Secrecy of Bank Deposits

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LAW ON SECRECY OF BANK DEPOSITS
Purposes:
1. to encourage people to deposit their money in banks
2. to discourage private hoarding so that the banks may lend out the money and assist in the
economic development of the country
Prohibited Acts:
1. the EXAMINAI!N AN" IN#$I%& !% '!!(IN) into !! deposits o" #hte$er
%ture *ith banks or banking institutions in the +hilippines ,including investments in
bonds issued by the )overnments or its political subdivisions and instrumentalities- by
i. any person or
ii. any government official or
iii. any bureau or
iv. any office
2. the "I./'!.$%E by
i. any !00I/IA' of any banking institution or
ii. any EM+'!&EE of any banking institution
to AN& $NA$1!%I2E" +E%.!N of any information concerning the said deposit.
 M3 a ne*spaper columnist3 *hile making a deposit in a bank3 overheard a bank teller
informing a co4employee that )3 a *ell4kno*n public official3 has 5ust a fe* hundred
pesos in )6s bank account and that her check *ill probably bounce. M *rote about this
information in his ne*spaper column. ) filed a complaint against M for unla*fully
disclosing information about her bank account.
he suit *ill not prosper. he 'a* on .ecrecy of 7ank "eposits does not penali8e the
mere receipt of information about a bank account. M3 having merely overheard the
information on )6s account and not having e9amined3 in:uired or looked into the said
account cannot be penali8ed under .ec. 2 of the 7ank .ecrecy 'a*. Neither could he be
penali8ed under .ec. ; of the 7ank .ecrecy 'a* since .ec. ; refers to disclosures made
by officials or employees of banking institutions.
 A has +1<3<<< in his savings account3 +2<3<<< in his checking account3 +;<3<<< in his
money market placement and +=<3<<< in a trust fund. >hich of the accounts are covered
by the .ecrecy of 7ank "eposits 'a*?
!nly the savings and checking account are covered. he money market placement and
the trust fund are not covered.
1

 A bought some goods from a department store and paid *ith his personal check. he
check *as dishonored. !n the assumption that the department store did not kno* *ho A
*as3 the store manager in:uired from the check6s dra*ee bank the name of the
dishonored check. he dra*ee bank refused to disclose the name of the dra*er invoking
the .ecrecy of 7ank "eposits 'a*.
In this case3 the bank is not 5ustified in not divulging the name of the dra*er to the store
manager. he store manager is merely in:uiring as to the name of the dra*er of the
check. o divulge the same *ould not in any*ay amount to disclosure of any
1
his *as the ans*er of the resource persons for the 1@@A 7ar E9ams ,see p. ;@-. 1o*ever3
Miravite thinks that the trust fund is also covered. ,p. B;A- Miravite says a money market placement is not
covered since it is not deposited in the bank.
1
information concerning his deposits. Also3 the in:uiry is not an investigation of any
balance in favor of the dra*er. o include such disclosure *ithin the ambit of the
prohibition *ould be unduly straining and stretching the meaning of the .ecrecy of 7ank
"eposits 'a*.
Instances >hen E9amination or "isclosure of Information about 7ank "eposits is Allo*ed
1. upon >%IEN +E%MI..I!N !0 1E "E+!.I!%
2. in cases of IM+EA/1MEN
;. upon order of a competent court in cases of
I. 7%I7E%& of public officials or
II. "E%E'I/I!N of duty of public officials
=. in cases *here the money deposited or invested is the sub5ect matter of the litigation
&e!!o% B%' $s( &)si%o
Even in cases not involving prosecution under the Anti4)raft and /orrupt
+ractices Act3 an in:uiry into the *hereabouts of the amount converted necessarily to
*hatever is concealed ,by being held or recorded in the name of persons other than the
one responsible for illegal ac:uisition- inasmuch as the case is aimed at recovering the
amount converted.
B. upon order of the court in cases of $NEX+'AINE" >EA'1 $N"E% .E/. C !0 1E
ANI )%A0 AN" /!%%$+ +%A/I/E. A/ D %A ;<1@ ,+N7 v. )ancayco-
B%co Fi!ipi%o $s( Purisi*
he permitted in:uiry into illegally ac:uitted property in anti4graft cases e9tends
to instances *here such property is concealed by being held by or recorded in the
name of other persons.
E. upon order of the /ommissioner of Internal %evenue in respect of the bank deposits of a
decedent for the +$%+!.E !0 "EE%MININ) .$/1 "E/E"EN6. )%!..
E.AE ,.ec. E F0G F1G3 NI%/-
A. upon the order of the /ommissioner of Internal %evenue in respect of the bank deposits
of a ta9payer *ho has filed an A++'I/AI!N 0!% /!M+%!MI.E !0 1I. AX
'IA7I'I& under .ec. 2<= ,A- ,2- of the NI%/ by reason of financial incapacity to pay
his ta9 liability ,.ec. E F0G F2G3 NI%/-
C. upon !%"E% !0 1E !M7$".MAN ,.ec. 1B FCG3 %A EAA<-
 M *as able to secure a favorable 5udgment against + for recovery of a sum of money and
the said 5udgment became final and e9ecutory. M *as informed by someone that + might
have a deposit *ith a bank in *hich M *as a stockholder. Invoking his right as a
stockholder to inspect the corporate records3 M demanded to see the records to see if +
really had a savings deposit *ith the bank. he bank manager refused invoking the
.ecrecy of 7ank "eposits 'a*.
In this case3 the stockholder6s right to the inspection of corporate books *ill have to bo*
to the provisions of the .ecrecy of 7ank "eposits 'a*. he case of M does not fall
under any of the e9ceptions. he only remedy of M is to ask the court for a *rit of
garnishment to be served on the bank.
 he /ity 0iscal re:uired a bank to produce at a hearing the records of the bank deposits
of A. he bank refused invoking the .ecrecy of 7ank "eposits 'a*. hreatened *ith
2
prosecution3 the bank filed an action for declaratory relief. May the bank be compelled to
disclose the bank deposits of A?
$nless the case comes under one of the e9ceptions3 the court cannot compel the bank to
disclose A6s deposits.
+r%ish*e%t o" B%' Deposits
 garnishment of bank deposits *ill not violate the bank secrecy la*
Chi% B%' $s( Orte)
he discussion in the conference committee report on the .enate and 1ouse bills
*hich eventually became %A 1=<B indicates that it *as not the intention of the legislature
to place bank deposits beyond the reach of the e9ecution to satisfy a final 5udgment.
0urthermore3 there is no real in:uiry in an order for garnishment and if the e9istence of
the deposit *ere disclosed3 the disclosure *as purely incidental to the e9ecution process.
RCBC $s( de Cstro
he ./ said that to e9pose garnishees to risks for obeying court orders and
processes *ould only undermine the administration of 5ustice.
PCIB $s( Court o" Appe!s
)arnishment is considered as a specie of attachment for reaching credits
belonging to the 5udgment debtor and o*ing to him from a stranger to the litigation. he
garnishee ,the ;
rd
person- is obliged to deliver the credits3 etc. to the proper officer issuing
the *rit and Hthe la* e9empts from liability the person having in his possession or under
his control any credits or other personal property belonging to the defendant3 of such
property be delivered or transferred to the clerk3 sheriff3 or other officer of the court in
*hich the action is pending.
.ince there is no evidence that the bank divulged the information that its client had an
account *ith the said bank and it is undisputed that the said account *as properly the
ob5ect of the notice of garnishment and the *rit of e9ecution carried out by the deputy
sheriff3 a duly authori8ed officer of the court3 there is no violation of the .ecrecy of 7ank
"eposits 'a*.
 he branch manager of a bank3 in response to a notice of garnishment3 discloses to the
sheriff the outstanding deposit balance of the 5udgment debtor *ith the bank as of the
date of the receipt of the garnishment notice. he 5udgment debtor files a criminal
complaint for violation of the 7ank .ecrecy 'a*.
In this case the criminal complaint *ill not prosper. he prohibition against e9amination
of3 or in:uiry3 into a bank deposit does not preclude its being garnished to insure
satisfaction of a 5udgment. Indeed3 there is no real in:uiry in such a case3 and if the
e9istence of the deposit is disclosed3 the disclosure is purely incidental to the e9ecution
process.
App!ictio% o" the Secrec, o" B%' Deposits o% S"et, Deposit Bo-es
 the prohibition against in:uiry or disclosure of bank accounts under the .ecrecy of 7ank
"eposits 'a* does N! to apply to safety deposit bo9es
2

Speci! Note o% Forei)% Curre%c, Deposits
 the 0oreign /urrency "eposit Act ,%A E=2E- allo*s any person to deposit33 and banks to
accept for deposit AN& foreign currency A//E+A7'E A. +A% !0 !$%
INE%NAI!NA' %E.E%IE
2
his *as the ans*er of the resource persons for the 1@C@ 7ar E9ams ,see p. 1@;-3 and yet3 the
resource persons *ere unsure of their ans*er. 1o*ever3 Miravite has a contrary opinion ,p. B=<-. In my
notes for +rof. /atindig6s class3 it says that safety deposit bo9es are considered deposits since the la* says
Hall deposits of *hatever natureJ.
;
 unlike ordinary bank deposits3 foreign currency deposits en5oy the follo*ing uni:ue
privileges
1. absolute confidentiality
 EX/E+ $+!N >%IEN +E%MI..I!N !0 1E "E+!.I!%3 a
foreign currency deposit cannot be e9amined3 in:uired3 or looked into
by any person or office3 *hether public or private3 or 5udicial3
administrative or legislative
 M *ithdre* *ithout authority funds of the partnership in the amounts
of +B<<3<<< and KB<3<<<. 1e deposited the +B<<3<<< in his personal
peso current account and the KB<3<<< in his foreign currency savings
account. he partnership sued M to return the money.
In this case3 the bank can be compelled to disclose the peso deposit of
M since sec. 2 of %A 1=<B allo*s the disclosure of deposits in case
*here the money deposited is the sub5ect matter of litigation.
>ith respect to the foreign currency deposit3 $nder the 0oreign
/urrency 'a*3 the e9emption to the prohibition against disclosure of
information concerning bank deposits is the *ritten consent of the
depositor
2. numbered accounts
 authori8ed banks may adopt a numbered account system for
recording and servicing the said deposits
;. rate of interest
 authori8ed banks are free to pay any rate of interest
=. ta9es
 the interest received by an individual residents3 domestic and
resident foreign corporations from such deposits are sub5ected to a
A.BL final income ta9
 there is N! final income ta9 on the interest received by non4resident
individuals and non4resident foreign corporations
B. court order or process
 EXEM+ from attachment3 garnishment or any other order or
process of any court3 legislative or administrative body3 or
government agency *hatsoever
S!$cio% $s( Ce%tr! B%' o" the Phi!ippi%es
7artelli3 a foreign transient3 deposited his dollars in a foreign
currencyt account *ith /hina 7ank. 7artelli raped .alvacion. A
criminal case for rape and a civil action for damages for rape *ere
filed. he ./ said that the e9emption from garnishment granted to
foreign currency deposits is inapplicable to a foreign transient.
;
E. ne* enactment or regulation
 in the event that a ne* enactment or regulation is issued decreasing
the rights granted under the la*3 such ne* enactment or regulation
.1A'' N! A++'& ! 0!%EI)N /$%%EN "E+!.I.
A'%EA"& MA"E or e9isting at the time of issuance of such ne*
enactment or legislative
;
he ./ said that the e9emption from garnishment did not apply in this case because of the
+E/$'IA% /I%/$M.AN/E.. .o3 one can argue that the e9emption from garnishment *ill still apply
to foreign transients as long as there are no peculiar circumstances.
=
TR.T/ IN LENDIN+ ACT
Purpose
 to protect citi8ens from a lack of a*areness of the true cost of credit to the user by
assuring a full disclosure of such cost *ith a vie* to preventing the uninformed use of
credit to the detriment of the national economy
!bligation of the /reditors
 furnish to each person ! >1!M /%E"I I. EXEN"E" +%I!% ! 1E
/!N.$MMAI!N !0 1E %AN.A/I!N3 a disclosure statement *hich contains
the follo*ingM
1. the cash price or delivered +%I/E !0 1E +%!+E%& !% .E%II/E ! 7E
A/#$I%E"
2. 1E AM!$N.3 I0 AN&3 ! 7E /%E"IE" A. "!>N +A&MEN andNor trade4
in
;. the difference bet*een the amounts set forth under clauses ,1- and ,2-
=. the charges3 individually itemi8ed3 *hich are to be paid by such person in connection
*ith the transaction but *hich are not incident to the e9tension of credit ,i.e. N!N4
0INAN/E /1A%)E.-
B. the !A' AM!$N to be financed
E. the 0INAN/E /1A%)E. e9pressed in terms of pesos and centavos
A. the +E%/ENA)E 1A 1E 0INAN/E /1A%)E. bears to the total amount
financed e9pressed as a simple annual rate on the outstanding unpaid balance of the
obligation.
/reditor
 any person engaged in the business of e9tending credit ,including any person *ho has a
regular business practice of making loans or sells or rents property or services on a time3
credit or installment basis3 either as principal or as agent- *ho re:uires as an incident to
the e9tension of credit the payment of a finance charge
"isclosure .tatement
 the statement *hich a creditor is obliged to furnish each person to *hom a credit is
e9tended prior to the consummation of the transaction in order to protect the said person
from a lack of a*areness of the true cost of credit
 there is no compliance *ith the ruth in 'ending Act if the creditor merely gives the
totalO it is re:uired that the breakdo*n ,detailed information- be given
 the disclosure statement is given 7E0!%E 1E A)%EEMEN I. MA"E
 " bought a car on installment basis and had it financed by a financing company. In
addition to the advertised selling price3 the financing company imposed financing and
non4financing charges. he disclosure statement failed to include the non4financing
charges. 1o*ever3 the conditional deed of sale *hich the parties e9ecuted mentioned the
total amount indicated therein included such non4finance charges.
In this case3 there *as no substantial compliance *ith the ruth in 'ending Act. he la*
provides that the creditor must make a full disclosure of the credit cost. he statement
that the total amount due includes the principal the financial charges3 and non4financial
*ithout specifying the amounts due on each portion thereof *ould be insufficient and
unacceptable.
B
A violation of the ruth in 'ending Act *ill not adversely affect the validity of the
contract itself. he violation of the ruth in 'ending Act *ould allo* " to refuse
payment of financial charges or3 if already paid3 to recover the same. " may also initiate
criminal charges against the creditor.
Credit Tr%sctio%s #ithi% the Scope o" the L#
1. loan
2. mortgage
;. deed of trust
=. advance
B. discount
E. conditional sales contract
A. contract to sell
C. contract of sale of property or services either for present or future delivery under *hich
all or part of the price is payable subse:uent to the making of such sale or contract
@. rental purchase contract
1<. contract for hire
11. contract for bailment
12. contract for leasing of property
1;. option
1=. demand
1B. lien
1E. pledge
1A. any claim against3 or for the delivery of3 property or money
1C. any purchase or ac:uisition of3 or any credit upon the security of any obligation or claim
arising out of any of the foregoing
1@. any transaction or series of transactions having a similar purpose or effect
Credit Tr%sctio%s Outside the Scope o" the L#
1. those that "! N! INI!'IE 1E +A&MEN !0 0INAN/E /1A%)E by the debtor
2. those in *hich the "E7!% I. 1E !NE .+E/I0&IN) A "E0INIE AN" 0IXE"
.E !0 /%E"I E%M. such as
a- bank deposits
b- insurance contracts
c- sale of bonds3 etc.
 no disclosure statement is re:uired in these 2 instances
Fi%%ce Chr)es
E
 amounts to be paid by the debtor IN/I"EN ! 1E EXEN.I!N !0 /%E"I such
as
a- interests
b- discounts
c- collection fees
d- credit investigation fees
e- attorney6s fees
Co%so!idted B%' %d Trust $s( Court o" Appe!s
he ./ held that *hile banks are authori8ed by the /7 to collect handling
charges on loans3 a /7 /ircular re:uires banks to adhere strictly to the provisions of
the ruth in 'ending Act such that if the promissory note signed by the borro*er
does not contain a stipulation on the payment of handling charges3 the bank cannot
charge and collect such handling charges from the borro*er.
No%0Fi%%ce Chr)es
 amounts A"IAN/E" 7& A /%E"I!% 0!% IEM. N!%MA''& A..!/IAE"
>I1 1E !>NE%.1I+ !0 +%!+E%& !% 1E AIAI'MEN !0 1E .E%II/E.
purchased *hich are not IN/I"EN ! 1E EXEN.I!N !0 /%E"I ,i.e. *hen a
debtor purchases a car on credit3 the creditor may advance the insurance premium as *ell
as the registration fee-
1io!tio% o" Truth i% Le%di%) Act
1. "!E. N! INIA'I"AE the loan agreement
2. debtor can %E0$.E to pay 0INAN/E /1A%)E.
;. if the debtor had already paid the finance charges3 the debtor can %E/!IE% 0INAN/E
/1A%)E.
=. debtor can file a /%IMINIA' A/I!N against the creditor
P/ILIPPINE DEPOSIT INS.RANCE CORPORATION ACT
+urposesM
1. to protect depositors from bank failures and other similar situations preventing banks
from paying out deposits
2. to encourage people to deposit in banks
+"I/
 the government4o*ned entity mandated by la* to insure the depositors of all banks
entitled to the benefits of insurance under this Act
"eposit 'iabilities %e:uired to be Insured by the +"I/
 the follo*ing deposits are re:uired to be insured *ith the +"I/
1. deposit liabilities of AN& 7AN( engaged in the business of receiving deposits
2. deposit liabilities of AN& 7AN(IN) IN.I$I!N engaged in the business of
receiving deposits
PDIC $s( Court o" Appe!s
A
In order that a claim for deposit insurance *ith the +"I/ may prosper3
the la* re:uires that a corresponding deposit be placed in the insured bank.
 coverage is /!M+$'.!%&
"eposit
 the unpaid balance of M!NE& or its e:uivalent %E/EIIE" 7& A 7AN( in the usual
course of business and for *hich it has given or is obliged to give credit to a commercial3
checking3 savings3 time or thrift account for *hich is evidenced by a passbook3 check
andNor certificate of deposit3 printed or issued in accordance *ith /entral 7ank rules and
regulations and other applicable la*s
 )en. %uleM any obligation of a bank *hich is payable at the office of the bank
'!/AE" !$.I"E of the +hilippines shall N! 7E A "E+!.I for any
purpose of this Act or included as part of the total deposits or of insured
deposit
E9ceptionM any insured bank incorporated under +hilippine la* *hich maintains a
branch outside the +hilippines if approved by the +"I/ 7oard of "irectors
may elect to include for insurance its deposit obligations payable only at such
branch
 trust funds are not considered as insured deposits
 a safety deposit bo9 is not insured under the +"I/ 'a* for 2 reasons
1. it is not *ithin the definition of deposit
2. a moral ha8ard is created if the safety deposit bo9 is coveredO it *ould encourage
morally honest people to be dishonest since only they *ould kno* *hat6s inside the
bo9
 A has +1<3<<< in his savings account3 +2<3<<< in his checking account3 +;<3<<< in his
money market placement and +=<3<<< in a trust fund. >hich of the accounts are covered
by the +"I/ 'a*?
In this case3 only the savings and checking account are covered. he +=<3<<< trust fund
is e9pressly e9empt from the coverage of the +"I/ 'a*.
As for the +;<3<<< money market3 it shall not also be insured because of its very nature
*hich involves market dealing in standardi8ed short4term credit instruments *here
lenders and borro*ers do not deal directly *ith each other but through a middle man or
dealer in the open market. If the money is not received by the bank3 it cannot be insured.
ermination of Insured .tatus
1. *hen the banks fails or refuse to pay assessment
 the bank has ;< days from the *ritten notice given by the +"I/ to correct such
failure or refusal3 other*ise3 the insured status of the bank shall be terminated

a- *ritten notice of such termination shall be given to each depositor by
the bank
b- +"I/ shall publish the notice of termination of the insured status of the
bank
 after termination of the insured status of the bank3 deposits shall continue to be
insured for a period of @< days
2. *hen the banks become insolvent
C
Instance >hen +"I/ 7ecomes 'iable to +ay the Insured "eposit
 +"I/ is liable to pay the insured deposits in a bank *hen the bank is closed on account
of IN.!'IEN/&
 a bank is ordered closed on account of insolvency *hen !%"E%E" /'!.E" by the
Monetary 7oard of the 7angko .entral ng +ilipinas pursuant sec. ;< of the 7.+ 'a*
E9tent of +"I/6s 'iability to a 7ank "epositor
 ma9imum coverage of +1<<3<<< per depositor per capacity
 all these types of deposit are coveredM demand3 savings3 and time depositsO if a depositor
has all ; types of accounts3 he can only recover up to +1<<3<<< being considered as one
depositor
 in determining the amount due to any depositor3 all deposits in the bank maintained in the
same capacity and the same right for his benefit either in his o*n name or in the name of
others shall be added together
 the liability of the +"I/ is per bank and N! per branch
 As of Pan. 1B3 A had various sums of money *ith +ro7ankM +;B3<<< in a time deposit
*hich is in her name in trust for her 12 year old sonO +E<3<<< in a savings account under
her nameO +2<3<<< in a safety deposit bo9 maintained under her name as treasurer of3
and in trust for3 the neighborhood associationO and a checking account under her name
*hich has +=<3<<< in it. !n the same day3 +ro7ank becomes insolvent. 1o* much can
A recover?
In this case3 A can recover all of the money she has *ith +ro7ankM the +1<<3<<< in the
time deposit and checking accounts under her name3 *hich she is holding in her personal
capacityO the +;B3<<< she holds in a time deposit in trust for her son3 *hich she is holding
in her capacity as a trustee for her sonO and the +2<3<<< belonging to her neighborhood
association *hich she *as keeping in a safety deposit bo9 under her name. he safety
deposit bo9 is not covered by the +"I/ insurance but since it is in a safety deposit bo93 it
is physically segregated from the rest of the assets of the bank.
"eposits in 0oreign /urrency
 deposit obligations in foreign currency of any insured bank are insured
Manner of +ayment of the Insured "eposits
1. cash
2. making available to each depositor a transferred deposit in another insured bank in an
amount e:ual to the insured deposit of such depositor
%ules %egarding "eposits in 0oreign /urrency
1. the deposit in foreign currency shall be /!NIE%E" ! I. E#$IIA'EN amount in
+hilippine pesos at the interbank rate obtaining on the "AE 1E 7AN( >A.
/'!.E" !% !N IN.!'IEN/&
2. insurance coverage shall N! EX/EE" +=<3<<< for each depositor
;. liability of +"I/ to each depositor shall be payable in +hilippine pesos
ransferred "eposit
 a deposit in an insured bank made available to a depositor by the +"I/ as payment of the
insured deposit of such depositor in a closed bank and A..$ME" 7& AN!1E%
IN.$%E" 7AN(
@
 in a transferred deposit3 it is actually +"I/6s money *hich is used to pay e9cept that it is
coursed through another bank
 this is done for 2 reasons
1. in order to keep the money *ithin the banking system keeping your money
hidden under your mattress
2. if the amounts are substantial3 for safety
7ar of /laim by "epositor
 must file a claim for the insured deposit *ith the +"I/ *ithin 1C months after the
Monetary 7oard ordered its closure
 the claimant must enforce the claim against the +"I/ *ithin 1 year after the 1C month
period mentioned
Effect of +ayment to the "epositor of 1is Insured "eposit
1. +"I/ shall be .$7%!)AE" to all rights of the depositor against the closed bank !
1E EXEN !0 .$/1 +A&MEN
 subrogation shall include the right on the part of +"I/ to receive the dividends
and payments from the proceeds of the assets of such closed bank and recoveries
on account of stockholder6s liability as *ould have been payable to the depositor
as a claim for the insured deposits3 but such depositor shall retain his claim for
any insured portion of his deposit
2. +"I/ is "I./1A%)E" from liability of the insured deposit
!ther +o*ers of +"I/
1. issue /EA.E AN" "E.I. !%"E%. to
a- an insured bank or
b- any of its directors or agents
to correct
i. unsafe or unsound banking practices in conducting the business of
the bank
 refers to any action or lack of action *hich in contrary to the
generally accepted standards of prudent operation3 the
possible conse:uences of *hich3 if continued3 *ould result
in abnormal risk of loss or damage to a bank3 depositors and
its shareholders or even the depletion of the Insurance fund
administered by the +"I/
ii. violations of any la* or regulation to *hich the insured bank is
sub5ect
iii. violations of the provisions of the provisions of the +"I/ 'a* as
amended3 or nay order3 rule or instruction issued by the +"I/ or any
*ritten condition imposed by the +"I/ in connection *ith any
transaction *ith the +"I/
 the purpose of the /ease and "esist order is to protect the depositors and the
+"I/ against e9isting or potential risk e9posures from the said practices or
violations
2. provide 0INAN/IA' A..I.AN/E to an insured bank in danger of closing
1<
;. 7!%%!> from the 7.+ and from any bank designated as depository or fiscal agent of
the +hilippine )overnment
=. I..$E 7!N".3 "E7EN$%E. AN" !1E% !7'I)AI!N. *ith the approval of
the +resident of the +hilippines
B. act as %E/EIIE% of any banking corporation
BAN+KO SENTRAL N+ PILIPINAS LAW
+olicy of the .tate
 to maintain a central monetary authority that shall
1. function and operate as an in IN"E+EN"EN AN" A//!$NA7'E 7!"& in the
discharge of its responsibilities concerning money3 banking and creditO and
2. en5oy 0I./A' AN" A"MINI.%AIIE A$!N!M&
%esponsibilities of the 7.+
1. to provide +!'I/& "I%E/I!N in the areas of
a- money
b- banking
c- credit
2. to .$+E%II.E 1E !+E%AI!N !0 7AN(.
;. to %E)$'AE 1E !+E%AI!N of
a- finance companies
b- non4bank financial institutions performing :uasi4banking functions ,i.e. :uasi4
banks-
c- institutions performing similar functions
+rimary !b5ectives of the 7.+
1. to MAINAIN +%I/E .A7I'I& conducive to a balanced and sustainable gro*th of
the economy and
 price refers to the general price level *hich is a composite or *eighted average
of the prices of commodities and servicesO it does not refer to prices of individual
goods and services purchased by the public
 price stability connotes 2 things
1. changes of the general price level or domestic inflation are minimal
2. such changes are not severely erratic or
 balanced refers to monetary policy that is neutral *ith respect to all sectors of the
economy
 sustainable implies that a certain level of gro*th is maintained *ithout
undergoing the boom4bust characteristic of an unstable economy
11
2. to +%!M!E AN" MAINAIN M!NEA%& .A7I'I& and the convertibility of the
peso
Monetary 7oard
 the po*ers and functions of the 7.+ are e9ercised by the Monetary 7oard
>ays in >hich 7.+ as an Independent and Accountable 7ody and >ith 0iscal and
Administrative Autonomy is Maintained
1. capital
 +B<3<<<3<<<3<<< fully subscribed by the )overnment
 +1<3<<<3<<<3<<< of the +B<3<<<3<<<3<<< shall be fully paid by the )overnment
*ithin 2 years from the effectivity of the la*
2. Monetary 7oard composition
 A members appointed by the +resident for a term of E years each
a- governor of the 7.+
 /hairman of the Monetary 7oard
 *henever he is unable to attend a meeting of the 7oard3 he
shall designated a "eputy )overnor to attendO in such an
event3 the Monetary 7oard shall designate one of its
members to act as /hairman
 must be natural born citi8en of the +hilippines
 must be at least =< years of age
b- a member of the /abinet designated by the +resident
 *henever the designated member of the cabinet is unable to
attend a meeting of the 7oard3 he shall designated an
$ndersecretary from his department to attend
 must be natural born citi8en of the +hilippines
 must be at least =< years of age
c- B members from the private sector
 all shall serve full4time
 staggered appointments
 must be natural born citi8en of the +hilippines
 must be at least =< years of age
;. reappointment of Monetary 7oard members
 no member may be reappointed M!%E 1AN !N/E
=. special dis:ualification for Monetary 7oard appointees
B. divestment re:uirement for Monetary 7oard members
E. removal by the +resident
A. post47.+ restriction
12
C. *ho can call Monetary 7oard meetings
@. reorgani8ation of personnel
1<. indemnification of 7.+ officials
11. e9traordinary diligence
12. transparency
1;. engagement of private counsel
1=. auditor must be a /+A
Fu%ctio%s o" the BSP
1. as bank of issue
 the 7.+ has the sole po*er to issue currency ,i.e. notes and coins- in the
+hilippines
2. as government banker
;. as government agent
=. as government financial advisor
B. as custodian of banks6 cash reserves
 refers to the reserves against
a- deposit liabilities
b- liabilities for deposit substitutes
c- funds held in trust *hich banks may be re:uired to maintain *ith the
7.+
E. as custodian of country6s international reserves
A. as bank of rediscount and lender of last resort
 the 7.+ may rediscount3 buy and sell
a- bills
b- acceptances
c- promissory notes
d- other credit instruments held by banks
 the 7.+ may also grant
a- emergency loans
b- advances
to banks under certain circumstances
C. as bank of central clearance and settlement
@. as controller of credit
1;
Institutions .ub5ect to the .upervision and E9amination of the 7.+
 the 7.+ has supervision over and can conduct periodic or special e9aminations of
2. 7AN(IN) IN.I$I!N. including their subsidiaries and affiliates engaged
in A''IE" A/IIIIE.
;. #$A.I 7AN(. including their subsidiaries and affiliates engaged in A''IE"
A/IIIIE.
%estraining !rder or In5unction of 7.+ E9aminations of 7anks and #uasi47anks
 )en %uleM no restraining order or in5unction is allo*ed
E9ceptionM !N'& in if the follo*ing re:uisites are present
1. there is convincing proof that the action of the 7.+ is +'AIN'&
A%7I%A%& AN" MA"E IN 7A" 0AI1 and
2. the plaintiff files *ith the clerk or 5udge of the court in *hich the action is
pending a 7!N" e9ecuted in favor of the 7.+ in an amount fi9ed by the
court
Instruments of 7.+ Action
1. gold and foreign e9change operations
 the 7.+ may buy and sell
a- gold in any form
b- foreign notes
c- spot e9change
2. credit operations
;. open market operations
 refers to the purchases and sales of securities by the 7.+ *ith the primary
ob5ective of achieving price stability
=. reserve re:uirements
 the purpose of serve re:uirements is to control the volume of money created by
credit operations of the banking system
B. selective regulation of bank operations
a- interest rate policy
b- margin re:uirements against letters of credit
c- ma9imum permissible maturities of loans and investments
d- kind and amount of security against bank loans
e- loans and investment portfolio ceilings
f- minimum capital ratios
E. moral influence
/onservator
First Phi!ippi%e I%ter%tio%! B%' $s( Court o" Appe!s
1=
he la* merely gives the conservator the po*er to revoke contracts that are
under e9isting la* deemed to be defective ,i.e. void3 voidable3 unenforceable or
rescissible-. 1ence3 the conservator merely takes the place of a bank6s board of
directors. >hat the said board cannot do D such as repudiating a contract validly
entered into under the doctrine of implied authority D the conservator cannot do
either. Ineluctably3 his po*er is not unilateral and he cannot simply repudiate
valid obligations of the 7ank. 1is authority *ould be only to bring court actions
to assail such contracts D as he has already done so in the instant cases. A
contrary understanding of the la* *ould simply not be permitted by the
/onstitution. Neither by common sense. o rule other*ise *ould be to enable a
failing bank to become solvent3 at the e9pense of ;
rd
parties3 by simply getting the
conservator to unilaterally revoke all previous dealing *hich had one *ay or
another to be considered unfavorable to the 7ank3 yielding nothing to perfected
contractual rights nor vested interests of the ;
rd
parties *ho had dealt *ith the
7ank.
Recei$ership
E9change /risis
1. imminence of or during an e9change crisis or
2. in time of national emergency
the Monetary 7oard *ith the concurrence of at least B MEM7E%. and *ith the
A++%!IA' of the +%E.I"EN of the +hilippines may
a- temporarily suspend or restrict sales of e9change by the 7.+
b- sub5ect all transactions in gold and foreign e9change to license by the 7.+
c- re:uire than any foreign e9change thereafter obtained by any
iv. person residing or
v. entity operating in the +hilippines
to be delivered to the 7.+ or to any bank designated by the 7.+ for the
purpose3 as the effective e9change rate or rates
1B

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