Banking

"Banks" shall refer to entities engaged in the lending of funds obtained in the form of deposits.
[Sec. 3.1]
How Banks are Structured
Generally, banks are corporations. However, cooperative banks may also be formed under the
Cooperative Code.
b. Classification of Banks
Universal Bank (UB)
As the name implies, a universal bank has the most banking power, as it has the same powers as
a commercial bank, plus the powers:
1. To operate an investment house, whether as an integral unit or as a subsidiary.
In turn, an investment house underwrites securities either on firm underwriting (good as sold) or
best efforts (excess to be returned to the firm)
2. To invest in non-allied enterprises
Commercial Bank (KB)
Has the powers defined in Secs. 29. And 53, infra. This is the most common kind of bank.
Thrift Bank
Thrift banks are banks that focus on basic banking services for their clients, with an emphasis on
individuals and small businesses. Thrift banks are primarily governed by RA 7906, the Thrift
Banks Act.
Thrift banks include:
• Savings and mortgage banks;
• Savings and loan associations; and
• Private development banks.
Rural Banks
These are banks that are formed for the purpose of providing adequate credit facilities to farmers
and merchants, or to cooperatives of such farmers and merchants and in general, the people of
the rural communities.
They are primarily governed by RA 7353 (Rural Banks Act).
Cooperative Banks
These are banks organized as cooperatives under RA 6938, the Cooperative Code.
Islamic Banks
There is only one Islamic Bank in the Philippines, the Al-Amanah Islamic Bank, which aims to
provide banking under the Shari’a principles governing banking.
Other banks as classified by the BSP
This includes Land Bank of the Philippines, the Philippine Veteran’s Bank, and Development
Bank of the Philippines.
Nadine has a checking account with Fair & Square Bank. One day, she lost her checkbook
and the finder was able to forge her signature and encash the forged check. Will Nadine be
able to recover the amount debited from her checking account from Fair & Square Bank?
Justify your answer.
(3%)
Yes, Nadine should be able to recover the amount debited from herchecking account from Fair
and Square Bank. The Bank is supposed to knowthe signature of its clients. The Bank was thus
negligent in not detecting the forgery of Nadine’s signature and paying the check. Under the
circumstances, there was no negligence on the part of Nadine which would preclude her from
invoking forgery.
A. On the anti-money laundering laws:

1. What is the distinction between a “covered transaction report” and a
“suspicious transaction report”? (2%)
A covered transaction report involves transaction/s in cash or other equivalent monetary
instrument involving a total amount in excess of 500k within one banking day while suspicion
transaction report involves transactions with covered institutions regardless of the amounts
involved made under any of the suspicious circumstances enumerated by law.
2. Does the Anti-Money Laundering Council have the authority to freeze deposits? Explain.
(2%)
No. The authority to freeze deposits is lodged with and based upon the order of the Court of
Appeals. ( Section 10 of RA 9160 as amended )
A commercial bank wants to acquire shares in a cement manufacturing company. Do you

think it can do that? Why or why not? (2%)
A commercial bank can not acquire shares in a cement manufacturing company because a
commercial bank can only invest in the equity of allied undertakings, meaning, undertakings
related to banking.
Q: XYZ Corporation is engaged in lending funds to small vendors in various public

markets. To fund the lending, XYZ Corporation raised funds through borrowings from
friends and investors. Which statement is most accurate? (2012 Bar)
A: b. XYZ Corporation is a quasi-bank BANK POWERS AND LIABILITIES
(d) Splitting of deposits (2%)

Splitting of deposits occurs whenever a deposit account with an outstanding balance of more
than the statutory maximum amount of insured deposit maintained under the name of natural or
juridical persons is broken down and transferred into two (2) or more accounts in the name/s of
natural or juridical persons or entities who have no beneficial ownership on transferred deposits
in their names within one hundred twenty (120) days immediately preceding or during a bank-
declared bank holiday, or immediately preceding a closure order issued by the Monetary Board
of the Bangko Sentral ng Pilipinas for the purpose of availing of the maximum deposit insurance
coverage.
Prosperous Bank is a domestic bank with head office in Makati. It handles the banking
requirements of thousands of clients.
The AMLC initiated a discreet investigation of the financial transactions of Lorenzo, a
suspected drug trafficker based in Naga City. The intelligence group of the AMLC, in
coordination with the counterpart group from the PDEA and the NBI, gathered ample
evidence establishing Lorenzo’s unlawful drug activities. The AMLC had probable cause
that his deposits and investments in various banks, including Prosperous Bank, were
related to money laundering.
Accordingly, the AMLC now transmits to Prosperous Bank a formal demand to allow its
agent to examine the banking transactions of Lorenzo, but Prosperous Bank refuses the
demand. (2017 Bar Question)
Is Prosperous Bank’s refusal justified? Explain your answer. (4%)
Prosperous Bank’s refusal is not justified. Notwithstanding the provisions of RA 1405, RA 6426
and RA 8791, the AMLC may inquire into or examine any particular deposit or investment with
any bank or non- bank financial institution if there is a probable cause that the deposits are
related to unlawful activity under the Anti-money laundering law, as in this case. Bank inquiry
order from the court is not necessary since the predicate crime is violation of the Dangerous
Drugs Law (Section 11 of RA 9160, as amended).

Banking

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Banking

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"Banks" shall refer to entities engaged in the lending of funds obtained in the form of deposits.

A. On the anti-money laundering laws:

A commercial bank wants to acquire shares in a cement manufacturing company. Do you

Q: XYZ Corporation is engaged in lending funds to small vendors in various public

(d) Splitting of deposits (2%)

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