall may issue such regulations as it may deem necessary with respect to the
serve as basis for the clearing of checks and the settlement of interbank maximum permissible maturities of the loans and investments which the
balances, subject to such rules and regulations as the Monetary Board banks may make, and the kind and amount of security to be required
may issue with respect to such operations: Provided, That any bank which against the various types of credit operations of the banks.
incurs on overdrawing in its deposit account with the Bangko Sentral shall Section 107. Portfolio Ceilings. - Whenever the Monetary Board
fully cover said overdraft, including interest thereon at a rate equivalent to considers it advisable to prevent or check an expansion of bank credit, the
one-tenth of one percent (1/10 of 1%) per day or the prevailing ninety- Board may place an upper limit on the amount of loans and investments
one-day treasury bill rate plus three percentage points, whichever is which the banks may hold, or may place a limit on the rate of increase of
higher, not later than the next clearing day: Provided, further, That such assets within specified periods of time. The Monetary Board may
settlement of clearing balances shall not be effected for any account apply such limits to the loans and investments of each bank or to specific
which continues to be overdrawn for five (5) consecutive banking days categories thereof.
until such time as the overdrawing is fully covered or otherwise converted In no case shall the Monetary Board establish limits which are
into an emergency loan or advance pursuant to the provisions of Section below the value of the loans or investments of the banks on the date on
84 of this Act: Provided, finally, That the appropriate clearing office shall which they are notified of such restrictions. The restrictions shall be
be officially notified of banks with overdrawn balances. Banks with existing applied to all banks uniformly and without discrimination.
overdrafts with the Bangko Sentral as of the effectivity of this Act shall, Section 108. Minimum Capital Ratios. - The Monetary Board may
within such period as may be prescribed by the Monetary Board, either prescribe minimum ratios which the capital and surplus of the banks must
convert the overdraft into an emergency loan or advance with a plan of bear to the volume of their assets, or to specific categories thereof, and
payment, or settle such overdrafts, and that, upon failure to so comply may alter said ratios whenever it deems necessary.
herewith, the Bangko Sentral shall take such action against the bank as ARTICLE IXCOORDINATION OF CREDIT POLICIES BY GOVERNMENT
may be warranted under this Act. INSTITUTIONS
Section 103. Exemption from Attachment and Other Purposes. - Section 109. Coordination of Credit Policies. - Government-owned
Deposits maintained by banks with the Bangko Sentral as part of their corporations which perform banking or credit functions shall coordinate
reserve requirements shall be exempt from attachment, garnishments, or their general credit policies with those of the Monetary Board.
any other order or process of any court, government agency or any other Toward this end, the Monetary Board may, whenever it deems it
administrative body issued to satisfy the claim of a party other than the expedient, make suggestions or recommendations to such corporations for
Government, or its political subdivisions or instrumentalities. the more effective coordination of their policies with those of the Bangko
ARTICLE VIIISELECTIVE REGULATION OF BANK OPERATIONS Sentral.
Section 104. Guiding Principle. - The Monetary Board shall use CHAPTER V FUNCTIONS AS BANKER AND FINANCIAL ADVISOR
the powers granted to it under this Act to ensure that the supply, OF THE GOVERNMENT
ARTICLE I which the Bangko Sentral does not have offices or agencies adequately
FUNCTIONS AS BANKER OF THE GOVERNMENT equipped to perform said operations: Provided, however, That for fiscal
Section 110. Designation of Bangko Sentral as Banker of the operations in foreign countries, the Bangko Sentral may engage the
Government. - The Bangko Sentral shall act as a banker of the services of foreign banking and financial institutions.
Government, its political subdivisions and instrumentalities. Section 116. Remuneration for Services. - The Bangko Sentral
Section 111. Representation with the International Monetary may charge equitable rates, commissions or fees for services which it
Fund. - The Bangko Sentral shall represent the Government in all dealings, renders to the Government, its political subdivisions and instrumentalities.
negotiations and transactions with the International Monetary Fund and ARTICLE IITHE MARKETING AND STABILIZATION OF SECURITIES
shall carry such accounts as may result from Philippine membership in, or FOR THE ACCOUNT OF THE GOVERNMENT
operations with, said Fund. A. THE ISSUE AND PLACING OF GOVERNMENT SECURITIES
Section 112. Representation with Other Financial Institutions. - Section 117. Issue of Government Obligations. - The issue of
The Bangko Sentral may be authorized by the Government to represent it securities representing obligations of the Government, its political
in dealings, negotiations or transactions with the International Bank for subdivisions or instrumentalities, may be made through the Bangko
Reconstruction and Development and with other foreign or international Sentral, which may act as agent of, and for the account of, the
financial institutions or agencies. The President may, however, designate Government or its respective subdivisions or instrumentality, as the case
any of his other financial advisors to jointly represent the Government in may be: Provided, however, That the Bangko Sentral shall not guarantee
such dealings, negotiations or transactions. the placement of said securities, and shall not subscribe to their issue
Section 113. Official Deposits. - The Bangko Sentral shall be the except to replace its maturing holdings of securities with the same type as
official depository of the Government, its political subdivisions and the maturing securities.
instrumentalities as well as of government-owned or controlled Section 118. Methods of Placing Government Securities. - The
corporations and, as a general policy, their cash balances should be Bangko Sentral may place the securities to which the preceding section
deposited with the Bangko Sentral, with only minimum working balances refers through direct sale to financial institutions and the public.
to be held by government-owned banks and such other banks The Bangko Sentral shall not be a member of any stock exchange
incorporated in the Philippines as the Monetary Board may designate, or syndicate, but may intervene therein for the sole purpose of regulating
subject to such rules and regulations as the Board may prescribe: their operations in the placing of government securities.
Provided, That such banks may hold deposits of the political subdivisions The Government, or its political subdivisions or instrumentalities,
and instrumentalities of the Government beyond their minimum working shall reimburse the Bangko Sentral for the expenses incurred in the
balances whenever such subdivisions or instrumentalities have placing of the aforesaid securities.
outstanding loans with said banks. Section 119. Servicing and Redemption of the Public Debt. - The
The Bangko Sentral may pay interest on deposits of the servicing and redemption of the public debt shall also be effected through
Government or of its political subdivisions and instrumentalities, as well as the Bangko Sentral.
on deposits of banks with the Bangko Sentral. B. BANGKO SENTRAL SUPPORT OF THE GOVERNMENT
Section 114. Fiscal Operations. - The Bangko Sentral shall open a SECURITIES MARKET
general cash account for the Treasurer of the Philippines, in which the Section 120. The Securities Stabilization Fund. - There shall be
liquid funds of the Government shall be deposited. established a "Securities Stabilization Fund" which shall be administered
Transfers of funds from this account to other accounts shall be by the Bangko Sentral for the account of the Government.
made only upon order of the Treasurer of the Philippines. The operations of the Securities Stabilization Fund shall consist of
Section 115. Other Banks as Agents of the Bangko Sentral. - In purchases and sales, in the open market, of bonds and other evidences of
the performance of its functions as fiscal agent, the Bangko Sentral may indebtedness issued or fully guaranteed by the Government. The purpose
engage the services of other government-owned and controlled banks and of these operations shall be to increase the liquidity and stabilize the
of other domestic banks for operations in localities at home or abroad in value of said securities in order thereby to promote investment in
government obligations. officio member of the National Economic and Development Authority
The Monetary Board shall use the resources of the Fund to prevent, Board.
or moderate, sharp fluctuations in the quotations of said government CHAPTER VI PRIVILEGES AND PROHIBITIONS
obligations, but shall not endeavor to alter movements of the market ARTICLE IPRIVILEGES
resulting from basic changes in the pattern or level of interest rates. Section 125. Tax Exemptions. - The Bangko Sentral shall be
The Monetary Board shall issue such regulations as may be exempt for a period of five (5) years from the approval of this Act from all
necessary to implement the provisions of this section. national, provincial, municipal and city taxes, fees, charges and
Section 121. Resources of the Securities Stabilization Fund. - assessments.
Subject to Section 132 of this Act, the resources of the Securities The exemption authorized in the preceding paragraph of this
Stabilization Fund shall come from the balance of the fund as held by the section shall apply to all property of the Bangko Sentral, to the resources,
Central Bank under Republic Act No. 265 as of the effective date of this receipts, expenditures, profits and income of the Bangko Sentral, as well
Act. as to all contracts, deeds, documents and transactions related to the
Section 122. Profits and Losses of the Fund. - The Securities conduct of the business of the Bangko Sentral: Provided, however, That
Stabilization Fund shall retain net profits which it may make on its said exemptions shall apply only to such taxes, fees, charges and
operations, regardless of whether said profits arise from capital gains or assessments for which the Bangko Sentral itself would otherwise be liable,
from interest earnings. The Fund shall correspondingly bear any net losses and shall not apply to taxes, fees, charges, or assessments payable by
which it may incur. persons or other entities doing business with the Bangko Sentral:
ARTICLE IIIFUNCTIONS AS FINANCIAL ADVISOR OF THE Provided, further, That foreign loans and other obligations of the Bangko
GOVERNMENT Sentral shall be exempt, both as to principal and interest, from any and all
Section 123. Financial Advice on Official Credit Operations. - taxes if the payment of such taxes has been assumed by the Bangko
Before undertaking any credit operation abroad, the Government, through Sentral.
the Secretary of Finance, shall request the opinion, in writing, of the Section 126. Exemption from Customs Duties. - The provision of
Monetary Board on the monetary implications of the contemplated action. any general or special law to the contrary notwithstanding, the
Such opinions must similarly be requested by all political subdivisions and importation and exportation by the Bangko Sentral of notes and coins, and
instrumentalities of the Government before any credit operation abroad is of gold and other metals to be used for purposes authorized under this
undertaken by them. Act, and the importation of all equipment needed for bank note
The opinion of the Monetary Board shall be based on the gold and production, minting of coins, metal refining and other security printing
foreign exchange resources and obligations of the nation and on the operations shall be fully exempt from all customs duties and consular fees
effects of the proposed operation on the balance of payments and on and from all other taxes, assessments and charges related to such
monetary aggregates. importation or exportation.
Whenever the Government, or any of its political subdivisions or Section 127. Applicability of the Civil Service Law. - Appointments
instrumentalities, contemplates borrowing within the Philippines, the prior in the Bangko Sentral, except as to those which are policy-determining,
opinion of the Monetary Board shall likewise be requested in order that the primarily confidential or highly technical in nature, shall be made only
Board may render an opinion on the probable effects of the proposed according to the Civil Service Law and regulations: Provided, That no
operation on monetary aggregates, the price level, and the balance of qualification requirements for positions in the Bangko Sentral shall be
payments. imposed other than those set by the Monetary Board: Provided, further,
Section 124. Representation on the National Economic and That, the Monetary Board or Governor, in accordance with Sections 15(c)
Development Authority. - In order to assure effective coordination between and 17(d) of this Act, respectively, may without need of obtaining prior
the economic, financial and fiscal policies of the Government and the approval from any other government agency, appoint personnel in the
monetary, credit and exchange policies of the Bangko Sentral, the Deputy Bangko Sentral whose services are deemed necessary in order not to
Governor designated by the Governor of the Bangko Sentral shall be an ex unduly disrupt the operations of the Bangko Sentral.
 Officers and employees of the Bangko Sentral, including all effectivity of this Act, three (3) members of the Monetary Board, which
members of the Monetary Board, shall not engage directly or indirectly in may include the Governor, in representation of the Bangko Sentral, the
partisan activities or take part in any election except to vote. Secretary of Finance and the Secretary of Budget and Management in
ARTICLE IIPROHIBITIONS representation of the National Government, and the Chairmen of the
Section 128. Prohibitions. - The Bangko Sentral shall not acquire Committees on Banks of the Senate and the House of Representatives
shares of any kind or accept them as collateral, and shall not participate in shall determine the assets and liabilities of the Central Bank which may be
the ownership or management of any enterprise, either directly or transferred to or assumed by the Bangko Sentral. The Committee shall
indirectly. complete its work within ninety (90) days from the constitution of the
The Bangko Sentral shall not engage in development banking or Monetary Board submitting a comprehensive report with all its findings
financing: Provided, however, That outstanding loans obtained or and justification.
extended for development financing shall not be affected by the The following guidelines shall be strictly observed in the
prohibition of this section. determination of which assets and liabilities shall be transferred to the
CHAPTER VII TRANSITORY PROVISIONS Bangko Sentral:
Section 129. Phase-out of Fiscal Agency Functions. - Unless (a) the Monetary Board and the Secretary of Finance shall have primary
circumstances warrant otherwise and approved by the Congress Oversight responsibility for working out creative monetary and financial solutions to
Committee, the Bangko Sentral shall, within a period of three (3) years but retire the Central Bank liabilities and losses at the least cost to the
in no case longer than five (5) years from the approval of this Act, phase Government;
out all fiscal agency functions provided for in Sections 117, 118, 119, and (b) the Bangko Sentral shall remit seventy-five percent (75%) of its net
120 as well as in other pertinent provisions of this Act and transfer the profits to a special deposit account (sinking fund) until such time as the
same to the Department of Finance. net liabilities of the Central Bank shall have been liquidated through
Section 130. Phase-out of Regulatory Powers Over the generally accepted finance mechanisms such as, but not limited to, write-
Operations of Finance Corporations and Other Institutions Performing offs, set-offs, condonation, collections, reappraisal, revaluation and bond
Similar Functions. - The Bangko Sentral shall, within a period of five (5) issuance by the National Government, or to the National Government as
years from the effectivity of this Act, phase out its regulatory powers over dividends;
finance companies without quasi-banking functions and other institutions (c) the assets and liabilities to be transferred shall be limited to an amount
performing similar functions as provided in existing laws, the same to be that will enable the Bangko Sentral to perform its responsibilities
assumed by the Securities and Exchange Commission. adequately and operate on a viable basis: Provided, That the assets shall
Section 131. Implementing Details. - The Bangko Sentral shall be exceed the liabilities as certified by the Commission on Audit (COA), by an
made operational by the performance of the following acts: initial amount of Ten billion pesos (P10,000,000,000);
(a) the President shall constitute the Monetary Board by appointing the (d) liabilities to be assumed by the Bangko Sentral shall include liability for
members thereof within sixty (60) days from the effectivity of this Act; and notes and coins in circulation as of the effective date of this Act; and
(b) the transfer of such assets and liabilities from the Central Bank to the (e) any asset or liability of the Central Bank not transferred to the Bangko
Bangko Sentral as provided in Section 132 shall be completed within Sentral shall be retained and administered, disposed of and liquidated by
ninety (90) days from the constitution of the Monetary Board. the Central Bank itself which shall continue to exist as the CB Board of
All incumbent personnel in the Central Bank as of the date of the Liquidators only for the purposes provided in this paragraph but not later
approval of this Act shall continue to exercise their duties and functions as than twenty-five (25) years or until such time that liabilities have been
personnel of the Bangko Sentral subject to the provisions of Section 133: liquidated: Provided, That the Bangko Sentral may financially assist the
Provided, That such personnel in the Central Bank as may be necessary Central Bank of Liquidators in the liquidation of CB liabilities: Provided,
for the purpose of implementing Section 132 may be assigned by the finally, That upon disposition of said retained assets and liquidation of said
Bangko Sentral Monetary Board to the Central Bank. retained liabilities, the Central Bank shall be deemed abolished.
Section 132. Transfer of Assets and Liabilities. - Upon the All actions taken by the Bangko Sentral Monetary Board under this
section shall be reported to Congress and the President within thirty (30) national newspapers of general circulation.
days. Approved: June 14, 1993
Section 133. Mandate to Organize. - The Bangko Sentral shall be
organized by the Monetary Board without being subject to the provisions
of Republic Act No. 7430, by adopting if it so desires, an entirely new
staffing pattern on organizational structure to suit the operations of the
Bangko Sentral under this Act. No preferential or priority right shall be
given to or enjoyed by any personnel for appointment to any position in
the new staffing pattern, nor shall any personnel be considered as having
prior or vested rights with respect to retention in the Bangko Sentral or in A 8791 GENERAL BANKING LAW OF 2000
any position which may be created in the new staffing pattern, even if he An Act Providing for the Regulation of and Organization and
should be the incumbent of a similar position prior to organization. The Operations of Banks, Quasi-banks, Trust Entities and for other
formulation of the program of organization shall be completed within six purposes.
(6) months after the effectivity of this Act, and shall be fully implemented
within a period of six (6) months thereafter. Personnel who may not be The General Banking Law of 2000 (GBL) is the law that generally governs
retained are deemed separated from the service. the regulation, organization and operation of banks, quasi-banks, and
Section 134. Separation Benefits. - Pursuant to Section 15 of this other quasi-entities. It primarily governs Universal Banks[1] (UB) and
Act, the Monetary Board is authorized to provide separation incentives, Commercial Banks[2] (CB), and has suppletory application to Thrift Banks
and all those who shall retire or be separated from the service on account (which is primarily governed by RA 7906, the Thrift Banks Act), Rural
of reorganization under the preceding section shall be entitled to such Banks (primarily governed by RA 7353, the Rural Banks Act), and
incentives, which shall be in addition to all gratuities and benefits to which Cooperative Banks (primarily governed by RA 6938, the Cooperative
they may be entitled under existing laws. Code).[3]
Section 135. Repealing Clause. - Except as may be provided for in
Section 46 and 132 of this Act, Republic Act No. 265, as amended, the Banks
provisions of any other law, special charters, rule or regulation issued
pursuant to said Republic Act No. 265, as amended, or parts thereof, Definition
which may be inconsistent with the provisions of this Act are hereby
repealed. Presidential Decree No. 1792 is likewise repealed. Banks are entities engaged in the lending of funds obtained in the form of
Section 136. Transfer of Powers. - All powers, duties and deposits from the public.[4] This is usually referred to as core-banking
functions vested by law in the Central Bank of the Philippines not functions of mobilizing savings (through deposit-taking) and allocating
inconsistent with the provisions of this Act shall be deemed transferred to resources (through lending).
the Bangko Sentral ng Pilipinas. All references to the Central Bank of the
Philippines in any law or special charters shall be deemed to refer to the GBL requires that banks are stock corporations and its funds are obtained
Bangko Sentral. from the public, i.e. deposits of twenty (20) or more persons.[5]
Section 137. Separability Clause. - If any provision or section of
this Act or the application thereof to any person or circumstance is held In Baas v. Asia Pacific Finance Corp.,[6] the Supreme Court said that an
invalid, the other provisions or sections of this Act, and the application of investment company that engages solely in investing, reinvesting, or
such provision or section to other persons or circumstances, shall not be trading in securities is not engaged in banking. An investment
affected thereby. company refers to any issuer which is or holds itself out as being
Section 138. Effectivity Clause. - This Act shall take effect fifteen engaged or proposes to engage primarily in the business of
(15) days following its publication in the Official Gazette or in two (2) investing, reinvesting or trading in securities. As defined in
 Revised Securities Act, securities shall include commercial papers To promote and maintain a stable and efficient banking and financial
evidencing indebtedness of any person, financial or non-financial system, there are special rules that govern banks. Because it is
entity, irrespective of maturity, issued, endorsed, sold, indispensable to the national interest, any strike or lockout involving
transferred or in any manner conveyed to another with or without banks, if unsettled after seven (7) calendar days shall be reported by the
recourse, such as promissory notes. Clearly, the transaction Bangko Sentral to the Secretary of Labor who has two options: (1) he may
between petitioners and respondent was one involving not a loan assume jurisdiction over the dispute or decide it or (2) certify the same to
but purchase of receivables at a discount, well within the purview the National Labor Relations Commission for compulsory arbitration. The
of investing, reinvesting or trading in securities which an law allows the President of the Philippines, at any time, to intervene and
investment company, like ASIA PACIFIC, is authorized to perform assume jurisdiction over such labor dispute in order to settle or terminate
and does not constitute a violation of the General Banking Act. the same.[10]

In Republic v. Security Credit and Acceptance Corporation,[7] the Authority to incorporate and operate
Court said that an investment company which loans out the
money of its customers, collects the interest and charges a GBL provides that a bank or quasi-bank cannot be incorporated without
commission to both lender and borrower, is a bank. It is conceded authority from the BSP. The law states that the Securities and Exchange
that a total of 59,463 savings account deposits have been made Commission shall not register the articles of incorporation of any bank, or
by the public with the corporation and its 74 branches, with an any amendment thereto, unless accompanied by a certificate of authority
aggregate deposit of P1,689,136.74, which has been lent out to issued by the Monetary Board, under its seal.[11]
such persons as the corporation deemed suitable therefore. It is
clear that these transactions partake of the nature of banking, as In addition, an entity performing banking and quasi-banking function
the term is used in Section 2 of the General Banking Act. cannot also operate without a certificate of authority from the BSP.[12]

Banks must also be contrasted from quasi-banks (QB). The Classification of Banks
latter refer to entities engaged in the borrowing of funds through
the issuance, endorsement or assignment with recourse or Section 3.2 of the GBL classifies banks into:
acceptance of deposit substitutes (as defined in Sec. 95 RA 7653,
the New Central Bank Act) for purposes of relending or Universal Banks (UB) banks that have the authority to exercise, in
purchasing of receivables and other obligations. (last part of Sec. addition to the powers authorized for a commercial bank, the powers of an
4) Since this is an inherent power of UBs and CBs, they do not investment house and the power to invest in non-allied enterprises.[13]
require separate licensing or authorization for this purpose. Commercial Banks (CB) banks that have, in addition to the general
powers incident to corporations, all such powers as may be necessary to
Nature of Business carry on the business of commercial banking, such as accepting drafts and
issuing letters of credit; discounting and negotiating promissory notes,
Section 2 of GBL provides that the State recognizes the vital role of banks drafts, bills of exchange, and other evidences of debt; accepting or
in providing an environment conducive to the sustained development of creating demand deposits; receiving other types of deposits and deposit
the national economy and the fiduciary nature of banking that requires substitutes; buying and selling foreign exchange and gold or silver bullion;
high standards of integrity and performance. This consequently means acquiring marketable bonds and other debt securities; and extending
that a bank shall be subject to heavy and close supervision and/or credit, subject to such rules as the Monetary Board may promulgate.[14]
regulation by the Bangko Sentral ng Pilipinas,[8] and that it must exercise iii. Rural Banks banks that are created to make needed credit available
utmost diligence in the handling of deposits.[9] and readily accessible in the rural areas for purposes of promoting
comprehensive rural development.[15]
1 Thrift Banks banks that include savings and mortgage banks, private A UB MAY INVEST IN THE EQUITIES OF A CB MAY INVEST ONLY IN
development banks, and stock savings and loan associations. ALLIED (EITHER FINANCIAL OR NON- THE EQUITIES
2 Cooperative Banks banks that primarily provide financial, banking and FINANCIAL) AND NON-ALLIED OF ALLIED ENTERPRISES
credit services to cooperative organizations and their members.[16] ENTERPRISES. (SEC. 24) (EITHER
3 Islamic Banks Charter of Al Amanah Islamic Investment Bank of the EXCEPT AS THE MB MAY OTHERWISE FINANCIAL OR NON-
Philippines.[17] PRESCRIBE: FINANCIAL). (SEC.
vii. Other classification of banks as determined by the Monetary Board THE TOTAL INVESTMENT 30)
(MB) of the BSP. IN EQUITIES OF ALLIED EXCEPT AS THE MB MAY
AND NON-ALLIED OTHERWISE
UNIVERSAL BANKS COMMERCIAL BANKS ENTERPRISES SHALL NOT PRESCRIBE:
EXCEED 50% OF THE NET WORTH; AND THE TOTAL INVESTMENT IN
As to Powers
THE EQUITY INVESTMENT IN ANY ONE EQUITIES OF
The powers authorized for a ENTERPRISE, WHETHER ALLIED OR ALLIED ENTERPRISES SHALL
Commercial Bank; BSP Circular 271 (2002) NON-ALLIED, SHALL NOT EXCEED 25% NOT
The powers of an investment house (1) invest in the equities of OF THE NET WORTH OF THE BANK (SEC. EXCEED 35% OF THE NET
as provided in existing laws; allied enterprises; 24) WORTH OF THE
and (2) purchase, hold and BANK; AND
The power to invest in non-allied convey real estate; THE EQUITY INVESTMENT IN
enterprises as provided in the GBL. (3) receive in custody funds, ANY ONE
(Sec. 23) documents and valuable ENTERPRISE SHALL NOT
THE GENERAL POWERS INCIDENT TO objects; EXCEED 25% OF
CORPORATIONS, (4) act as financial agent; THE NET WORTH OF THE
ALL SUCH POWERS AS MAY BE (5) make collections and BANK. (SEC
NECESSARY TO CARRY ON THE payments for the account of
Equity Investments in Financial Allied
BUSINESS OF COMMERCIAL BANKING, others;
Enterprises
SUCH AS ACCEPTING DRAFTS AND (6) act as managing agent,
ISSUING LETTERS OF CREDIT; adviser, consultant or A UB CAN OWN UP TO A KB MAY OWN UP TO 100%
DISCOUNTING AND NEGOTIATING administrator of investment 100% OF THE EQUITY IN OF THE
PROMISSORY NOTES, DRAFTS, BILLS OF management/advisory/- A THRIFT BANK, EQUITY OF
EXCHANGE, AND OTHER EVIDENCES OF consultancy accounts; A RURAL BANK OR A THRIFT BANK OR
DEBT; (7) rent out safety deposit A FINANCIAL ALLIED A RURAL BANK. (SEC. 31)
SUBJECT TO SUCH RULES AS THE MB boxes; and ENTERPRISE. (SEC. 25) WHERE THE EQUITY
MAY PROMULGATE. THESE RULES MAY (8) engage in quasi-banking INVESTMENT OF A CB IS IN
INCLUDE THE DETERMINATION OF functions. OTHER FINANCIAL ALLIED
BONDS AND OTHER DEBT SECURITIES ENTERPRISES, INCLUDING
ELIGIBLE FOR INVESTMENT, THE ANOTHER
MATURITIES AND AGGREGATE AMOUNT COMMERCIAL BANK, SUCH
OF SUCH INVESTMENT. (SEC. 29) INVESTMENT SHALL REMAIN
A
As to Equity Investments
MINORITY HOLDING IN THAT
 ENTERPRISE. (SEC. 31)
Since the bank is the borrower, it can make use as its own the money
Equity Investments in Non-Financial Allied Enterprises deposited, and the amount is not held in trust for the depositor nor is it
A UB OR CB MAY OWN UP TO ONE A UB OR CB MAY OWN UP TO kept for safekeeping.[18] Bank officers cannot also be held liable for
HUNDRED PERCENT (100%) OF THE ONE HUNDRED PERCENT estafa if they authorized the use of the money deposited by the depositor.
EQUITY IN A NON-FINANCIAL ALLIED (100%) OF THE [19] Third persons who may have the right to the money deposited cannot
ENTERPRISE. (SEC. 26 AND 32) EQUITY IN A NON-FINANCIAL hold the bank responsible unless there is a court order or garnishment,
ALLIED ENTERPRISE. (SEC. since the duty of the bank is to the creditor-depositor and not to third
26 AND 32) persons.[20]
Equity Investments in QBs In San Carlos Milling Co., Ltd v. BPI, the Court declared that banks are run
TO PROMOTE COMPETITIVE TO PROMOTE COMPETITIVE for gain, and they solicit deposits in order that they can use the money for
CONDITIONS IN FINANCIAL MARKETS, CONDITIONS IN FINANCIAL that very purpose. For the same reason, it has been held that a bank
THE MB MAY FURTHER LIMIT TO 40% MARKETS, THE MB MAY has a right of set off of the deposits in its hands for the payment of any
EQUITY INVESTMENTS OF UBS AND FURTHER LIMIT TO 40% indebtedness to it on the part of a depositor.[21] Conversely, the
CBS IN QBS. (SEC. 28) EQUITY INVESTMENTS OF depositor has every right to apply his deposit in a bank against his loan
UBS AND from such bank.[22]
CBS IN QBS. (SEC. 28)
Kinds of Deposits
Equity Investments in Non-Allied Enterprises
THE EQUITY INVESTMENT OF A UB, OR The basic types of deposit are demand deposits, savings account,
OF ITS WHOLLY OR MAJORITY-OWNED time deposits, and NOW account.
SUBSIDIARIES, IN A SINGLE NON-ALLIED Demand deposits are those liabilities of banks which are denominated in
ENTERPRISE Philippine currency and are subject to payment in legal tender upon
shall not exceed 35% of the total demand by presentation of checks. In here, no interest is paid by the bank
equity in that enterprise nor because the depositor can take out his funds any time. It is called demand
shall it exceed 35% of the voting stock deposit because the depositor can withdraw the money he deposited on
in that enterprise. (Sec. 27) the very same day.
Savings Account, which is the most common type of deposit, is usually
evidenced by a passbook. Under the fine print, if you deposit today, you
cannot withdraw the amount until 60 days later. Bank pays an interest
2 Functions of Banks
rate, but not as high as time deposits.
Time Deposit is an account with fixed term. The interest rate is stipulated
1 Deposit Function
depending on the number of days. During this period, the money
deposited cannot be withdrawn. It has a higher rate of interest than saving
1 Nature of the Function
account.
Deposit is one of the core banking functions. While the function is referred
Negotiable Order of Withdrawal (NOW) Account is an interest-bearing
to as deposit, it is strictly simple loan where the bank is the debtor and
deposit account that combines the payable on demand feature of checks
the depositor is the creditor. Fixed, savings and current deposits of money
and investment feature of savings accounts.
in banks and similar institutions shall be governed by the provisions
Other Account is one that may be opened by one individual or by two or
concerning simple loan (Article 1980, Civil Code of the Philippines).
more persons. Whenever two or more persons open an account, the same
 may be an and/or account or an and account. accommodations and guarantees as may be defined by the MB that may
be extended by a bank to any person, partnership, association,
NB: A bank other than a UB or CB cannot accept or create demand corporation or other entity shall at no time exceed 25% of the net worth of
deposits except upon prior approval of, and subject to such conditions and such bank.[29] The basis for determining compliance with SBL is the total
rules as may be prescribed by the Monetary Board.[23] credit commitment of the bank to the borrower.[30]
Moreover, the bank is under the obligation to treat deposit accounts of it GBL provides that, unless the MB prescribes otherwise, the total amount of
depositors with meticulous care. It must bear the blame for failing to loans, credit accommodations and guarantees prescribed in the preceding
discover the mistake of its employees despite the established procedure paragraph may be increased by an additional 10% of the net worth of such
requiring bank papers to pass through bank personnel whose duty it is to bank provided the additional liabilities of any borrower are adequately
check and countercheck them for possible errors.[24] As a business secured by trust receipts, shipping documents, warehouse receipts or
affected with public interest and because of the nature of its functions, a other similar documents transferring or securing title covering readily
bank is under obligation to treat the accounts of its depositors with marketable, non-perishable goods which must be fully covered by
meticulous case, always having in mind the fiduciary nature of their insurance.[31]
relationship.[25] DORSI Accounts: GBL imposes restrictions (not total prohibition) on
Note on Safety Deposit Boxes: In the case of rent of safety deposit box, borrowings and security arrangement by directors, officers, and
the contract is a special kind of deposit and cannot be characterized as an stockholders of the bank. These restrictions apply when the loan or
ordinary contract of lease because the full and absolute possession and financial accommodation of DORSI is in excess of 5% of the capital and
control of the deposit box is not given to the renters. The prevailing rule is surplus of the lending bank or in the maximum amount permitted by law,
that the relation between the bank renting out and the renter is that of whichever is lower. The GENERAL RULE is: a director or officer of any bank
bailer and bailee the bailment being for hire and mutual benefit.[26] shall neither, directly or indirectly, for himself or as the representative or
agent of others, borrow from such bank; nor become a guarantor, indorser
1 Loan Function or surety for loans from such bank to others, or in any manner be an
obligor or incur any contractual liability to the bank. The EXCEPTION is
1 Basic Rules and Restrictions: A bank shall grant loans and other credit when there is a written approval of the majority of all the directors of the
accommodations only in amounts and for the periods of time essential for bank, excluding the director concerned. The required approval shall be
the effective completion of the operations to be financed, consistent with entered upon the records of the bank and a copy of such entry shall be
safe and sound banking practices. The bank must ascertain before transmitted forthwith to the appropriate supervising and examining
granting the load or other credit accommodation the ability of the debtor department of the BSP.[32]
to fulfill his commitment. Limits on loans and other credit accommodations (collaterals): Unless
otherwise prescribed by the MB, loans and other credit accommodations
1 Risk-Based Capital Ratio: The MB shall prescribe the minimum ratio which against real estate shall not exceed 75% of the appraised value of the
the net worth of a bank must bear to its total risk assets which may respective real estate security, plus 60% of the appraised value of the
include contingent accounts (i.e. net worth : total risk assets).[27] The insured improvements, and such loans may be made to the owner of the
risk-based capital ratio of a bank, expressed as a percentage of qualifying real estate or to his assignees.[33] Those against security of chattels and
capital to risk-weighted assets, shall not be less than 10% for both solo intangible properties shall not exceed 75% of the appraised value of the
basis (head office plus branches) and consolidated basis (parent bank plus security, and such loans and other credit accommodations may be made
subsidiary financial allied undertakings, but excluding insurance to the title-holder of the chattels and intangible properties or his
companies). The ratio shall be maintained daily.[28] assignees.[34]
NB: The limit on loans, credit accommodations and guarantees prescribed
iii. Single Borrowers Limit (SBL): Except as the MB may otherwise herein shall not apply to loans, credit accommodations and guarantees
prescribe for reasons of national interest, the total amount of loans, credit extended by a cooperative bank to its cooperative shareholders.[35]
 securities;
1 Foreclosure of Mortgage: In the event of foreclosure, whether judicially or iii. Make collections and payments for the account of others and perform
extrajudicially, of any mortgage on real estate which is security for any such other services for their customers as are not incompatible with
loan or other credit accommodation granted, the mortgagor or debtor baking business;
whose real property has been sold for the full or partial payment of his Upon prior approval of the MB, act as managing agent, adviser, consultant
obligation shall have the right within one year after the sale of the real of administrator of investment management/advisory/consultancy
estate, to redeem the property by paying the amount due under the accounts; and
mortgage deed, with interest thereon at the rate specified in the Rent out safety deposit boxes.
mortgage, and all the costs and expenses incurred by the bank or
institution from the sale and custody of said property less the income Prohibited Acts
derived therefrom. However, the purchaser at the auction sale concerned GBL prohibits banks from directly engaging in insurance business as
whether in a judicial or extrajudicial foreclosure shall have the right to insurer.[37]
enter upon and take possession of such property immediately after the Directors, officers, employees, or agents of any bank are prohibited from:
date of the confirmation of the auction sale and administer the same in (1) Making false entries in any bank report or statement or participating in
accordance with law. Any petition in court to enjoin or restrain the conduct any fraudulent transaction, thereby affecting the financial interest of, or
of foreclosure proceedings instituted pursuant to this provision shall be causing damage to, the bank or any person;
given due course only upon the filing by the petitioner of a bond in an (2) Without order of a court of competent jurisdiction, disclosing to any
amount fixed by the court conditioned that he will pay all the damages unauthorized person any information relative to the funds or properties in
which the bank may suffer by the enjoining or the restraint of the the custody of the bank belonging to private individuals, corporations, or
foreclosure proceeding. any other entity: Provided, That with respect to bank deposits, the
Notwithstanding Act 3135, juridical persons whose property is being sold provisions of existing laws shall prevail;
pursuant to an extrajudicial foreclosure, shall have the right to redeem the (3) Accepting gifts, fees or commissions or any other form of remuneration
property in accordance with this provision until, but not after, the in connection with the approval of a loan or other credit accommodation
registration of the certificate of foreclosure sale with the applicable from said bank;
Register of Deeds which in no case shall be more than 3 months after (4) Overvaluing or aiding the overvaluing of any security for the purpose
foreclosure, whichever is earlier. Owners of property that has been sold in of influencing in any way the actions of the bank or any bank; or
a foreclosure sale prior to the effectivity of the GBL shall retain their (5) Outsourcing inherent banking functions.[38]
redemption rights until their expiration.[36] iii. Outsourcing per BSP Circular 268 (2000)
1 Loan to Banks Section 2.1 Outsourcing of inherent banking functions shall refer to any
The guiding principle for loan on banks is enunciated in Section 81 of contract between the bank and a service provider for the latter to supply
NCBA which reads, The rediscounts, discounts, loans and advances which the manpower to service the deposit transactions of the former.
the BSP is authorized to extend to banking institutions under the Section 2.2 Banks cannot outsource management functions except as may
provisions of the present article of this Act shall be used to influence the be authorized by the Monetary Board when circumstances justify.
volume of credit consistent with the objective of price stability. Section 3. Outsourcing of Information Technology Systems/Processes.
Subject to prior approval of the MB, banks may outsource all information
1 Other Functions technology systems and processes except for functions excluded in
Section 3.1.
UB and CB may also exercise any of the following functions: Section 3.1 Functions affecting the ability of the bank to ensure the fit of
1 Receive in custody funds, documents and valuable objects; technology services deployed to meet its strategic and business objectives
2 Act as financial agent and buy and sell, by order of and for the account of and to comply with all pertinent banking laws and regulations may not be
their customers, shares, evidences of indebtedness and all types of outsourced. Subject to prior approval of the MB, consultants and/or service
 providers may be engaged to provide assistance/support. follow the citizenship of the controlling stockholders of the corporation,
Section 4. Outsourcing of Other Banking Functions. irrespective of the place of incorporation.
Section 4.1 Subject to prior approval of the MB, banks may outsource data NB: Foreign banks are not subject to the 40% limitation prescribed under
imaging, storage, retrieval and other related systems; clearing and Sec. 11 of the GBL. R.A. 7721 prescribes 60% are the maximum foreign
processing of checks not included in the Philippine Clearing House System; bank equity. Sec. 73 of the GBL also allows the acquisition beyond the
printing of bank deposit statements. 60% limit within a period of seven years from the effectivity of the GBL.
Section 4.2. Banks may outsource credit card services; printing of bank
loan statements and other non-deposit records, bank forms and Filipino Stockholdings
promotional materials; credit investigation and collection; processing of Section 11 of the GBL applies to Filipinos and domestic non-bank
export, import and other trading transactions; transfer agent services for corporations.
debt and equity securities; property appraisal; property management NB: The restriction applies on foreigners in terms of their total equity
services; messenger, courier and postal services; security guard services; participation, while it applies to individual equity participation to Filipinos
vehicle service contracts; janitorial services. and non-bank corporations.
Section 5. Service Providers. When allowed by law and under this circular,
banks may enter into outsourcing contracts only with service providers Stockholdings of Family Groups and related interests
with demonstrable technical and financial capability commensurate to the There is no prohibition against stockholding of family groups or
services to be rendered. related interests. What GBL imposes is that stockholdings of individuals
related to each other within the fourth degree of consanguinity or affinity,
1 Prohibited Transactions of Borrowers of Bank: borrowers of banks are legitimate or common-law, shall be considered family groups or related
prohibited from interests and must be fully disclosed in all transactions by such an
2 Fraudulently overvaluing property offered as security for a loan or other individual with the bank.[41]
credit accommodation from the bank; In addition, two or more corporations owned or controlled by the same
3 Furnishing false or misrepresenting or suppressing material facts for the family group or same group of persons shall be considered related
purpose of obtaining, renewing, or increasing a loan or other credit interests and must be fully disclosed in all transactions by such
accommodation or extending the period thereof; corporations or related groups of persons with the bank.
4 Attempting to defraud the said bank in the event of a court action to
recover a loan or other credit accommodation; or Directors and Officers
5 Offering any director, officer, employee or agent of a bank any gift, fee,
commission, or any other form of compensation in order to influence such Composition of Board
persons into approving a loan or other credit accommodation application. Section 15 of the GBL provides for the composition of the BOD:
[39] there shall be at least five (5), and a maximum of fifteen (15) members of
the board of directors of bank, two (2) of whom shall be independent
3 Ownership of Banks directors.
4 Foreign Ownership[40] An independent director shall mean a person other than an officer or
As to their stockholdings, foreign individuals and non-bank employee of the bank, its subsidiaries or affiliates or related interests. (n)
corporations may own or control up to forty percent (40%) of the voting Non-Filipino citizens may become members of the board of directors of a
stock of a domestic bank. This rule shall apply to Filipinos and domestic bank to the extent of the foreign participation in the equity of said bank.
non-bank corporations. (Sec. 7, RA 7721)
The percentage of foreign-owned voting stocks in a bank shall be Section 19 of GBL imposes a prohibition on public officials, such that no
determined by the citizenship of the individual stockholders in that bank. appointive or elective public official, whether full-time or part-time shall at
The citizenship of the corporation which is a stockholder in a bank shall the same time serve as officer of any private bank, save in cases where
 such service is incident to financial assistance provided by the The law imposes restrictions on the value of collaterals on loans.
government or a government-owned or controlled corporation to the bank The law may provide for restrictions on unsecured loans.[44]
or unless otherwise provided under existing laws. MB may prescribe maturities and other terms and conditions for various
types of loans and accommodations.[45]
1 Meetings The law prescribes restrictions on dividend declrations.[46]
Section 15 of the GBL also provides that the meetings of the board
of directors may be conducted through modern technologies such as, but Ownership of Real Property
not limited to, teleconferencing and video-conferencing.
Section 51 of the GBL provides that any bank may acquire real estate as
1 Qualifications shall be necessary for its own use in the conduct of its business.
Section 16 of the GBL provides the Fit and Proper Rule which However, the total investment in such real estate and improvements
states that to maintain the quality of bank management and afford better thereof, including bank equipment, shall not exceed fifty percent (50%) of
protection to depositors and the public in general, the Monetary Board combined capital accounts. It must be noted however that the equity
shall prescribe, pass upon and review the qualifications and investment of a bank in another corporation engaged primarily in real
disqualifications of individuals elected or appointed bank directors or estate shall be considered as part of the banks total investment in real
officers and disqualify those found unfit. estate, unless otherwise provided by the Monetary Board.
After due notice to the board of directors of the bank, the Monetary Board
may disqualify, suspend or remove any bank director or officer who In Section 52, however, of the GBL, a bank may acquire, hold or convey
commits or omits an act which render him unfit for the position. real property under the following circumstances:
In determining whether an individual is fit and proper to hold the position Such as shall be mortgaged to it in good faith by way of security for debts;
of a director or officer of a bank, regard shall be given to his integrity, Such as shall be conveyed to it in satisfaction of debts previously
experience, education, training, and competence. contracted in the course of its dealings; or
NB: Sec. 19 of the GBL prohibits appointive or elective public iii. Such as it shall purchase at sales under judgments, decrees,
official, whether full-time or part-time, from serving as officer of any mortgages, or trust deeds held by it and such as it shall purchase to
private bank, save in cases where: secure debts due it.
1 Such service is incident to financial assistance provided by the
government or a GOCC to the bank; Any real property acquired or held under the circumstances enumerated in
2 Unless otherwise provided in the Rural Banks Act; or the above paragraph shall be disposed of by the bank within a period of
3 Unless otherwise provided under existing laws. five (5) years or as may be prescribed by the Monetary Board. After said
period, the bank may continue to hold the property for its own use,
5 Liquidity and Security subject to the limitations of the preceding Section.

For purposes of maintaining liquidity and security, GBL and the

New Central Bank Act provide regulations relating to loans and other Trust Operations of Banks
matters:
1 The Monetary Board shall prescribe the minimum ratio which the net Applicable Rules
worth of a bank must bear to its total risk assets which may include
contingent accounts.[42] NB: Art 1442 of the Civil Code states that the principles of the general
2 The law imposes limits on loans, credit accommodations and quarantees law of trusts, insofar as they are not in conflict w/ the Civil Code, the Code
that may be extended by banks. of Commerce, the Rules of Court and special laws (including the GBL) are
3 Limitation is placed on banks exposure to DORSI.[43] hereby adopted.
2 Prudent Man Rule trustee, or depositary of the estate of any minor or other incompetent
A trust entity shall administer the funds or property under its custody with person, and as receiver and depositary of any moneys paid into court by
the diligence that a prudent man would exercise in the conduct of an parties to any legal proceedings and of property of any kind which may be
enterprise of a like character and with similar aims.[47] brought under the jurisdiction of the court;
iii. Self-Dealing Rule Act as the executor of any will when it is named the executor thereof;
The GBL provides, as a general rule, that no trust entity shall, for the Act as administrator of the estate of any deceased person, with the will
account of the trustor or the beneficiary of the trust, annexed, or as administrator of the estate of any deceased person when
1 purchase or acquire property from, or there is no will;
2 sell, transfer, assign or lend money or property to, or Accept and execute any trust for the holding, management, and
3 purchase debt instruments of administration of any estate, real or personal, and the rents, issues and
4 any of the departments, directors, officers, stockholders, or employees of profits thereof; and
the trust entity Establish and manage common trust funds, subject to such rules and
5 relatives within the 1st degree of consanguinity or affinity, or the related regulations as may be prescribed by the MB.
interests, of such directors, officers and stockholders,
Except: Separation of Trust Business of Banks
1 the transaction is specifically authorized by the trustor, and Section 87 of the GBL requires that the trust business and all funds,
2 the relationship of the trustee and the other party involved in the properties or securities received by any trust entity as executor,
transaction administrator, guardian, trustee, receiver, or depositary shall be kept
is fully disclosed to the trustor or beneficiary of the trust prior to the separate and distinct from the general business including all other funds,
transaction.[48] properties, and assets of such trust entity. The accounts of all such funds,
properties, or securities shall likewise be kept separate and distinct from
1 Prior Authority the accounts of the general business of the trust entity
Only a stock corporation or a person duly authorized by the MB to engage
in trust business shall act as a trustee or administer any trust or hold Conservatorship
property in trust or on deposit for the use, benefit, or behalf of others. For
purposes of the GBL, such a corporation is referred to as a trust entity.[49] Section 67 of the GBL provides that the grounds and procedures for
placing a bank under conservatorship, as well as, the powers and duties of
1 Trust Business the conservator appointed for the bank shall be governed by the
A trust business is any activity resulting from a trustor-trustee relationship provisions of Section 29 and the last two paragraphs of Section 30 of the
(trusteeship) involving the appointment of a trustee by a trustor for the New Central Bank Act: Provided, That this Section shall also apply to
administration, holding, management of funds and/or properties of the conservatorship proceedings of quasi-banks.
trustor by the trustee for the use, benefit or advantage of the trustor or of
others called beneficiaries.[50] Grounds
Whenever, on the basis of a report submitted by the appropriate
1 Powers supervising or examining department, the Monetary Board finds that a
A trust entity, in addition to the general powers incident to corporations, bank or a quasi-bank is in a state of continuing inability or unwillingness to
shall have the power to: maintain a condition of liquidity deemed adequate to protect the interest
1 Act as trustee on any mortgage or bond issued by any municipality, of depositors and creditors, the Monetary Board may appoint a
corporation, or any body politic and to accept and execute any trust conservator with such powers as the Monetary Board shall deem
consistent with law; necessary.[51]
2 Act under the order or appointment of any court as guardian, receiver,
1 Powers of Conservatorship[52] (b) Commercial banks;
2 Take charge of the assets, liabilities, and the management thereof, (c) Thrift banks, composed of: (i) Savings and mortgage banks, (ii) Stock
3 Reorganize the management, savings and loan associations, and (iii) Private development banks, as
iii. Collect all monies and debts due said institution, and defined in the Republic Act No. 7906 (hereafter the "Thrift Banks Act");
1 Exercise all powers necessary to restore its viability. (d) Rural banks, as defined in Republic Act No. 73S3 (hereafter the "Rural
Banks Act");
9 Receivership and Liquidation (e) Cooperative banks, as defined in Republic Act No 6938 (hereafter the
"Cooperative Code");
The grounds and procedures for placing a bank under receivership or (f) Islamic banks as defined in Republic Act No. 6848, otherwise known as
liquidation, as well as the powers and duties of the receiver or liquidator the "Charter of Al Amanah Islamic Investment Bank of the Philippines";
appointed for the bank shall be governed by the provisions of Secs. 30, 31, and
32, and 33 of the NCBA: Provided, That the petitioner or plaintiff files with (g) Other classifications of banks as determined by the Monetary Board of
the clerk or judge of the court in which the action is pending a bond, the Bangko Sentral ng Pilipinas. (6-Aa)
executed in favor of the BSP, in an amount to be fixed by the court. This CHAPTER IIAUTHORITY OF THE BANGKO SENTRAL
shall also apply to the extent possible to the receivership and liquidation Section 4. Supervisory Powers. The operations and activities of banks
proceedings of QBs. (Sec. 69) shall be subject to supervision of the Bangko Sentral. "Supervision" shall
include the following:
4.1. The issuance of rules of, conduct or the establishment standards of
operation for uniform application to all institutions or functions covered,
taking into consideration the distinctive character of the operations of
institutions and the substantive similarities of specific functions to which
such rules, modes or standards are to be applied;
Republic ACT NO. 8791 May 23, 2000 4.2 The conduct of examination to determine compliance with laws and
AN ACT PROVIDING FOR THE REGULATION OF THE ORGANIZATION regulations if the circumstances so warrant as determined by the
AND OPERATIONS OF BANKS, QUASI-BANKS, TRUST ENTITIES AND Monetary Board;
FOR OTHER PURPOSES 4.3 Overseeing to ascertain that laws and regulations are complied with;
CHAPTER ITITLE AND CLASSIFICATION OF BANKS 4.4 Regular investigation which shall not be oftener than once a year from
Section 1. Title. The short title of this Act shall be "The General Banking the last date of examination to determine whether an institution is
Law of 2000." (1a) conducting its business on a safe or sound basis: Provided, That the
Section 2. Declaration Of Policy. - The State recognizes the vital role of deficiencies/irregularities found by or discovered by an audit shall be
banks providing an environment conducive to the sustained development immediately addressed;
of the national economy and the fiduciary nature of banking that requires 4.5 Inquiring into the solvency and liquidity of the institution (2-D); or
high standards of integrity and performance. In furtherance thereof, the 4.6 Enforcing prompt corrective action. (n)
State shall promote and maintain a stable and efficient banking and The Bangko Sentral shall also have supervision over the operations of and
financial system that is globally competitive, dynamic and responsive to exercise regulatory powers over quasi-banks, trust entities and other
the demands of a developing economy. (n) financial institutions which under special laws are subject to Bangko
Section 3. Definition and Classification of Banks. - Sentral supervision. (2-Ca)
3.1. "Banks" shall refer to entities engaged in the lending of funds For the purposes of this Act, "quasi-banks" shall refer to entities engaged
obtained in the form of deposits. (2a) in the borrowing of funds through the issuance, endorsement or
3.2. Banks shall be classified into: assignment with recourse or acceptance of deposit substitutes as defined
(a) Universal banks; in Section 95 of Republic Act No. 7653 (hereafter the "New Central Bank
Act") for purposes of re-lending or purchasing of receivables and other Persons or entities found to be performing banking or quasi-banking
obligations. (2-Da) functions without authority from the Bangko Sentral shall be subject to
Section 5. Policy Direction; Ratios, Ceilings and Limitations. - The Bangko appropriate sanctions under the New Central Bank Act and other
Sentral shall provide policy direction in the areas of money, banking and applicable laws. (4a)
credit. (n) Section 7. Examination by the Bangko Sentral. - The Bangko Sentral
For this purpose, the Monetary Board may prescribe ratios, ceilings, shall, when examining a bank, have the authority to examine an
limitations, or other forms of regulation on the different types of accounts enterprise which is wholly or majority-owned or controlled by the bank. (2-
and practices of banks and quasi-banks which shall, to the extent feasible, Ba)
conform to internationally accepted standards, including of the Bank for CHAPTER IIIORGANIZATION, MANAGEMENT AND ADMINISTRATION
International Settlements (BIS). The Monetary Board may exempt OF BANKS. QUASI-BANKS AND TRUST ENTITIES
particular categories of transactions from such ratios, ceilings. and Section 8. Organization. - The Monetary Board may authorize the
limitations, but not limited to exceptional cases or to enable a bank or organization of a bank or quasi-bank subject to the following conditions:
quasi-bank under rehabilitation or during a merger or consolidation to 8.1 That the entity is a stock corporation (7);
continue in business, with safety to its creditors, depositors and the 8.2 That its funds are obtained from the public, which shall mean twenty
general public. (2-Ca) (20) or more persons (2-Da); and
Section 6. Authority to Engage in Banking and Quasi-Banking Functions. - 8.3 That the minimum capital requirements prescribed by the Monetary
No person or entity shall engage in banking operations or quasi-banking Board for each category of banks are satisfied. (n)
functions without authority from the Bangko Sentral: .Provided, however, No new commercial bank shall be established within three (3) years from
That an entity authorized by the Bangko Sentral to perform universal or the effectivity of this Act. In the exercise of the authority granted herein,
commercial banking functions shall likewise have the authority to engage the Monetary Board shall take into consideration their capability in terms
in quasi-banking functions. of their financial resources and technical expertise and integrity. The bank
The determination of whether a person or entity is performing banking or licensing process shall incorporate an assessment of the bank's ownership
quasi-banking functions without Bangko Sentral authority shall be decided structure, directors and senior management, its operating plan and
by the Monetary Board. To resolve such issue, the Monetary Board may; internal controls as well as its projected financial condition and capital
through the appropriate supervising and examining department of the base.
Bangko Sentral, examine, inspect or investigate the books and records of Section 9. Issuance of Stocks. - The Monetary Board may prescribe rules
such person or entity. Upon issuance of this authority, such person or and regulations on the types of stock a bank may issue, including the
entity may commence to engage in banking operations or quasi-banking terms thereof and rights appurtenant thereto to determine compliance
function and shall continue to do so unless such authority is sooner with laws and regulations governing capital and equity structure of banks;
surrendered, revoked, suspended or annulled by the Bangko Sentral in Provided, That banks shall issue par value stocks only.
accordance with this Act or other special laws. Section 10. Treasury Stocks. - No bank shall purchase or acquire shares
The department head and the examiners of the appropriate supervising of its own capital stock or accept its own shares as a security for a loan,
and examining department are hereby authorized to administer oaths to except when authorized by the Monetary Board: Provided, That in every
any such person, employee, officer, or director of any such entity and to case the stock so purchased or acquired shall, within six (6) months from
compel the presentation or production of such books, documents, papers the time of its purchase or acquisition, be sold or disposed of at a public or
or records that are reasonably necessary to ascertain the facts relative to private sale. (24a)
the true functions and operations of such person or entity. Failure or Section 11. Foreign Stockholdings. - Foreign individuals and non-bank
refusal to comply with the required presentation or production of such corporations may own or control up to forty percent (40%) of the voting
books, documents, papers or records within a reasonable time shall stock of a domestic bank. This rule shall apply to Filipinos and domestic
subject the persons responsible therefore to the penal sanctions provided non-bank corporations. (12a; 12-Aa) The percentage of foreign-owned
under the New Central Bank Act. voting stocks in a bank shall be determined by the citizenship of the
individual stockholders in that bank. The citizenship of the corporation technologies such as, but not limited to, teleconferencing and video-
which is a stockholder in a bank shall follow the citizenship of the conferencing. (n)
controlling stockholders of the corporation, irrespective of the place of Section 16. Fit and Proper Rule. - To maintain the quality of bank
incorporation. (n) management and afford better protection to depositors and the public in
Section 12. Stockholdings of Family Groups of Related Interests. - general the Monetary Board shall prescribe, pass upon and review the
Stockholdings of individuals related to each other within the fourth degree qualifications and disqualifications of individuals elected or appointed
of consanguinity or affinity, legitimate or common-law, shall be considered bank directors or officers and disqualify those found unfit. After due notice
family groups or related interests and must be fully disclosed in all to the board of directors of the bank, the Monetary Board may disqualify,
transactions by such corporations or related groups of persons with the suspend or remove any bank director or officer who commits or omits an
bank. (12-Ba) act which render him unfit for the position. In determining whether an
Section 13. Corporate Stockholdings. - Two or more corporations owned individual is fit and proper to hold the position of a director or officer of a
or controlled by the same family group or same group of persons shall be bank, regard shall be given to his integrity, experience, education,
considered related interests and must be fully disclosed in all transactions training, and competence. (9-Aa)
by such corporations or related group of persons with the bank. (12-Ba) Section 17. Directors of Merged or Consolidated Banks. - In the case of a
Section 14. Certificate of Authority to Register. - The Securities and bank merger or consolidation, the number of directors shall not exceed
Exchange Commission shall no register the articles of incorporation of any twenty-one (21). (l3a)
bank, or any amendment thereto, unless accompanied by a certificate of Section 18. Compensation and Other Benefits of Directors and Officers.
authority issued by the Monetary Board, under it seal. Such certificate To protect the finds of depositors and creditors the Monetary Board may
shall not be issued unless the Monetary Board is satisfied from the regulate the payment by the bark to its directors and officers of
evidence submitted to it: compensation, allowance, fees, bonuses, stock options, profit sharing and
14.1 That all requirements of existing laws and regulations to engage in fringe benefits only in exceptional cases and when the circumstances
the business for which the applicant is proposed to be incorporated have warrant, such as but not limited to the following:
been complied with; 18.1. When a bank is under comptrollership or conservatorship; or
14.2 That the public interest and economic conditions, both general and 18.2. When a bank is found by the Monetary Board to be conducting
local, justify the authorization; and business in an unsafe or unsound manner; or
14.3 That the amount of capital, the financing, organization, direction and 18.3. When a bank is found by the Monetary Board to be in an
administration, as well as the integrity and responsibility of the organizers unsatisfactory financial condition. (n)
and administrators reasonably assure the safety of deposits and the public Section 19. Prohibition on Public Officials. - Except as otherwise provided
interest. (9) in the Rural Banks Act, no appointive or elective public official whether
The Securities and Exchange Commission shall not register the by-laws of full-time or part-time shall at the same time serve as officer of any private
any bank, or any amendment thereto, unless accompanied by a certificate bank, save in cases where such service is incident to financial assistance
of authority from the Bangko Sentral. (10) provided by the government or a government owned or controlled
Section 15. Board of Directors. - The provisions of the Corporation Code corporation to the bank or unless otherwise provided under existing laws.
to the contrary notwithstanding, there shall be at least five (5), and a (13)
maximum of fifteen (15) members of the board or directors of a bank, two Section 20. Bank Branches. - Universal or commercial banks may open
(2) of whom shall be independent directors. An "independent director" branches or other offices within or outside the Philippines upon prior
shall mean a person other than an officer or employee of the bank, its approval of the Bangko Sentral. Branching by all other banks shall be
subsidiaries or affiliates or related interests. (n) Non-Filipino citizens may governed by pertinent laws.
become members of the board of directors of a bank to the extent of the A bank may, subject to prior approval of the Monetary Board, use any or
foreign participation in the equity of said bank. (Sec. 7, RA 7721) The all of its branches as outlets for the presentation and/or sale of the
meetings of the board of directors may be conducted through modern financial products of its allied undertaking or of its investment house units.
A bank authorized to establish branches or other offices shall be As used in this Act, "net worth" shall mean the total of the unimpaired
responsible for all business conducted in such branches and offices to the paid-in capital including paid-in surplus, retained earnings and undivided
same extent and in the same manner as though such business had all profit, net of valuation reserves and other adjustments as may be required
been conducted in the head office. A bank and its branches and offices by the Bangko Sentral.
shall be treated as one unit. (6-B; 27) The acquisition of such equity or equities is subject to the prior approval of
Section 21. Banking Days and Hours. - Unless otherwise authorized by the Monetary Board which shall promulgate appropriate guidelines to
the Bangko Sentral in the interest of the banking public, all banks govern such investments. (21-Ba)
including their branches and offices shall transact business on all working Section 25. Equity Investments of a Universal Bank in Financial Allied
days for at least six (6) hours a day. In addition, banks or any of their Enterprises. - A universal bank can own up to one hundred percent (100%)
branches or offices may open for business on Saturdays, Sundays or of the equity in a thrift bank, a rural bank or a financial allied enterprise. A
holidays for at least three (3) hours a day: Provided, That banks which opt publicly-listed universal or commercial bank may own up to one hundred
to open on days other than working days shall report to the Bangko percent (100%) of the voting stock of only one other universal or
Sentral the additional days during which they or their branches or offices commercial bank. (21-B; 21-Ca)
shall transact business. For purposes of this Section, working days shall Section 26. Equity Investments of a Universal Bank in Non-Financial
mean Mondays to Fridays, except if such days are holidays. (6-Ca) Allied Enterprises. - A universal bank may own up to one hundred percent
Section 22. Strikes and Lockouts. - The banking industry is hereby (100%) of the equity in a non-financial allied enterprise. (21-Ba)
declared as indispensable to the national interest and, notwithstanding Section 27. Equity Investments of a Universal Bank in Non-Allied
the provisions of any law to the contrary, any strike or lockout involving Enterprises. - The equity investment of a universal bank, or of its wholly or
banks, if unsettled after seven (7) calendar days shall be reported by the majority-owned subsidiaries, in a single non-allied enterprise shall not
Bangko Sentral to the secretary of Labor who may assume jurisdiction exceed thirty-five percent (35%) of the total equity in that enterprise nor
over the dispute or decide it or certify the sane to the National Labor shall it exceed thirty-five percent (35%) of the voting stock in that
Relations Commission for compulsory arbitration. However, the President enterprise. (21-B)
of the Philippines may at any time intervene and assume jurisdiction over Section 28. Equity Investments in Quasi-Banks. - To promote competitive
such labor dispute in order to settle or terminate the same. (6-E) conditions in financial markets, the Monetary Board may further limit to
CHAPTER IVDEPOSITS. LOANS AND OTHER OPERATIONS forty percent (40%) equity investments of universal banks in quasi-banks.
Article IOperations Of Universal Banks This rule shall also apply in the case of commercial banks. (12-E) Article II.
Section 23. Powers of a Universal Bank - A universal bank shall have the Operations Of Commercial Banks
authority to exercise, in addition to the powers authorized for a Section 29. Powers of a Commercial Bank. - A commercial bank shall
commercial bank in Section 29, the powers of an investment house as have, in addition to the general powers incident to corporations, all such
provided in existing laws and the power to invest in non-allied enterprises powers as may be necessary to carry on the business of commercial
as provided in this Act. (21-B) banking such as accepting drafts and issuing letters of credit; discounting
Section 24. Equity Investments of a Universal Bank. - A universal bank and negotiating promissory notes, drafts, bills of exchange, and other
may, subject to the conditions stated in the succeeding paragraph, invest evidences of debt; accepting or creating demand deposits; receiving other
in the equities of allied and non-allied enterprises as may be determined types of deposits and deposit substitutes; buying and selling foreign
by the Monetary Board. Allied enterprises may either be financial or non- exchange and gold or silver bullion; acquiring marketable bonds and other
financial. Except as the Monetary Board may otherwise prescribe: debt securities; and extending credit, subject to such rules as the
24.1. The total investment in equities of allied and non-allied enterprises Monetary Board may promulgate. These rules may include the
shall not exceed fifty percent (50%) of the net worth of the bank; and determination of bonds and other debt securities eligible for investment,
24.2. The equity investment in any one enterprise, whether allied or non- the maturities and aggregate amount of such investment.
allied, shall not exceed twenty-five percent (25%) of the net worth of the Section 30. Equity Investments of a Commercial Bank. - A commercial
bank. bank may, subject to the conditions stated in the succeeding paragraphs,
invest only in the equities of allied enterprises as may be determined by the capital accounts of the bank until the minimum requirement has been
the Monetary Board. Allied enterprises may either be financial or non- met The Monetary Board may, furthermore, restrict or prohibit the
financial. Except as the Monetary Board may otherwise prescribe: acquisition of major assets and the making of new investments by the
30.1. The total investment in equities of allied enterprises shall not exceed bank, with the exception of purchases of readily marketable evidences of
thirty-five percent (35%) of the net worth of the bark; and indebtedness of the Republic of the Philippines and of the Bangko Sentral
30.2. The equity investment in any one enterprise shall not exceed and any other evidences of indebtedness or obligations the servicing and
twenty-five percent (25%) of tile net worth of the bank. The acquisition of repayment of which are fully guaranteed by the Republic of the
such equity or equities is subject to the prior approval of the Monetary Philippines, until the minimum required capital ratio has been restored. In
Board which shall promulgate appropriate guidelines to govern such case of a bank merger or consolidation, or when a bank is under
investment.(2lA-a; 21-Ca) rehabilitation under a program approved by the Bangko Sentral, Monetary
Section 31. Equity Investments of a Commercial Bank in Financial Allied Board may temporarily relieve the surviving bank, consolidated bank, or
Enterprises. - A commercial bank may own up to one hundred percent constituent bank or corporations under rehabilitation from full compliance
(100%) of the equity of a thrift bank or a rural bank. Where the equity with the required capital ratio under such conditions as it may prescribe.
investment of a commercial bank is in other financial allied enterprises, Before the effectivity of rules which the Monetary Board is authorized to
including another commercial bank, such investment shall remain a prescribe under this provision, Section 22 of the General Banking Act, as
minority holding in that enterprise. (21-Aa; 21-Ca) amended, Section 9 of the Thrift Banks Act, and all pertinent rules issued
Section 32. Equity Investments of a Commercial Bank in Non-Financial pursuant thereto, shall continue to be in force. (22a)
Allied Enterprises. A commercial bank may own up to one hundred percent Section 35. Limit on Loans, Credit Accommodations and Guarantees
(100%) of the equity in a non-financial allied enterprise. (21-Aa) Article III. 35.1 Except as the Monetary Board may otherwise prescribe for reasons of
Provisions Applicable To All Banks, Quasi-Banks, And Trust Entities national interest, the total amount of loans, credit accommodations and
Section 33. Acceptance of Demand Deposits. - A bank other than a guarantees as may be defined by the Monetary Board that may be
universal or commercial bank cannot accept or create demand deposits extended by a bank to any person, partnership, association, corporation or
except upon prior approval of, and subject to such conditions and rules as other entity shall at no time exceed twenty percent (20%) of the net worth
may be prescribed by the Monetary Board. (72-Aa) of such bank. The basis for determining compliance with single borrower
Section 34. Risk-Based Capital. - The Monetary Board shall prescribe the limit is the total credit commitment of the bank to the borrower.
minimum ratio which the net worth of a bank must bear to its total risk 35.2. Unless the Monetary Board prescribes otherwise, the total amount of
assets which may include contingent accounts. For purposes of this loans, credit accommodations and guarantees prescribed in the preceding
Section, the Monetary Board may require such ratio be determined on the paragraph may be increased by an additional ten percent (10%) of the net
basis of the net worth and risk assets of a bank and its subsidiaries, worth of such bank provided the additional liabilities of any borrower are
financial or otherwise, as well as prescribe the composition and the adequately secured by trust receipts, shipping documents, warehouse
manner of determining the net worth and total risk assets of banks and receipts or other similar documents transferring or securing title covering
their subsidiaries: Provided, That in the exercise of this authority, the readily marketable, non-perishable goods which must be fully covered by
Monetary Board shall, to the extent feasible conform to internationally insurance.
accepted standards, including those of the Bank for International 35.3 The above prescribed ceilings shall include (a) the direct liability of
Settlements(BIS), relating to risk-based capital requirements: Provided the maker or acceptor of paper discounted with or sold to such bank and
further, That it may alter or suspend compliance with such ratio whenever the liability of a general endorser, drawer or guarantor who obtains a loan
necessary for a maximum period of one (1) year: Provided, finally, That or other credit accommodation from or discounts paper with or sells
such ratio shall be applied uniformly to banks of the same category. In papers to such bank; (b) in the case of an individual who owns or controls
case a bank does not comply with the prescribed minimum ratio, the a majority interest in a corporation, partnership, association or any other
Monetary Board may limit or prohibit the distribution of net profits by such entity, the liabilities of said entities to such bank; (c) in the case of a
bank and may require that part or all of the net profits be used to increase corporation, all liabilities to such bank of all subsidiaries in which such
corporation owns or controls a majority interest; and (d) in the case of a required for loans, other credit accommodations and advances granted to
partnership, association or other entity, the liabilities of the members officers under a fringe benefit plan approved by the Bangko Sentral. The
thereof to such bank. required approval shall be entered upon the records of the bank and a
35.4. Even if a parent corporation, partnership, association, entity or an copy of such entry shall be transmitted forthwith to the appropriate
individual who owns or controls a majority interest in such entities has no supervising and examining department of the Bangko Sentral. Dealings of
liability to the bank, the Monetary Board may prescribe the combination of a bank with any of its directors, officers or stockholders and their related
the liabilities of subsidiary corporations or members of the partnership, interests shall be upon terms not less favorable to the bank than those
association, entity or such individual under certain circumstances, offered to others. After due notice to the board of directors of the bank,
including but not limited to any of the following situations: (a) the parent the office of any bank director or officer who violates the provisions of this
corporation, partnership, association, entity or individual guarantees the Section may be declared vacant and the director or officer shall be subject
repayment of the liabilities; (b) the liabilities were incurred for the to the penal provisions of the New Central Bank Act. The Monetary Board
accommodation of the parent corporation or another subsidiary or of the may regulate the amount of loans, credit accommodations and guarantees
partnership or association or entity or such individual; or (c) the that may be extended, directly or indirectly, by a bank to its directors,
subsidiaries though separate entities operate merely as departments or officers, stockholders and their related interests, as well as investments of
divisions of a single entity. such bank in enterprises owned or controlled by said directors, officers,
35.5. For purposes of this Section, loans, other credit accommodations and stockholders and their related interests. However, the outstanding loans,
guarantees shall exclude: (a) loans and other credit accommodations credit accommodations and guarantees which a bank may extend to each
secured by obligations of the Bangko Sentral or of the Philippine of its stockholders, directors, or officers and their related interests, shall
Government: (b) loans and other credit accommodations fully guaranteed be limited to an amount equivalent to their respective unencumbered
by the government as to the payment of principal and interest; (c) loans deposits and book value of their paid-in capital contribution in the bank:
and other credit accommodations covered by assignment of deposits Provided, however, That loans, credit accommodations and guarantees
maintained in the lending bank and held in the Philippines; (d) loans, secured by assets considered as non-risk by the Monetary Board shall be
credit accommodations and acceptances under letters of credit to the excluded from such limit: Provided, further, That loans, credit
extent covered by margin deposits; and (e) other loans or credit accommodations and advances to officers in the form of fringe benefits
accommodations which the Monetary Board may from time to time, granted in accordance with rules as may be prescribed by the Monetary
specify as non-risk items. Board shall not be subject to the individual limit. The Monetary Board shall
35.6. Loans and other credit accommodations, deposits maintained with, define the term "related interests." The limit on loans, credit
and usual guarantees by a bank to any other bank or non-bank entity, accommodations and guarantees prescribed herein shall not apply to
whether locally or abroad, shall be subject to the limits as herein loans, credit accommodations and guarantees extended by a cooperative
prescribed. bank to its cooperative shareholders. (83a)
35.7. Certain types of contingent accounts of borrowers may be included Section 37. Loans and Other Credit Accommodations Against Real
among those subject to these prescribed limits as may be determined by Estate. - Except as the Monetary Board may otherwise prescribe, loans
the Monetary Board.(23a) and other credit accommodations against real estate shall not exceed
Section 36. Restriction on Bank Exposure to Directors, Officers, seventy-five percent (75%) of the appraised value of the respective real
Stockholders and Their Related Interests. - No director or officer of any estate security, plus sixty percent (60%) of the appraised value of the
bank shall, directly or indirectly, for himself or as the representative or insured improvements, and such loans may be made to the owner of the
agent of others, borrow from such bank nor shall he become a guarantor, real estate or to his assignees. (78a)
endorser or surety for loans from such bank to others, or in any manner be Section 38. Loans And Other Credit Accommodations on Security of
an obligor or incur any contractual liability to the bank except with the Chattels and Intangible Properties. - Except as the Monetary Board may
written approval of the majority of all the directors of the bank, excluding otherwise prescribe, loans and other credit accommodations on security of
the director concerned: Provided, That such written approval shall not be chattels and intangible properties such as, but not limited to, patents,
trademarks, trade names, and copyrights shall not exceed seventy-five New Central Bank Act, the Board may by regulation, reduce the maximum
percent (75%) of the appraised value of the security, an such loans and ratios established in Sections 36 and 37 of this Act, or, in special cases,
other credit accommodation may be made to the title-holder of the increase the maximum ratios established therein. (78)
chattels and intangible properties or his assignees. (78a) Section 43. Authority to Prescribe Terms and Conditions of Loans and
Section 39. Grant and Purpose of Loans and Other Credit Other Credit Accommodations. - The Monetary Board, may, similarly in
Accommodations. - A bank shall grant loans and other credit accordance with the authority granted to it in Section 106 of the New
accommodations only in amounts and for the periods of time essential for Central Bank Act, and taking into account the requirements of the
the effective completion of the operations to be financed. Such grant of economy for the effective utilization of long-term funds, prescribe the
loans and other credit accommodations shall be consistent with safe and maturities, as well as related terms and conditions for various types of
sound banking practices. (75a) The purpose of all loans and other credit bank loans and other credit accommodations. Any change by the Board in
accommodations shall be stated in the application and in the contract the maximum maturities, as well as related terms and conditions for
between the bank and the borrower. If the bank finds that the proceeds of various types of bank loans and other credit accommodations. Any change
the loan or other credit accommodation have been employed, without its by the Board in the maximum maturities shall apply only to loans and
approval, for purposes other than those agreed upon with the bank, it other credit accommodations made after the date of such action. The
shall have the right to terminate the loan or other credit accommodation Monetary Board shall regulate the interest imposed on micro finance
and demand immediate repayment of the obligation. (77) borrowers by lending investors and similar lenders such as, but not limited
Section 40. Requirement for Grant Of Loans or 0ther Credit to, the unconscionable rates of interest collected on salary loans and
Accommodations. - Before granting a loan or other credit accommodation, similar credit accommodations. (78a)
a bank must ascertain that the debtor is capable of fulfilling his Section 44. Amortization on Loans and Other Credit Accommodations. -
commitments to the bank. Toward this end, a bank may demand from its The amortization schedule of bank loans and other credit accommodations
credit applicants a statement of their assets and liabilities and of their shall be adapted to the nature of the operations to be financed. In case of
income and expenditures and such information as may be prescribed by loans and other credit accommodations with maturities of more than five
law or by rules and regulations of the Monetary Board to enable the bank (5) years, provisions must be made for periodic amortization payments,
to properly evaluate the credit application which includes the but such payments must be made at least annually: Provided, however,
corresponding financial statements submitted for taxation purposes to the That when the borrowed funds are to be used for purposes which do not
Bureau of Internal Revenue. Should such statements prove to be false or initially produce revenues adequate for regular amortization payments
incorrect in any material detail, the bank may terminate any loan or other therefrom, the bank may permit the initial amortization payment to be
credit accommodation granted on the basis of said statements and shall deferred until such time as said revenues are sufficient for such purpose,
have the right to demand immediate repayment or liquidation of the but in no case shall the initial amortization date be later than five (5)
obligation. In formulating rules and regulations under this Section, the years from the date on which the loan or other credit accommodation is
Monetary Board shall recognize the peculiar characteristics of micro granted. (79a) In case of loans and other credit accommodations to micro
financing, such as cash flow-based lending to the basic sectors that are finance sectors, the schedule of loan amortization shall take into
not covered by traditional collateral. (76a) consideration the projected cash flow of the borrower and adopt this into
Section 41. Unsecured Loans or Other Credit Accommodations. - The the terms and conditions formulated by banks. (n)
Monetary Board is hereby authorized to issue such regulations as it may Section 45. Prepayment of Loans and Other Credit Accommodations. - A
deem necessary with respect to unsecured loans or other credit borrower may at any time prior to the agreed maturity date prepay, in
accommodations that may be granted by banks. (n) whole or in part, the unpaid balance of any bank loan and other credit
Section 42. Other Security Requirements for Bank Credits. - The accommodation, subject to such reasonable terms and conditions as may
Monetary Board may, by regulation, prescribe further security be agreed upon between the bank and its borrower. (80a)
requirements to which the various types of bank credits shall be subject, Section 46. Development Assistance Incentives. - The Bangko Sentral
and, in accordance with the authority granted to it in Section 106 of the shall provide incentives to banks which, without government guarantee,
extend loans to finance educational institutions cooperatives, hospitals regulations issued by the Monetary Board. (84a)
and other medical services, socialized or low-cost housing, local Section 50. Major Investments. - For the purpose or enhancing bank
government units and other activities with social content. (n) supervision, the Monetary Board shall establish criteria for reviewing
Section 47. Foreclosure of Real Estate Mortgage. - In the event of major acquisitions of investments by a bank including corporate
foreclosure, whether judicially or extra-judicially, of any mortgage on real affiliations or structures that may expose the bank to undue risks or in any
estate which is security for any loan or other credit accommodation way hinder effective supervision.
granted, the mortgagor or debtor whose real property has been sold for Section 51. Ceiling on Investments in Certain Assets. - Any bank may
the full or partial payment of his obligation shall have the right within one acquire real estate as shall be necessary for its own use in the conduct of
year after the sale of the real estate, to redeem the property by paying its business: Provided, however, That the total investment in such real
the amount due under the mortgage deed, with interest thereon at rate estate and improvements thereof including bank equipment, shall not
specified in the mortgage, and all the costs and expenses incurred by the exceed fifty percent (50%) of combined capital accounts: Provided,
bank or institution from the sale and custody of said property less the further, That the equity investment of a bank in another corporation
income derived therefrom. However, the purchaser at the auction sale engaged primarily in real estate shall be considered as part of the bank's
concerned whether in a judicial or extra-judicial foreclosure shall have the total investment in real estate, unless otherwise provided by the Monetary
right to enter upon and take possession of such property immediately Board. (25a)
after the date of the confirmation of the auction sale and administer the Section 52. Acquisition of Real Estate by Way of Satisfaction of Claims. -
same in accordance with law. Any petition in court to enjoin or restrain the Notwithstanding the limitations of the preceding Section, a bank may
conduct of foreclosure proceedings instituted pursuant to this provision acquire, hold or convey real property under the following circumstances:
shall be given due course only upon the filing by the petitioner of a bond 52.1. Such as shall be mortgaged to it in good faith by way of security for
in an amount fixed by the court conditioned that he will pay all the debts;
damages which the bank may suffer by the enjoining or the restraint of 52.2. Such as shall be conveyed to it in satisfaction of debts previously
the foreclosure proceeding. Notwithstanding Act 3135, juridical persons contracted in the course of its dealings, or
whose property is being sold pursuant to an extrajudicial foreclosure, shall 52.3. Such as it shall purchase at sales under judgments, decrees,
have the right to redeem the property in accordance with this provision mortgages, or trust deeds held by it and such as it shall purchase to
until, but not after, the registration of the certificate of foreclosure sale secure debts due it.
with the applicable Register of Deeds which in no case shall be more than Any real property acquired or held under the circumstances enumerated in
three (3) months after foreclosure, whichever is earlier. Owners of property the above paragraph shall be disposed of by the bank within a period of
that has been sold in a foreclosure sale prior to the effectivity of this Act five (5) years or as may be prescribed by the Monetary Board: Provided,
shall retain their redemption rights until their expiration. (78a) however, That the bank may, after said period, continue to hold the
Section 48. Renewal or Extension of Loans and Other Credit property for its own use, subject to the limitations of the preceding
Accommodations. - The Monetary Board may, by regulation, prescribe the Section. (25a)
conditions and limitations under which a bank may grant extensions or Section 53. Other Banking Services. - In addition to the operations
renewals of its loans and other credit accommodations. (81) specifically authorized in this Act, a bank may perform the following
Section 49. Provisions for Losses and Write-Offs. - All debts due to any services:
bank on which interest is past due and unpaid for such period as may be 53.1. Receive in custody funds, documents and valuable objects;
determined by the Monetary Board, unless the same are welt-secured and 53.2. Act as financial agent and buy and sell, by order of and for the
in the process of collection shall be considered bad debts within the account of their customers, shares, evidences of indebtedness and all
meaning of this Section. The Monetary Board may fix, by regulation or by types of securities;
order in a specific case, the amount of reserves for bad debts or doubtful 53.3. Make collections and payments for the account of others and
accounts or other contingencies. Writing off of loans, other credit perform such other services for their customers as are not incompatible
accommodations, advances and other assets shall be subject to with banking business;
53.4 Upon prior approval of the Monetary Board, act as managing agent, recover a loan or other credit accommodation; or
adviser, consultant or administrator of investment (d) Offer any director, officer, employee or agent of a bank any gift, fee,
management/advisory/consultancy accounts; and commission, or any other form of compensation in order to influence such
53.5. Rent out safety deposit boxes. persons into approving a loan or other credit accommodation application.
The bank shall perform the services permitted under Subsections 53.1, 55.3 No examiner, officer or employee of the Bangko Sentral or of any
53.2,53.3 and 53.4 as depositary or as an agent. Accordingly, it shall keep department, bureau, office, branch or agency of the Government that is
the funds, securities and other effects which it receives duly separate from assigned to supervise, examine, assist or render technical assistance to
the bank's own assets and liabilities: The Monetary Board may regulate any bank shall commit any of the acts enumerated in this Section or aid in
the operations authorized by this Section in order to ensure that such the commission of the same. (87-Aa)
operations do not endanger the interests of the depositors and other The making of false reports or misrepresentation or suppression of
creditors of the bank. In case a bank or quasi-bark notifies the Bangko material facts by personnel of the Bangko Sental ng Pilipinas shall be
Sentral or publicly announces a bank holiday, or in any manner suspends subject to the administrative and criminal sanctions provided under the
the payment of its deposit liabilities continuously for more than thirty (30) New Central Bank Act.
days, the Monetary Board may summarily and without need for prior 55.4. Consistent with the provisions of Republic Act No. 1405, otherwise
hearing close such banking institution and place it under receivership of known as the Banks Secrecy Law, no bank shall employ casual or non
the Philippine Deposit Insurance Corporation. (72a) regular personnel or too lengthy probationary personnel in the conduct of
Section 54. Prohibition to Act as Insurer. - A bank shall not directly its business involving bank deposits.
engage in insurance business as the insurer. (73) Section 56. Conducting Business in an Unsafe or Unsound Manner - In
Section 55. Prohibited Transactions. determining whether a particular act or omission, which is not otherwise
55.1. No director, officer, employee, or agent of any bank shall - prohibited by any law, rule or regulation affecting banks, quasi-banks or
(a) Make false entries in any bank report or statement or participate in any trust entities, may be deemed as conducting business in an unsafe or
fraudulent transaction, thereby affecting the financial interest of, or unsound manner for purposes of this Section, the Monetary Board shall
causing damage to, the bank or any person; consider any of the following circumstances:
(b) Without order of a court of competent jurisdiction, disclose to any 56.1 The act or omission has resulted or may result in material loss or
unauthorized person any information relative to the funds or properties in damage, or abnormal risk or danger to the safety, stability, liquidity or
the custody of the bank belonging to private individuals, corporations, or solvency of the institution;
any other entity: Provided, That with respect to bank deposits, the 56.2 The act or omission has resulted or may result in material loss or
provisions of existing laws shall prevail; damage or abnormal risk to the institution's depositors, creditors,
(c) Accept gifts, fees, or commissions or any other form of remuneration in investors, stockholders or to the Bangko Sentral or to the public in
connection with the approval of a loan or other credit accommodation general;
from said bank; 56.3 The act or omission has caused any undue injury, or has given any
(d) Overvalue or aid in overvaluing any security for the purpose of unwarranted benefits, advantage or preference to the bank or any party in
influencing in any way the actions of the bank or any bank; or the discharge by the director or officer of his duties and responsibilities
(e) Outsource inherent banking functions. through manifest partiality, evident bad faith or gross inexcusable
55.2. No borrower of a bank shall - negligence; or
(a) Fraudulently overvalue property offered as security for a loan or other 56.4 The act or omission involves entering into any contract or transaction
credit accommodation from the bank; manifestly and grossly disadvantageous to the bank, quasi-bank or trust
(b) Furnish false or make misrepresentation or suppression of material entity, whether or not the director or officer profited or will profit thereby.
facts for the purpose of obtaining, renewing, or increasing a loan or other Whenever a bank, quasi-bank or trust entity persists in conducting its
credit accommodation or extending the period thereof; business in an unsafe or unsound manner, the Monetary Board may,
(c) Attempt to defraud the said bank in the event of a court action to without prejudice to the administrative sanctions provided in Section 37 of
the New Central Bank Act, take action under Section 30 of the same Act of its branches, offices, subsidiaries and affiliates, including the results of
and/or immediately exclude the erring bank from clearing, the provisions its operations, and shall contain such information as may be required in
of law to the contrary notwithstanding. (n) Bangko Sentral regulations. (n)
Section 57. Prohibition on Dividend Declaration. - No bank or quasi-bank Section 61. Publication of Financial Statements. - Every bank, quasi-bank
shall declare dividends, if at the time of declaration: or trust entity, shall publish a statement of its financial condition, including
57.1 Its clearing account with the Bangko Sentral is overdrawn; or those of its subsidiaries and affiliates, in such terms understandable to the
57.2 It is deficient in the required liquidity floor for government deposits layman and in such frequency as may be prescribed Bangko Sentral, in
for five (5) or more consecutive days, or English or Filipino, at least once every quarter in a newspaper of general
57.3 It does not comply with the liquidity standards/ratios prescribed by circulation in the city or province where the principal office, in the case of
the Bangko Sentral for purposes of determining funds available for a domestic institution or the principal branch or office in the case of a
dividend declaration; or foreign bank, is located, but if no newspaper is published in the same
57.4 It has committed a major violation as may be determined by the province, then in a newspaper published in Metro Manila or in the nearest
Bangko Sentral (84a) city or province. The Bangko Sentral may by regulation prescribe the
Section 58. Independent Auditor. - The Monetary Board may require a newspaper where the statements prescribed herein shall be published.
bank, quasi-bank or trust entity to engage the services of an independent The Monetary Board may allow the posting of the financial statements of a
auditor to be chosen by the bank, quasi-bank or trust entity concerned bank, quasi-bank or trust entity in public places it may determine, lieu of
from a list of certified public accountants acceptable to the Monetary the publication required in the preceding paragraph, when warranted by
Board. The term of the engagement shall be as prescribed by the the circumstances. Additionally, banks shall make available to the public
Monetary Board which may either be on a continuing basis where the in such form and manner as the Bangko Sentral may prescribe the
auditor shall act as resident examiner, or on the basis of special complete set of its audited financial statements as well as such other
engagements; but in any case, the independent auditor shall be relevant information including those on enterprises majority-owned or
responsible to the bank's, quasi-bank's or trust entity's board of directors. controlled by the bank, that will inform the public of the true financial
A copy of the report shall be furnished to the Monetary Board. The condition of a bank as of any given time. In periods of national and/or local
Monetary Board may also direct the board of directors of a bank, quasi- emergency or of imminent panic which directly threaten monetary and
bank, trusty entity and/or the individual members thereof; to conduct, banking stability, the Monetary Board, by a vote of at least five (5) of its
either personally or by a committee created by the board, an annual members, in special cases and upon application of the bank, quasi-bank or
balance sheet audit of the bank, quasi-bank or trust entity to review the trust entity, may allow such bank, quasi-bank or trust entity to defer for a
internal audit and control system of the bank, quasi-bank or trust entity stated period of time the publication of the statement of financial
and to submit a report of such audit. (6-Da) condition required herein. (n)
Section 59. Authority to Regulate Electronic Transactions. - The Bangko Section 62. Publication of Capital Stock. - A bank, quasi-bank or trust
Sentral shall have full authority to regulate the use of electronic devices, entity incorporated under the laws of the Philippines shall not publish the
such as computers, and processes for recording, storing and transmitting amount of its authorized or subscribed capital stock without indicating at
information or data in connection with the operations of a bank; quasi- the same time and with equal prominence, the amount of its capital
bank or trust entity, including the delivery of services and products to actually paid up. No branch of any foreign bank doing business in the
customers by such entity. (n) Philippines shall in any way announce the amount of the capital and
Section 60. Financial Statements. - Every bank, quasi-bank or trust entity surplus of its head office, or of the bank in its entirety without indicating at
shall submit to the appropriate supervising and examining department of the same time and with equal prominence the amount of the capital, if
the Bangko Sentral financial statements in such form and frequency as any, definitely assigned to such branch, such fact shall be stated in, and
may be prescribed by the Bangko Sentral. Such statements, which shall be shall form part of the publication. (82)
as of a specific date designated by the Bangko Sentral, shall show thee Section 63. Settlement of Disputes. - The provisions of any law to the
actual financial condition of the institution submitting the statement, and contrary notwithstanding, the Bangko Sentral shall be consulted by other
government agencies or instrumentalities in actions or proceedings may be necessary to protect the interests of creditors. (86)
initiated by or brought before them involving controversies in banks, Section 69. Receivership and Involuntary Liquidation. - The grounds and
quasi-banks or trust entities arising out of and involving relations between procedures for placing a bank under receivership or liquidation, as well as
and among their directors, officers or stockholders, as well as disputes the powers and duties of the receiver or liquidator appointed for the bank
between any or all of them and the bank, quasi-bank or trust entity of shall be governed by the provisions of Sections 30, 31, 32, and 33 of the
which they are directors, officers or stockholders. (n) New Central Bank Act: Provided, That the petitioner or plaintiff files with
Section 64. Unauthorized Advertisement or Business Representation. - the clerk or judge of the court in which the action is pending a bond,
No person, association, or corporation unless duly authorized to engage in executed in favor of the Bangko Sentral, in an amount to be fixed by the
the business of a bank, quasi-bank, trust entity, or savings and loan court. This Section shall also apply to the extent possible to the
association as defined in this Act, or other banking laws, shall advertise or receivership and liquidation proceedings of quasi-banks. (n)
hold itself out as being engaged in the business of such bank, quasi-bank, Section 70. Penalty for Transactions After a Bank Becomes Insolvent. -
trust entity, or association, or use in connection with its business title, the Any director or officer of any bank declared insolvent or placed under
word or words "bank", "banking", "banker", "quasi-bank", "quasi-banking", receivership by the Monetary Board who refuses to turn over the bank's
"quasi-banker", "savings and loan association", "trust corporation", "trust records and assets to the designated receivers, or who tampers with
company" or words of similar import or transact in any manner the banks records, or who appropriates for himself for another party or
business of any such bank, corporation or association. (6) destroys or causes the misappropriation and destruction of the bank's
Section 65. Service Fees. - The Bangko Sentral may charge equitable assets, or who receives or permits or causes to be received in said bank
rates, commissions or fees, as may be prescribed by the Monetary Board any deposit, collection of loans and/or receivables, or who pays out or
for supervision, examination and other services which it renders under this permits or causes to be transferred any securities or property of said bank
Act. (n) shall be subject to the penal provisions of the New Central Bank Act. (85a)
Section 66. Penalty for Violation of this Act. - Unless otherwise herein CHAPTER VIILAWS GOVERNING OTHER TYPES OF BANKS
provided, the violation of any of the provisions of this Act shall be subject Section 71. Other Banking Laws. - The organization, the ownership and
to Sections 34, 35, 36 and 37 of the New Central Bank Act. If the offender capital requirements, powers, supervision and general conduct of business
is a director or officer of a bank, quasi-bank or trust entity, the Monetary of thrift banks, rural banks and cooperative banks shall be governed by
Board may also suspend or remove such director or officer. If the violation the provisions of the Thrift Banks Act, the Rural Banks Act, and the
is committed by a corporation, such corporation may be dissolved by quo Cooperative Code, respectively. The organization, ownership and capital
warranto proceedings instituted by the Solicitor General. (87) requirements, powers, supervision and general conduct of business of
CHAPTER VPLACEMENT UNDER CONSERVATORSHIP Islamic banks shall be governed by special laws. The provisions of this Act,
Section 67. Conservatorship. - The grounds and procedures for placing a however, insofar as they are not in conflict with the provisions of the Thrift
bank under conservatorship, as well as, the powers and duties of the Banks Act, the Rural Banks Act, and the Cooperative Code shall likewise
conservator appointed for the bank shall be governed by the provisions of apply to thrift banks, rural banks, and cooperative banks, respectively.
Section 29 and the last two paragraphs of Section 30 of the New Central However, for purposes of prescribing the minimum ratio which the net
Bank Act: Provided, That this Section shall also apply to conservatorship worth of a thrift bank must bear to its total risk assets, the provisions of
proceedings of quasi-banks. (n) Section 33 of this Act shall govern. (n)
CHAPTER VICESSATION OF BANKING BUSINESS CHAPTER VIIIFOREIGN BANKS
Section 68. Voluntary Liquidation. - In case of voluntary liquidation of any Section 72. Transacting Business in the Philippines. - The entry of foreign
bank organized under the laws of the Philippines, or of any branch or banks in the Philippines through the establishment of branches shall be
office in the Philippines of a foreign bank, written notice of such liquidation governed by the provisions of the Foreign Banks Liberalization Act. The
shall be sent to the Monetary Board before such liquidation shall be sent conduct of offshore banking business in the Philippines shall be governed
to the Monetary Board before such liquidation is undertaken, and the by the provisions of the Presidential Decree No. 1034, otherwise known as
Monetary Board shall have the right to intervene and take such steps as the "Offshore Banking System Decree." (14a)
Section 73. Acquisition of Voting Stock in a Domestic Bank. - Within service of summons and processes in legal proceedings against the bank
seven (7) years from the effectivity of this act and subject to guidelines and of notices affecting the bank may be made, and to file with the
issued pursuant to the Foreign Banks Liberalization Act, the Monetary Securities and Exchange Commission a duly authenticated nomination of
Board may authorize a foreign bank to acquire up to one hundred percent such agent. In the absence of the agent or head or should there be no
(100%) of the voting stock of only one (1) bank organized under the laws person authorized by the bank upon whom service of summons, processes
of the Republic of the Philippines. Within the same period, the Monetary and all legal notices may be made, service of summons, processes and
Board may authorize any foreign bank, which prior to the effectivity of this legal notices may be made upon the Bangko Sentral Deputy Governor In-
Act availed itself of the privilege to acquire up to sixty percent (60%) of Charge of the supervising and examining departments and such service
the voting stock of a bank under the Foreign Banks Liberalization Act and shall be as effective as if made upon the bank or its duly authorized agent
the Thrift Banks Act, to further acquire voting shares such bank to the or head. In case of service for the bank upon the Bangko Sentral Deputy
extent necessary for it to own one hundred percent (100%) of the voting Governor In-charge of the supervising and examining departments, the
stock thereof. In the exercise of the authority, the Monetary Board shall said deputy Governor shill register and transmit by mail to the president
adopt measures as may be necessary to ensure that at all times the or the secretary of the bank at its head or principal office a copy, duly
control of seventy percent (70%) of the resources or assets of the entire certified by him, of the summons, process, or notice. The sending of such
banking system is held by banks which are at least majority-owned by copy of the summons, process, or notice shall be a necessary part of the
Filipinos. Any right, privilege or incentive granted to a foreign bank under services and shall complete the service. The registry receipt of mailing
this Section shall be equally enjoyed by and extended under the same shall be prima facie evidence of the transmission of the summons, process
conditions to banks organized under the laws of the Republic of the or notice. All costs necessarily incurred by the said Deputy Governor for
Philippines. (Secs. 2 and 3, RA 7721 the making and mailing and sending of a copy of the summons, process,
Section 74. Local Branches of Foreign Banks. - In the case of a foreign or notice to the president or the secretary of the bank at its head or
bank which has more than one (1) branch in the Philippines, all such principal office shall be paid in advance by the party at whose instance the
branches shall be treated as one (1) unit for the purpose of this Act, and service is made. (17)
all references to the Philippine branches of foreign banks shall be held to Section 77. Laws Applicable. - In all matters not specifically covered by
refer to such units. (68) special provisions applicable only to a foreign bank or its branches and
Section 75. Head Office Guarantee. - In order to provide effective other offices in the Philippines any foreign bank licensed to do business in
protection of the interests of the depositors and other creditors of the Philippines shall be bound by the provisions of this Act, all other laws,
Philippine branches of a foreign bank, the head office of such branches rules and regulations applicable to banks organized under the laws of the
shall fully guarantee the prompt payment of all liabilities of its Philippine Philippines of the same class, except those that provide for the creation,
branch. (69) Residents and citizens of the Philippines who are creditors of formation, organization or dissolution of corporations or for the fixing of
a branch in the Philippines of a foreign bank shall have preferential rights the relations, liabilities, responsibilities, or duties of stockholders,
to the assets of such branch in accordance with the existing laws. (19) members, directors or officers of corporations to each other or to the
Section 76. Summons and Legal Process. - Summons and legal process corporation. (18)
served upon the Philippine agent or head of any foreign bank designated Section 78. Revocation of License of a Foreign Bank - The Monetary
to accept service thereof shall give jurisdiction to the courts over such Board may revoke the license to transact business in the Philippines of,
bank, and service of notices on such agent or head shall be as binding any foreign bank, if it finds that the foreign bank is insolvent or in
upon the bank which he represents as if made upon the bank itself. Should imminent danger thereof or that its continuance in business will involve
the authority of such agent or head to accept service of summons and probable loss to those transacting business with it. After the revocation of
legal processes for the bank or notice to it be revoked, or should such its license, it shall be unlawful for any such foreign banks to transact
agent or head become mentally incompetent or otherwise unable to business in the Philippines unless its license is renewed or reissued. After
accept service while exercising such authority, it shall be the duty of the the revocation of such license, the Bangko Sentral shall take the necessary
bank to name and designate promptly another agent or head upon whom action to protect the creditors of such foreign bank and the public. The
provisions of the New Central Bank Act on sanctions and penalties shall into court by parties to any legal proceedings and of property of any kind
likewise be applicable. (16) which may be brought under the jurisdiction of the court;
CHAPTER IXTRUST OPERATIONS 83.3. Act as the executor of any will when it is named the executor
Section 79. Authority to Engage in Trust Business. - Only a stock thereof;
corporation or a person duly authorized by the Monetary Board to engage 83.4 Act as administrator of the estate of any deceased person, with the
in trust business shall act as a trustee or administer any trust or hold will annexed, or as administrator of the estate of any deceased person
property in trust or on deposit for the use, benefit, or behoof of others. For when there is no will;
purposes of this Act, such a corporation shall be referred to as a trust 83.5. Accept and execute any trust for the holding, management, and
entity. (56a; 57a) administration of any estate, real or personal, and the rents, issues and
Section 80. Conduct of Trust Business. - A trust entity shall administer profits thereof; and
the funds or property under its custody with the diligence that a prudent 83.6. Establish and manage common trust funds, subject to such rules and
man would exercise in the conduct of an enterprise of a like character and regulations as may be prescribed by the Monetary Board.
with similar aims. No trust entity shall, for the account of the trustor or the Section 84. Deposit for the Faithful Performance of Trust Duties. - Before
beneficiary of the trust, purchase or acquire property from, or sell, transacting trust business, every trust entity shall deposit with the Bangko
transfer, assign, or lend money or property to, or purchase debt Sentral, as security for the faithful performance of its trust duties, cash or
instruments of, any of the departments, directors, officers, stockholders, securities approved by the Monetary Board in an amount equal to or not
or employees of the trust entity, relatives within the first degree of less than Five hundred thousand pesos (P500,000.00) or such higher
consanguinity or affinity, or the related interests, of such directors, officers amount as may fixed by the Monetary Board: Provided, however, That the
and stockholders, unless the transaction is specifically authorized by the Monetary Board shall require every trust entity to increase the amount of
trustor and the relationship of the trustee and the other party involved in its cash or securities on deposit with the Bangko Sentral in accordance
the transaction is fully disclosed to the trustor of beneficiary of the trust with the provisions of this paragraph. Should the capital and surplus fall
prior to the transaction. The Monetary Board shall promulgate such rules below said amount, the Monetary Board shall have the same authority as
and regulations as may be necessary to prevent circumvention of this that granted to it under the provisions of the fifth paragraph of Section 34
prohibition or the evasion of the responsibility herein imposed on a trust of this Act. A trust entity so long as it shall continue to be solvent and
entity. (56) comply with laws or regulations shall have the right to collect the interest
Section 81. Registration of Articles of Incorporation and By-Laws of a earned on such securities deposited with the Bangko Sentral and, from
Trust Entity. - The Securities and Exchange Commission shall not register time to time, with the approval of the Bangko Sentral, to exchange the
the articles of incorporation and by-laws or any amendment thereto, of securities for others. If the trust entity fails to comply with any law or
any trust entity, unless accompanied by a certificate of authority issued by regulation, the Bangko Sentral shall retain such interest on the securities
the Bangko Sentral. (n) deposited with it for the benefit of rightful claimants. Al claims rising out of
Section 82. Minimum Capitalization. - A trust entity, before it can engage the trust business of a trust entity shall have priority over all other claims
in trust or other fiduciary business, shall comply with the minimum paid-in as regards the cash or securities deposited as above provided. The
capital requirement which will be determined by the Monetary Board. (n) Monetary Board may not permit the cash or securities deposited in
Section 83. Powers of a Trust Entity. - A trust entity, in addition to the accordance with the provisions of this Section to be reduced below the
general powers incident to corporations, shall have the power to: prescribed minimum amount until the depositing entity shall discontinue
83.1 Act as trustee on any mortgage or bond issued by any municipality, its trust business and shall satisfy the Monetary Board that it has complied
corporation, or any body politic and to accept and execute any trust with all its obligations in connection with such business. (65a)
consistent with law; Section 85. Bond of Certain Persons for the Faithful Performance of
83.2 Act under the order or appointment of any court as guardian, Duties. - Before an executor, administrator, guardian, trustee, receiver or
receiver, trustee, or depositary of the estate of any minor or other depositary appointed by the court enters upon the execution of his duties,
incompetent person, and as receiver and depositary of any moneys paid he shall, upon order of the court, file a bond in such sum as the court may
direct. Upon the application of any executor, administrator, guardian, Act. (64a)
trustee, receiver, depositary or any other person in interest, the court Section 90. Investment of Non-Trust Funds. - The investment of funds
may, after notice and hearing, order that the subject matter of the trust or other than trust funds of a trust entity which is a bank, financing company
any part, thereof be deposited with a trust entity. Upon presentation of or an investment house shall be governed by the relevant provisions of
proof to the court that the subject matter of the trust has been deposited this Act and other applicable laws. (64)
with a trust entity. Upon presentation of proof to the court that the subject Section 91. Sanctions and Penalties. - A trust entity or any of its officers
matter of the trust has been deposited with a trust entity, the court may and directors found to have willfully violated any pertinent provisions of
order that the bond given by such persons for the faithful performance of this Act, shall be subject to the sanctions and penalties provided tinder
their duties be reduced to such sums as it may deem proper: Provided, Section 66 of this Act as well as Sections 36 and 37 of the New Central
however, That the reduced bond shall be sufficient to secure adequately Bank Act.
the proper administration and care of any property remaining under the Section 92. Exemption of Trust Assets from Claims. - No assets held by a
control of such persons and the proper accounting for such property. trust entity in its capacity as trustee shall be subject to any claims other
Property deposited with any trust entity in conformity with this Section than those of the parties interested in the specific trusts. (65)
shall be held by such entity under the orders and direction of the court. Section 93. Establishment of Branches of a Trust Entity. - The ordinary
(59) business of a trust entity shall be transacted at the place of business
Section 86. Exemption of Trust Entity from Bond Requirement. - No bond specified in its articles of incorporation. Such trust entity may, with prior
or other security shall be required by the court from a trust entry for the approval of the Monetary Board, establish branches in the Philippines and
faithful performance of its duties as court-appointed trustee, executor, the said entity shall be responsible for all business conducted in such
administrator, guardian, receiver, or depositary. However, the court may, branches to the same extent and in the same manner as though such
upon proper application with it showing special cause therefore, require business had all been conducted in the head office. For the purpose of this
the trust entity to post a bond or other security for the protection of funds Act, the trust entity and its branches shall be treated as one unit. (67)
or property confided to such entity. (59) CHAPTER XFINAL PROVISIONS
Section 87. Separation of Trust Business from General Business. - The Section 94. Phase Out of Bangko Sentral Powers Over Building and Loan
trust business and all funds, properties or securities received by any trust Associations. - Within a period of three (3) years from the effectivity of this
entity as executor, administrator, guardian, trustee, receiver, or Act, the Bangko Sentral shall phase out and transfer its supervising and
depositary shall be kept separate and distinct from the general business regulatory powers over building and loan associations to the Home
including all other funds, properties, and assets of such trust entity. The Insurance and Guaranty Corporation which shall assume the same. Until
accounts of all such funds, properties, or securities shall likewise be kept otherwise provided bylaw1 building and loan associations shall continue to
separate and distinct from the accounts of the general business of the be governed by Sections 39 to 55, Chapter VI of the General Banking Act,
trust entity. (61) as amended, including such rules and regulations issued pursuant thereto.
Section 88. Investment Limitations of a Trust Entity. - Unless otherwise Upon assumption by the Home Insurance and Guaranty Corporation of
directed by the instrument creating the trust, the lending and investment supervising and regulatory powers over building and loan associations, a
of funds and other assets acquired by a trust entity as executor, references in Sections 39 to 55 of the General Banking Act, as amended,
administrator, guardian, trustee, receiver or depositary of the estate of to the Bangko Sentral and the Monetary Board shall be deemed to refer to
any minor or other incompetent person shall be limited to loans or the Home Insurance and Guaranty Corporation and its board of directors,
investments as may be prescribed by law, the Monetary Board or any respectively. (n)
court of competent jurisdiction. (63a) Section 95. Repealing Clause. - Except as may be provided for in
Section 89. Real Estate Acquired by a Trust Entity. - Unless otherwise Sections 34 and 94 of this Act, the General Banking Act, as amended, and
specifically directed by the trustor or the nature of the trust, real estate the provisions of any other law, special charters, rule or regulation issued
acquired by a trust entity in whatever manner and for whatever purposes, pursuant to said General Banking Act, as amended, or parts thereof, which
shall likewise be governed by the relevant provisions of Section 52 of this may be inconsistent with the provisions of this Act are hereby repealed.
The provisions of paragraph 8, Section 8, Republic Act No. 3591, as newspapers of general circulation. (91)
amended by republic Act No. 7400, are likewise repealed. (90a) Approved,
Section 96. Separability Clause. - If any provision or section of this Act or
the application thereof to any person or circumstance is held invalid, the
other provisions or sections of this Act, and the application of such
provision or section to other persons or circumstances shall not be
affected thereby. (n)
Section 97. Effectivity Clause - This Act shall take effect fifteen (15) days
following its publication in the Official Gazette or in two (2) national