e) Within 60 days, the Monetary

Answers to Bar Questions in Banking 2003 Board shall determine and

to 1990 confirm if the bank is
Banking Laws; bank insolvency; requisites insolvent, and public
interest requires, to order
1997 (8) the liquidation of the bank.

Give the basic requirements to be complied

with by the BSP before the Monetary Board can Banking Laws; BSP
declare a bank insolvent, order it closed and
forbid it from doing further business in the 1998 (9)
Philippines.
1998 9 1. What are the responsibilities
Answer: and primary objectives of the BSP? (5%)
Before the Monetary Board can declare a
bank insolvent, order it closed and forbid it Answer:
from doing further business in the Philippines, 1998 9 1. The BSP shall provide policy
the following basic requirements must be directions in the areas of money, banking and
complied with by the BSP, to wit: credit. It shall have supervision over the
a) There must be an examination operations of banks and exercise such regulatory
by the head of the Department powers as provided in the Central Bank Act and
of Supervision or his other pertinent laws over the operations of
examiners or agents into the finance companies and non-bank financial
condition of the bank. institutions performing quasi-banking functions,
b) The examination discloses such as quasi-banks and institutions performing
that the condition of the similar functions. The primary objective of the
bank is one of insolvency, or BSP is to maintain price stability conducive to
that its continuance in a balanced and sustainable growth of the
business would involve economy. It shall promote and maintain monetary
probable loss to creditors or stability and convertibility of the Peso.
depositors.
c) The head of said Department Banking Laws; diligence required of banks
shall inform in writing the
Monetary Board of such facts. 1992 (11)
d) Upon finding said information
or statement to be true, the Placido, a bank depositor, left his
Monetary Board shall appoint checkbook on his desk at his house. Unknown to
a receiver to take charge of him, a visitor at the time, noticing the same,
the assets and liabilities of took a check therefrom, filled it up in the
the bank. amount of P3,000.00 and succeeded in encashing

1
the check on the same day. Placido’s account was begun to trickle to the business community about
thereby debited in the same amount. the dire financial pit the bank had fallen into.
Discovering the erroneous debit, Placido Immediately after the meeting, X caused the
demanded that the bank credit him with a like preparation and issuance of a manager’s check
amount. The bank refused on the ground that payable to himself in the sum of 5 million pesos
Placido was negligent in leaving his checkbook equivalent to the amount placed or invested in
on his desk so that he could not put up the the bank by a business acquaintance. He now
defense of forgery or want of authority under claims that he is keeping the funds in trust for
the NIL. the owner and that he had committed no violation
The Facts disclose that even to the naked of the General Banking Act (RA 337, as amended)
eye, there were marked differences between for which he should be punished. Do you agree
Placido’s signature and the one in the check that there has been no violation of the statute?
forged by the visitor. (3%)
As between Placido and the bank, who
should bear the loss? Explain. Suggested Answer:
2000 19 a) No. I do not agree that there
Answer: is no violation of the statute (RA 337, as
The bank should bear the loss. A drawee amended). X violated Sec 85 when he caused the
bank must exercise the highest diligence in preparation and issuance of a manager’s check
safeguarding the accounts of its client- payable to himself in the sum of P5 million.
depositors. The bank is also charged with This is paying out or permitting to be paid out
genuineness of the signatures of its current funds of the bank after the latter became
account holders. But what can be more striking insolvent. This act is penalized by fine of not
is that there were marked differences between less than P1,000.00 nor more than P10,000.00 and
Placido’s signature and the one in the check by imprisonment for not less than two nor more
forged by the visitor. Certainly, Placido was than ten years.
not negligent in leaving his checkbook in his
own desk (See PNB v Quimpo 158 s 582) Banking Laws; GBL; classifications of banks

Banking Laws; GBL; prohibited transactions after 2002 (7)

insolvency
There are six (6) classes of banks
2000 (19) identified in the General Banking Law of 2000.
Name at least four (4) of them and explain the
2000 19 a) The Monetary Board of the BSP distinguishing characteristic or function of
closed Urban Bank after it encountered crippling each one. (5%)
financial difficulties that resulted in a bank
run. X, one of the members of the BOD of the Suggested Answer:
bank, attended and stayed throughout the entire Any four (4) of the following six (6)
meeting of the Board that was held well in classes of banks identified in the General
advance of the bank run and before news had Banking Law of 2002, to wit:
2
1. Universal banks – These are those which primarily governed by the Cooperative
used to be called expanded commercial Code of the Philippines (RA 6938).
banks and the operations of which are 6. Islamic Banks – these are those which
now primarily governed by the General are organized primarily to provide
Banking Law of 2002. They can exercise financial and credit services in a
the powers of an investment house and manner or transaction consistent with
invest in non-allied enterprises. They the Islamic Shari’ah. At present, only
have the highest capitalization the Al Amanah Islamic Investment Bank of
requirement. the Philippines has been organized as an
2. Commercial banks – These are ordinary or Islamic Bank.
regular commercial banks, as
distinguished from a universal bank.
They have a lower capitalization Banking Laws; GBL; restrictions on loan
requirement than universal banks and accomodations
cannot exercise the powers of an
investment house and invest in non- 2002 (4)
allied enterprises.
3. Thrift banks – These banks (such as As part of the safeguards against
savings and mortgage banks, stock imprudent banking, the General Banking Law
savings and loan associations, and imposes limits or restrictions on loans and
private development banks) may exercise credit accommodations which may be extended by
most of the powers and functions of a banks. Identify at least two (2) of these limits
commercial bank except that they cannot, or restrictions and explain the rationale of
among others, open current or check each of them. (5%)
accounts without prior Monetary Board
approval, and they cannot issue letters Suggested Answer:
of credit. Their operations are governed Any two (2) of the following limits or
primarily by the Thrift Banks Act of restrictions on loan and credit transactions
1995 (RA 7906). which may be extended by banks, as part of the
4. Rural Banks – these are those which are safeguards against imprudent banking, to wit:
organized primarily to extend loans and 1. SBL Rules – SBL (i.e., single
other credit facilities to farmers, borrower’s limit) rules are those promulgated by
fishermen or farm families, as well as the Bangko Sentral ng Pilipinas (BS), upon the
cooperatives, merchants, and private and authority of Section 35 of the General Banking
public employees and whose operations Law of 2000, which regulate the total amount of
are primarily governed by the Rural loans, credit accommodations and guarantees that
Banks Act of 1992 (RA 7353). may be extended by a bank to any person,
5. Cooperative Banks – these are those partnership, association, corporation or other
which are organized primarily to provide entity. The rules seek to protect a bank from
financial and credit services to making excessive loans to a single borrower by
cooperatives and whose operations are
3
prohibiting it from lending beyond a specified
ceiling. Answer:
2. DOSRI Rules – These rules promulgated No. The RTC has no authority to restrain
by the BSP, upon authority of Section 5 of the the monetary board of the BSP from statutory
General Banking Law of 2000, which regulate the authority to undertake receivership and ultimate
amount of credit accommodations that a bank may liquidation of a bank. Any opposition to such an
extend to its directors, officers, stockholders action could be made to the court itself where
and their related interests (thus, DOSRI). assistance is sought.
Generally, a bank’s credit accommodations to its The action of the RTC where the proceeding
DOSRI must be in the regular course of business is pending appeal have to be made in the Court
and on terms not less favorable to the bank than of Appeals.
those offered to non-DOSRI borrowers.
3. No commercial bank shall make any loan Banking Laws; legal tender
or discount on the security of shares of its own
capital stock. 2000 19 b) After many years of shopping in
the Metro Manila area, housewife HW has
developed the sound habit of making cash
Banking Laws; jurisdiction over receivership purchases only, none on credit. In one shopping
issues trip to Mega Mall, she got the shock of her
shopping life for the first time, a store’s
1992 (10) smart salesgirl refused to accept her coins in
payment for a purchase worth not more than one
Family Bank was placed under statutory hundred pesos. HW was paying seventy pesos in
receivership and subsequently ordered liquidated 25-centavo coins and twenty five pesos in 10
by the Central Bank (CB) due to fraud and centavo coins. Strange as it may seem, the
irregularities in its lending operations which salesgirl told HW that her coins were not “legal
rendered it insolvent. Judicial proceedings for tender.” Do you agree with the salesgirl in
liquidation were thereafter commenced by the CB respect of her understanding of “legal tender?”
before the RTC. Family Bank opposed the Explain (2%)
petition.
Shortly thereafter, Family Bank filed in Answer:
the same court a special civil action against 2000 19 b) No. The salesgirl’s
the CB seeking to enjoin and dismiss the understanding that coins are not legal tender is
liquidation proceeding on the ground of grave not correct. Coins are legal tender in amounts
abuse of discretion by the CB. The court poised not exceeding fifty pesos for denominations from
to: 1) restrain the CB from closing Family Bank; twenty five centavos and above, and in amounts
and 2) authorize Family Bank to withdraw money not exceeding twenty pesos for denominations ten
from its deposits during the pendency of the centavos and less.
case.
If you were the Judge, would you issue Banking Laws; legal tender; uniform currency law
such orders? Why? (repealed)
4
 money market placement and a P40,000 trust fund
1993 (4) in a medium-size commercial bank.
a) State which of the four accounts are
On October 10, 1981, B borrowed from C the deemed insured by the PDIC.
sum of P1.5M. To hedge against the depreciation b) State which of the above accounts are
of the Phil peso, it was stipulated in the covered by the Law on Secrecy of Bank Deposits.
promissory note executed by B in favor of C that
the loan shall be paid in US dollars at the Answer:
exchange rate prevailing on the date the a) The P10th savings account and the P20th
obligation was incurred, plus interest at 12% checking account are deemed insured by the PDIC.
per annum. b) The P10th savings account and the P20th
1) Is the stipulation valid? Explain. checking account are covered by the Law on
2) Assuming that the stipulation is Secrecy of Bank Deposits.
invalid, does the obligation to pay subsist? How
should it be discharged?
Banking Laws; Secrecy of Bank Deposits Act
Answer:
1) No. The obligation was incurred in the 2001 (15)
Philippines. Hence, the Uniform Currency Law,
which requires payment in the Philippine The Law on Secrecy of Bank Deposits,
currency, applies. otherwise known as RA 1405, is intended to
2) Yes. It should be discharged in encourage people to deposit their money in
Philippine pesos at the rate of exchange banking institutions and also to discourage
prevailing at the time of payment. private hoarding so that the same may be
Note: Villanueva p. 992, the Uniform properly utilized by banks to assist in the
Currency Law has been repealed by RA 8183. Now, economic development of the country. Is a notice
the answer to no. 1 would be yes, however, of garnishment served on a bank at the instance
foreign currency may be paid in Philippine of a creditor of a depositor covered by the said
equivalent by debtor because it is legal tender. law? State the reason(s) for your answer. (5%)

Banking Laws; PDIC Law, Secrecy of Bank Deposits Suggested Answer:

Act No. The notice of garnishment served on a
bank at the instance of a creditor is not
1997 (7) covered by the Law on Secrecy of Bank Deposits.
Garnishment is just a part of the process of
An employee of a large manufacturing firm execution. The moment a notice of garnishment is
earns a salary which is just a bit more than served on a bank and there exists a deposit by
what he needs for a comfortable living. He is the judgment debtor, the bank is directly
thus able to still maintain a P10,000 savings accountable to the sheriff, for the benefit of
account, a P20,000 checking account, a P30,000 the judgment creditor, for the whole amount of
the deposit. In such event, the amount of the
5
deposit becomes, in effect, a subject of the
litigation. Banking Laws; Secrecy of Bank Deposits Act

Banking Laws; Secrecy of Bank Deposits Act 1998 (20)

2000 (2) An insurance company is deluded into

releasing a check to A for P35th to pay for
GP is a suspected jueteng lord who is Treasury Bills (T-bills) which A claims to be en
rumored to be enjoying police and military route on board an armored truck from a
protection. The envy of many drug lords who had government bank. The check is delivered to A who
not escaped the dragnet of the law, GP was deposits it to his account with XYZ Bank before
summoned to a hearing of the Committee on the insurance company realizes it is a scam.
Racketeering and Other Syndicated Crimes of the Upon such realization, the insurance company
House of Representatives, which was conducting a files an action against A for recovery of the
congressional investigation “in aid of amount defrauded and obtains a writ of
legislation” on the involvement of police and preliminary attachment. In addition to the writ,
military personnel, and possibly even of local the Bank is also served a subpoena to examine
government officials, in the illegal activities the account records of A. The Bank declines to
of suspected gambling and drug lords. Subpoenaed provide any information in response to the writ
to attend the investigation were officers of and moves to quash the subpoena invoking secrecy
certain identified banks with a directive to of bank deposits under RA 1405, as amended. Can
them to bring the records and documents of bank the Bank justifiably invoke RA 1405 and a) not
deposits of individuals mentioned in the respond to the writ and b) quash the subpoena
subpoenas, among them GP. GP and the banks for examination? (5%)
opposed the production of the banks’ records of
deposits on the ground that no such inquiry is Answer:
allowed under the Law on Secrecy of Bank Yes. Whether the transaction is considered
Deposits (RA 1405 as amended). Is the opposition a sale or money placement does not make the
of GP and the banks valid? Explain. money “subject matter of litigation” within the
meaning of Sec 2 of RA 1405 which prohibits the
Suggested Answer: disclosure or inquiry into bank deposit except
Yes. The opposition is valid. GP is not a “in cases where the money deposited or invested
public official. The investigation does not is the subject matter of litigation” nor will it
involve one of the exceptions to the prohibition matter whether the money was “swindled.”
against disclosure of any information concerning
bank deposits under the Law on Secrecy of Bank
Deposits. The Committee conducting the Banking Laws; Secrecy of Bank Deposits Act
investigation is not a competent court or the
Ombudsman authorized under the law to issue a 1995 (11)
subpoena for the production of the bank record
involving such disclosure.
6
 Michael withdrew without authority funds
of the partnership in the amounts of P500th and 1994 (17)
US$50th for services he claims he rendered for
the benefit of the partnership. He deposited the Miguel, a special customs agent is charged
P500th in his personal peso current account with before the Ombudsman with having acquired
Prosperity Bank and the US$50th in his personal property out of proportion to his salary, in
foreign currency savings account with Eastern violation of the Anti-Graft and Corrupt
Bank. Practices Act. The Ombudsman issued a subpoena
The partnership instituted an action in duces tecum to the Banco de Cinco commanding its
court against Michael, Prosperity, and Eastern representative to furnish the Ombudsman records
to compel Michael to return the subject funds to of transactions by or in the name of Miguel, his
the partnership and pending litigation to order wife and children. A second subpoena was issued
both banks to disallow any withdrawal from his expanding the first by including the production
accounts. of records of friends of Miguel in said bank and
At the initial hearing of the case the in all its branches and extension offices,
court ordered Prosperity to produce the records specifically naming them.
of Michael’s peso current account, and Eastern Miguel moved to quash the subpoenas
to produce the records of his foreign currency arguing that they violate the Secrecy of Bank
savings account. Deposits Law. In addition, he contends that the
Can the court compel Prosperity and subpoenas are in the nature of “fishing
Eastern to disclose the bank deposits of expedition” or “general warrants” and are
Michael? Discuss fully. constitutionally impermissible with respect to
private individuals who are not under
Answer: investigation.
Is Miguel’s contention tenable?
Yes, as far as the peso account is
concerned. Sec 2 of RA 1405 allows the Answer:
disclosure of bank deposits in case where the No. Miguel’s contention is not tenable.
money deposited is the subject matter of The inquiry into illegally acquired property
litigation. Since the case filed against Michael extends to cases where such property is
is aimed at recovering the amount he withdrew concealed by being held by or recorded in the
from the funds of the partnership, which amount name of other persons. To sustain Miguel’s
he allegedly deposited in his account, a theory and restrict the inquiry only to property
disclosure of his bank deposits would be proper. held by or in the name of the government
No, with respect to the foreign currency official would make available to persons in
account. Under the Foreign Currency Law, the government who illegally acquire property an
exemption to the prohibition against disclosure easy means of evading prosecution. All they have
of information concerning bank deposits is the to do would be to simply place the property in
written consent of the depositor. the name of persons other than their spouses and
children (Banco Filipino Savings vs. Purisima
Banking Laws; Secrecy of Bank Deposits Act
7
161 s 576; Sec 8 Anti-Graft Law as amended by BP
195) Banking Laws; Secrecy of Bank Deposits Act

Banking Laws; Secrecy of Bank Deposits Act 1991 (1)

1992 (12) The law (RA 6832) creating a Commission to

conduct a Through Fact-Finding Investigation of
Socorro received $10,000 from a foreign the Failed Coup d’Etat of Dec 1989, Recommend
bank although she was entitled only to Measures to Prevent the Occurrence of Similar
$1,000.00. In an apparent plan to conceal the Attempts At a Violent Seizure of Power and for
erroneously sent amount, she opened a dollar Other Purposes, provides that the Commission may
account with her local bank, deposited the ask the Monetary Board to disclose information
$10,000 and issued 4 checks in the amount of on and/or to grant authority to examine any bank
$2,000 and 1 check for $1,000 each payable to deposits, trust or investment funds, or banking
different individuals who deposited the same in transactions in the name of and/or utilized by a
their respective dollar accounts with different person, natural or juridical, under
local banks. investigation by the Commission, in any bank or
The sender bank then brought a civil suit banking institution in the Philippines, when the
before the RTC for the recovery of the Commission has reasonable ground to believe that
erroneously sent amount. In the course of the said deposits, trust or investment funds, or
trial, the sender presented testimonies of bank banking transactions have been used in support
officials to show that the funds were, in fact, or in furtherance of the objectives of the said
deposited in a bank by Socorro and paid out to coup d’etat.
several persons, who participated in the Does not the above provision violate the
concealment and dissipation of the amount that Law on Secrecy of Bank Deposits (RA 1405)?
Socorro had erroneously received.
Socorro moved to strike out said Answer:
testimonies from the record invoking the law on The Law on Secrecy of Bank Deposits is
secrecy of bank deposits. itself merely a statutory enactment, and it may,
If you were the Judge, would you issue an therefore, be modified, or amended (such as by
order to strike them out? Why? providing further exceptions therefrom), or even
repealed, expressly or impliedly, by a
Answer: subsequent law. The Secrecy of Bank Deposits Act
I will not strike out the testimonies from did not amount to a contract between the
the record. The testimonies of bank officials depositors and depository banks within the
indicating where the questioned dollar accounts meaning of the non-impairment clause of the
were opened in depositing misappropriated sums Constitution. Even if it did, the police power
must be considered as likewise involved in of the State is superior to the non-impairment
litigation – one which is among the excepted clause. RA 6832, creating a commission to
cases under the Secrecy of Bank Deposits Act conduct an investigation of the failed 1989 coup
(Melon Bank v Magsino 190 s 633) d’etat and to recommend measures to prevent
8
similar attempts to seize power is a valid a Bank employee to a co-employee is not the
exercise of police power. disclosure contemplated by law. If anyone should
be liable, it will be the bank employee who
Banking Laws; Secrecy of Bank Deposits Act disclosed the information.

1990 (7) b) Among the instances excepted from the

coverage of the Secrecy of Bank Deposits Act are
a) Manosa, a newspaper columnist, while Anti-graft cases. Hence Gigi may not validly
making a deposit in a bank, overheard a pretty oppose the issuance of a subpoena duces tecum
bank teller informing a co-employee that Gigi, a for the bank records on her.
well known public official, has just a few
hundred pesos in her bank account and that her Banking Laws; Truth in Lending Act
next check will in all probability bounce.
Manosa wrote this information in his newspaper 2000 (20)
column. Thus, Gigi filed a complaint with the
City Fiscal of Manila for unlawfully disclosing Embassy Appliances sells home theater
information about her bank account. Will the components that are designed and customized as
said suit prosper? Explain your answer. entertainment centers for consumers within the
b) Supposing that Gigi is charged with medium-to-high price bracket. Most, if not all,
unlawfully acquiring wealth under RA 1379 and of these packages are sold on installment basis,
that the fiscal issued a subpoena duces tecum usually by means of credit cards allowing a
for the records of the bank account of Gigi. May maximum of 36 equal monthly payments. Preferred
Gigi validly oppose the said issuance on the credit cards of this type are those issued by
ground that the same violates the law on secrecy banks, which regularly hold mall wide sales
of bank deposits? Explain your answer. blitzes participated in by appliance retailers
like Embassy Appliances. You are a buyer of a
Answer: home theater center at Embassy Appliances. The
a) The Secrecy of Bank Deposits Act salesclerk who is attending to you simply swipes
prohibits, subject to its exclusionary clauses, your credit card on the electronic approval
any person from examining, inquiring or looking machine (which momentarily prints out your
into all deposits of whatever nature with banks charge slip since you have unlimited credit),
or banking institutions in the Philippines which tears the slip from the machine, hands the same
by law are declared “absolutely confidential” in over to you for your signature, and without
nature. Manosa who merely overheard what more, proceeds to arrange the deliver and
appeared to be a vague remark of a Bank employee installation of your new home theater system.
to a co-employee and writing the same in his You know you will receive a statement on your
newspaper column is neither the inquiry nor credit card purchases from the bank containing
disclosure contemplated by law. an option to pay only a minimum amount, which is
Alternative Answer: usually 1/36 of the total price you were charged
a) The complaint against Manosa will not for your purchase. Did Embassy Appliances comply
prosper because merely writing a vague remark of
9
with the provisions of the Truth in Lending Act law provides that the creditor must make a full
(RA 3765)? disclosure of the credit lost. The statement
that the total amount due includes the principal
Suggested Answer: and the financial charges, without specifying
There is no need for Embassy Appliances to the amounts due on each portion thereof would be
comply with the Truth in Lending Act. The insufficient and unacceptable.
transaction is not a sale on installment basis.
Embassy Appliances is a seller on cash basis. It 1991 18 b) A violation of the Truth in
is the credit card company which allows the Lending Act will not adversely affect the
buyer to enjoy the privilege of paying the price validity of the contract itself.
on installment basis.
1991 18 c) It would allow Dana to refuse
Banking Laws; Truth in Lending Act payment of financial charges or, if already
paid, to recover the same. Dana may also
1991 (18) initiate criminal charges against the creditor.
Alternative Answer:
Dana Gianina purchased on a 36 month 1991 18 c) (Per Atty Jomby Paras if u read
installment basis the latest model of the Nissan the provisions closely) Under the Truth in
Sentra Sedan car from the Jobel Cars Inc. In Lending Act, said financial charges are valid,
addition to the advertised selling price, the and Dana may not refuse payment thereof. Only
latter imposed finance charges consisting of criminal charges may be initiated against the
interests, fees and service charges. It did not, creditor.
however, submit to Dana a written statement
setting forth therein the information required
by the Truth in Lending Act (RA 3765).
Nevertheless, the conditional deed of sale which
the parties executed mentioned that the total
amount indicated therein included such finance
charges.
1991 18 a) Has there been substantial
compliance of the aforesaid Act?
1991 18 b) If your answer to the foregoing
question is in the negative, what is the effect
of the violation on the contract?
1991 18 c) In the event of a violation of
the Act, what remedies may be availed of by
Dana?

Answer:
1991 18 a) There was no substantial
compliance with the Truth in Lending Act. The
10