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RA 1405LAW ON SECRECY

OF BANK DEPOSITS

IPURPOSE

To give encouragement to the people to

deposit their money in banking

institutions and to discourage privatehoarding (Sec. 1)

So that the peoples money may be

properly utilized by banks in authorized

loans to assist in the economicdevelopment of the country. (Sec. 1)

II

COVERAGE

All deposits of hatever nature! ith

banks or banking institutions in the"hils. are hereby considered as of an

absolutely confidential nature and maynot be e#amined. (Sec. $)

NOTE* This includes investments in bondsissued by the Philippine Government, its

political subdivisions and itsinstrumentalities. (Sec. 2)

III

PROHIBITED ACTS

1. %o person& government official& bureauor office may e#amine& in'uire into or

look into such deposits and

$. %o official or employee of any bankinginstitution may disclosure to any

unauthorized person any informationconcerning said deposits (Sec. ).

NOT

* !" #$%& does not prohibit attachment or'arnishment o ban accounts. (hina+anin' orp v. Orte'a, #-, Philippineommercial and /ndustrial +an v. ",

##)

IVEXCEPTIONS

(UNDER RA 1405)

1. upon ritten permission of the depositor&(Sec. $)

$. in cases of impeachment& (Sec. $)

. upon order of a competent court in casesof

a. bribery&b. dereliction of duty of public officials&

orc. here the money deposited or

invested is the sub*ect matter of thelitigation. (Sec. $)

NOTES !" #$%& does not prohibit attachment or

'arnishment o ban accounts. (hina

+anin' orp v. Orte'a, #-, Philippineommercial and /ndustrial +an v. ",

##) /n a collection suit by an insurance company

to determine ho0 the deendant has appliedthe proceeds o a chec paid to it, the 'rantby the trial court o e1amination o the

pertinent records o the ban 0as allo0ed

0ithout need o notice to the depositorhimsel, pursuant to Sec. #%, !ule &- o the!ules o ourt coverin' e1amination o party0ho property is attached and personsindebted to him or controllin' his propertydelivery o property to oicer. (Onate v

"bor'ar, #$) The e1ception applies to cases o

concealment o ille'ally ac3uired property inanti4'rat cases. The in3uiry into ille'allyac3uired property 5 or property NOT6le'itimately ac3uired6 5 e1tends to cases0here such property is concealed by bein'held by or recorded in the name o other

persons. This proposition is made clear by!.". No. %# 0hich 3uite cate'oricallystates that the term, 6le'itimately ac3uired

property o a public oicer or employee shallnot include .. property unla0ully ac3uiredby the respondent, but its o0nership isconcealed by its bein' recorded in the nameo, or held by, respondent7s spouse,ascendants, descendants, relatives or anyother persons.6 (+anco 8ilipino vs Purisima #99)

/t also e1tends to cases o concealment oille'ally ac3uired property not involvin' anti4'rat cases. /n the case o :ellon +an, N.".v. :a'sino, #%, 0hich involved theerroneous 0ire transer and o ;S< # :illioninstead o the intended ;S< #,%%%, and theresultin' ille'al conversion by the recipients,the Supreme ourt held that =an in3uiry

+,orybeth-aldrias.he!/ +%ayna-0alayang.!e"#$%/ +ionne-Sanchez.&!'/ +2am-2acob.!e'*/+obbie-Sta0aria."+*$*/ +0iles 0alaya.,e&$#+e'/

+2apee-e,eon."-,.,// +Ascheia-3umul.+e.,// +"aul-Sorino42udy-5ipol.&.,// +6ya-5afael40ac-0acapagal.&+.,//

+7ivian-Tan42ustin-0endoza.,2-+.,// +0iguel-e2esus.,e,.e$h&'/ +,ianne-8ervasio.&-.,//+9es-Sicangco45oena-5omero.$3.,//

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into the 0hereabouts o money ille'allyac3uired e1tends to 0hatever is concealed

or bein' held or recorded in the name opersons other than the one responsible orthe ille'al ac3uisition,> inasmuch as thecase is aimed at recoverin' the amountconverted.

OTHER EXCEPTIONS

1. upon order of a competent court incases of une#plained ealth under 5A

:1; or the Anti

anco ?ilipino v. "urisima& 1;@@0ar'uez v. esierto& $::1)

Sec. @ of 5A :1; provides that bank

deposits shall be taken intoconsideration in the enforcement ofthis section& notithstanding anyprovision of la to the contrary.B

Sec. @ of 5A :1; is intended to

amend Sec. $ of 5A 1C:> by providingan additional e#ception to the ruleagainst the disclosure of bank

deposits. 9ases of une#plained ealthare similar to cases of bribery ordereliction of duty. ("% v. 8ancayco)

Dn anco ?ilipino v. "urisima& 1;@@&

the court ent further and stated thatthe provisions of the Anti

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a decedent for the purpose ofdetermining the gross estate of such

decedent. (Sec. =(?)& %D59)

b. Dn case a ta#payer offers tocompromise his ta# liabilities on the

ground of financial incapacity& hemust aive& in riting the secrecy ofhis bank deposits in favor of the

9ommissioner of Dnternal 5evenue(Sec. =(?)& %D59)

>. under Sec. $= of 5A F=> or the %e9entral ank Act of 1;;& hen the

e#amination is conducted pursuant tothe re'uired aiver of the secrecy ofdeposits (of hatever nature in all banksin the "hilippines) made by any GS5D

(irector& Gfficer or Stockholder ho&together ith his 5elated Dnterest&contracts a loan or any form of financialaccommodation fromE

a. his bank or

b. from a bank

1.) hich is a subsidiary of a bankholding company of hich both hisbank and the lending bank aresubsidiaries or

$.) in hich a controlling proportion

of the shares is oned by thesame interest that ons acontrolling proportion of theshares of his bank& in e#cess of>H of the capital and surplus ofthe bank& or in the ma#imumamount permitted by la&hichever is loer.

Any information obtained from an

e#amination of his deposits shall be heldstrictly confidential and may be used bythe e#aminers only in connection iththeir supervisory and e#amination

responsibility or by the angko Sentralin an appropriate legal action it has

initiated involving the deposit account.

=. isclosure of certain information aboutbank deposits hich have been dormant

for at least ten years& to the Treasurer ofthe "hilippine in a sorn statement& acopy of hich is posted in the bankpremises. (Sec. $& Inclaimed alances

,a (Act %o. ;$=& as amended))

+not included in the above enumerationfor reasons that shall be soon be

provided/

Dn 1;@1& " 1F;$ added the folloing

grounds hen the bank can be compelledto reveal the amount of a depositorE

(1) made in the course of a special or

general e#amination of a bank andis specifically authorized by the0onetary oard after being satisfiedthat there is reasonable ground tobelieve that a bank fraud or serious

irregularity has been or is beingcommitted and that it is necessaryto look into the deposit to establishsuch fraud or irregularity&B or

($) made by an independent auditorhired by the bank to conduct itsregular audit provided that thee#amination is for audit purposesonly and the results thereof shall befor the e#clusive use of the bank.B6oever& Sec. 1> of 5A F=> orthe %e 9entral ank Act reverted5A 1C:> to its version prior to thepromulgation of the decree.

Thus 7illanueva says that theseto instances as e#cluded fromthe enumeration of e#ceptionsto the secrecy of bank deposits

(7illanueva& 9ommercial ,a5evie& $::C).

0orales hoever notes that

Jith the Amendment of theAnti) ofthen Secretary of 2ustice "edroTuason. (0orales& The "hil.8eneral banking ,aAnnotated& $nd ed. $::C)

Dt used to be believed that the 5A 1C:>

did not apply to the Gmbudsman& on

account of his authority under Sec. 1>(@)of 5A =FF: or the Gmbudsman Act of1;@; to e#amine and have access tobank accounts and records.B 6oever& the

S9 (0ar'uez v. esierto& $::1) restrictedthe Gmbudsmans poer as follosE Kbefore an in camera inspection$ may bealloed& there must be a pending case

,-n ca!era inspection. 2nder certain circu!stances$ a

trial udge !ay inspect a docu!ent #hich counsel #ishes touse at trial in his cha!"ers "efore ruling on its ad!issi"ilityor its use. (&lac's 4a# 5ictonary$ 6th ed.)




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before a court of competent *urisdiction.?urther& the account must be clearly

identified& the inspection limited to thesub*ect matter of the pending case

before the court of competent*urisdiction. The bank personnel and the

account holder must be notified to bepresent during the inspection& and suchinspection may cover only the account

identified in the pending case.B (0orales&The "hil. 8eneral banking ,aAnnotated& $nd ed. $::C)

?urther& it is interesting to note that the

Secretary of 2ustice in his Gpinion %o.

1 (s. 1;@F) concluded that the"residential 9ommission on 8ood

8overnment can compel banks todisclose or produce bank records ithout

violating the bank secrecy las.B(0orales& The "hil. 8eneral banking ,aAnnotated& $nd ed. $::C)

0oreover& under Sec. 1(d) of 5A =@$

(1;;:)& hich created the avide9ommission that conducted a fact

finding investigation of the failed coup d?etatof ecember 1;@;& the commissionhad the poer to Lask the 0onetaryboard to disclose information on and4orgrant authority to e#amine bankdeposits& trust finds& or banking

transactions in the name of and4orutilized by a person& natural or *uridical&under investigation by the 9ommission&in any bank or banking institution in the

"hilippines& hen the 9ommission hasreasonable ground to believe that saiddeposits& trust or investment funds& or

banking transactions have been used insupport of furtherance of the ob*ectivesof the coup d? etat.B (0orales& The "hil.8eneral banking ,a Annotated& $nd ed.$::C)

V

WHEN AY FOREIGN CURRENCYDEPOSITS BE

EXAINEDGARNISHED

Ge*e+, R#,eE

Se&6 76 Secrecy of ?oreign 9urrencyeposits.< All foreign currency depositsauthorized under this Act& as amended by "1:>& as ell as foreign currency depositsauthorized under " 1:C& are declared and

considered of an absolutely confidentialnature and& e#cept upon the ritten

permission of the depositor& in no instanceshall such foreign currency deposits be

e#amined& in'uired or looked into by anyperson& government official bureau or office

hether *udicial or administrative or legislativeor any other entity hether public or privateE

"rovided& hoever& that said foreign currencydeposits shall be e#empt from attachment&garnishment& or any other order or process of

any court& legislative body& governmentagency or any administrative body hatsoever

E3&e"$-*'E1. upon ritten permission of the

depositor (Sec. @& ?oreign 9urrencyeposit Act Dntengan vs 9A $::$)

$. upon order of a competent court in

cases of violation of the Anti. Dn a case here a ?ilipino child asraped by a foreigner& the S9 alloedgarnishment of foreign currencydeposits stating E Je rule that the

'uestioned Section 11 of 9entralank 9ircular %o. ;=: hich e#emptsfrom attachment& garnishment& or any

other order or process of any court.,egislative body& government agencyor any administrative bodyhatsoever& is applicable to a foreigntransient& in*ustice ould result

especially to a citizen aggrieved by aforeign guest. (Salvacion vs 9 1;;F)

VIPENALTY FOR VIOLATION

Any violation of this la ill sub*ect offenderupon conviction to an imprisonment of notmore than > years or a fine of not more than

"$:&::: or both& in the discretion of the court.(Sec. >)




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VII

WHAT ELSE SHOULD I KNOW

ABOUT RA 14058

Dt took effect on April ;& 1;>>& and is

entitled An act prohibiting disclosure ofor in'uiry into& deposits ith anybanking institution and providing the

penalty therefore.B

Sec. = of 5A =C$= or The ?oreign

9urrency eposit Act provides that thesecrecy of deposits under this act shall

be governed in accordance ith theprovisions ofB 5A 1C:>.B

SubSec. >>.C of 5A @F;1 or the 8eneral

anking ,a of 1;;1 provides that in

line ith 5A 1C:>& no bank shall employcasual or non $he BSP

IDECLARATION OF POLICY

The State shall maintain a central

monetary authority that shall functionand operate as an independent andaccountable body corporate in the

discharge of its mandatedresponsibilities concerning money&banking and credit. (Sec. 1)

Dn line ith this policy& and considering

its uni'ue functions and responsibilities&the central monetary authority

established under the %9A& hile being agovt. To e#ercise such regulatory poers (as

provided under the %9A and otherpertinent las) over the operations of

finance companies and non

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PLACE OF BUSINESS OF THE BSP

The S" shall have its principal place ofbusiness in 0etro 0anila& but may maintainbranches& agencies and correspondents insuch other places as the proper conduct of

its business may re'uire. (Sec. C)

VCORPORATE POWERS

1. To adopt& alter& and use a corporate seal

hich shall be *udicially noticed$. To enter into contracts

. To lease or on real and personalproperty& and to sell or otherise

dispose of the sameC. To sue and be sued and>. To ac'uire and hold such assets and

incur such liabilities in connection ith

its operations authorized by theprovisions of the %9A& or as areessential to the proper conduct of suchoperations

=. To compromise& condone or release& inhole or in part& any claim of or settledliability to the S"& regardless of theamount involved& under such terms and

conditions as may be prescribed by the0 to protect the interests of the S"

F. To do and perform any and all thingsthat may be necessary or proper to

carry out the purposes of the %9A(Sec. >)

The poers and functions of the S"

shall be e#ercised by the S" 0.(Sec. =)

VICREATION@ FRO CB TO BSP

A. T+*'>e+ -> A''e$' *! L2,$e'

Ipon the effectivity of this Act& members of the 0 & hich may include

the 8overnor& in representation of theS"& the Secretary of ?inance and the

Secretary of udget and 0anagement inrepresentation of the %ational

8overnment& and the 9hairmen of the9ommittees on anks of the Senate andthe 6ouse of 5epresentatives shalldetermine the assets and liabilities of

the 9entral ank (9) hich may be

transferred to or assumed by the S".(Sec. 1$)C

. *!$e $- O+*e

The S" shall be organized by the 0 byadopting& if it so desires& an entirely nestaffing pattern on organizational

structure to suit the operations of theS". %o preferential or priority right shallbe given to or en*oyed by any personnelfor appointment to any position in the nestaffing pattern& nor shall any personnel

be considered as having prior or vestedrights ith respect to retention in the S"or in any position hich may be created inthe ne staffing pattern& even if he should

be the incumbent of a similar positionprior to organization. The formulation ofthe program of organization shall becompleted ithin = months after the

effectivity of this Act& and shall be fullyimplemented ithin a period of = months

thereafter. "ersonnel ho may not beretained are deemed separated from the

service. (Sec. 1)

:he o!!ittee shall co!plete its #or' #ithin 90days fro! the constitution of the 8& su"!itting aco!prehensive report #ith all its findings and ustification.:he follo#ing guidelines shall "e strictly o"served in thedeter!ination of #hich assets and lia"ilities shall "etransferred to the &S% (a) the 8& and the Secretary of7inance shall have pri!ary responsi"ility for #or'ing outcreative !onetary and financial solutions to retire theentral &an' lia"ilities and losses at the least cost to theovern!ent+ (") the &S shall re!it ;ational overn!ent$ or to the >ational overn!ent asdividends+ (c) the assets and lia"ilities to "e transferred shall"e li!ited to an a!ount that #ill ena"le the &S to perfor!its responsi"ilities ade*uately and operate on a via"le "asis%rovided$ :hat the assets shall eceed the lia"ilities ascertified "y the ?A$ "y an initial a!ount of 10&+ (d)lia"ilities to "e assu!ed "y the &S shall include lia"ility fornotes and coins in circulation as of the effective date of thisAct+ and (e) any asset or lia"ility of the entral &an' nottransferred to the &S shall "e retained and ad!inistered$disposed of and li*uidated "y the entral &an' itself #hichshall continue to eist as the & &oard of 4i*uidators onlyfor the purposes provided in this paragraph "ut not later than

t#entyfive (,

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9. Se"+$-* Be*e>$'

"ursuant to Sec. 1> of this Act& the 0 isauthorized to provide separation

incentives& and all those ho shall retireor be separated from the service on

account of reorganization under thepreceding section shall be entitled tosuch incentives& hich shall be in

addition to all gratuities and benefits tohich they may be entitled undere#isting las. (Sec. 1C)

. T+*'>e+ -> P-/e+'

All poers& duties and functions vestedby la in the 9entral ank of the

"hilippines not inconsistent ith theprovisions of this Act shall be deemedtransferred to the S". All references tothe 9entral ank of the "hilippines in

any la or special charters shall bedeemed to refer to the S". (Sec. 1=)

. I",ee*$* De$,'

The S" shall be made operational bythe performance of the folloing actsE

(a) the "resident shall constitute the 0by appointing the members thereof

ithin =: days from the effectivity ofthis Act and (b) the transfer of suchassets and liabilities from the 9entralank to the S" as provided in Sec. 1$

shall be completed ithin ;: days fromthe constitution of the 0.

All incumbent personnel in the 9entralank as of the date of the approval ofthis Act shall continue to e#ercise theirduties and functions as personnel of theS" sub*ect to the provisions of Section

1E "rovided& That such personnel inthe 9entral ank as may be necessaryfor the purpose of implementing Section1$ may be assigned by the S" 0 to

the 9entral ank. (Sec. 11)

THE ONETARY BOARD

ICOPOSITION

The 0 is composed of F members appointed

by the "resident for a term of = years. %omember of the 0 may be reappointed more

than once.

1. S" 8overnor& ho shall be the 9hairmanof the 0 N shall be head of a

department and his appointment shall besub*ect to confirmation by the 9GA.Jhenever the 8overnor is unable toattend a meeting of the oard& he shall

designate a eputy 8overnor to act as hisalternateE "rovided& That in such event&the 0 shall designate one of its membersas acting 9hairman

$. 9abinet 0ember N designated by the"resident. Jhenever the designated9abinet 0ember is unable to attend ameeting of the oard& he shall designate

an Indersecretary in his epartment toattend as his alternate and

. > 0embers from the "rivate Sector Nall ofhom shall serve full years of age& ith

the e#ception of the 8overnor hoshould at least be C: years of age&

. 0ust be of good moral character&C. 0ust be of un'uestionable integrity&

>. 0ust be of knon probity andpatriotism& and

=. 0ust be ith recognized competencein social and economic disciplines.

(Sec. @)

B. D'#,>&$-*' -> e2e+'

1. The dis'ualifications imposed by 5A=F1 (9ode of 9onduct and MthicalStandards for "ublic Gfficials and

Mmployees)& and




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$. A 0ember may not be a director&officer& employee& consultant&

layer& agent or stockholder of anybank& O or any other institution

hich is sub*ect to supervision ore#amination by the S". Dn such

cases& he shall resign from& anddivest himself of any and allinterests in such institution before

assumption of office as member ofthe 0.. The members of the 0 coming

from the private sector shall nothold any other public office or public

employment during their tenure.C. %o person shall be a member of the

0 if he has been connected directlyith any multilateral banking or

financial institution or has asubstantial interest in any privatebank in the "hils.& ithin 1 yearprior to his appointment

>. %o member of the 0 shall beemployed in any such institution

ithin $ years after the e#piration ofhis term e#cept hen he serves as

an official representative of the"hilippine 8overnment to such

institution. (Sec. ;)

Dn addition to the re'uirements of 5A

=F1 (9ode of 9onduct and MthicalStandards for "ublic Gfficials andMmployees)& any member of the 0ith personal or pecuniary interest inany matter in the agenda of the 0

shall disclose his interest to the 0and shall retire from the meeting henthe matter is taken up. The decision

taken on the matter shall be madepublic. The minutes shall reflect thedisclosure made and the retirement of

the member concerned from themeeting. (Sec. 1C)

Gutside Dnterests of the 8overnor and

the ?ulldays from the date of their issuance




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$.direct the management& operations& andadministration of the S"& reorganize its

personnel& and issue such rules andregulations as it may deem necessary or

convenient for this purpose. The legalunits of the S" shall be under the

e#clusive supervision and control of the0

3. establish a human resource

management system hich shall governthe selection& hiring& appointment&transfer& promotion& or dismissal of allpersonnel. Such system shall aim to

establish professionalism and e#cellence atall levels of the S" in accordance ithsound principles of management.>

C.adopt an annual budget for and authorize

such e#penditures by the S" as are in theinterest of the effective administration and

operations of the S" in accordance ithapplicable las and regulations and

>.indemnify its members and other officialsof the S"& including personnel of the

departments performing supervision and

e#amination functions against all costs ande#penses reasonably incurred by suchpersons in connection ith any civil or

criminal action& suit or proceedings tohich he may be& or is& made a party byreason of the performance of his functionsor duties& unless he is finally ad*udged in

such action or proceeding to be liable fornegligence or misconduct.6(Sec. 1>)

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e#traordinary diligence in the performanceof his duties shall be held liable for any

loss or in*ury suffered by the S" or otherbanking institutions as a result of such

violation& negligence& abuse& malfeasance&misfeasance or failure to e#ercise

e#traordinary diligence. (Sec. 1=)

Similar responsibility shall apply to

members& officers& and employees of theS" forE1. the disclosure of any information of a

confidential nature& or any information

on the discussions or resolutions ofthe 0& or about the confidential

operations of the S"& unless thedisclosure is in connection ith the

performance of official functions iththe S"& or is ith prior authorization

of the 0 or the 8overnor or$. the use of such information for

personal gain or to the detriment ofthe 8overnment& the S" or third

partiesE "rovided& hoever& That any

data or information re'uired to besubmitted to the "resident and4or the9ongress& or to be published under the

provisions of this Act shall not beconsidered confidential. (Sec. 1=)

VI

GOVERNOR

A. P-/e+' *! D#$e'

The 8overnor shall be the chief

e#ecutive officer of the S". (Sec. 1F)

1. prepare the agenda for the meetingsof the 0 and to submit for the

consideration of the 0 the policiesand measures hich he believes tobe necessary to carry out thepurposes and provisions of the

%9A$. e#ecute and administer the policies

and measures approved by the 0. direct and supervise the operations

and internal administration of theS". The 8overnor may delegate

certain of his administrativeresponsibilities to other officers or

may assign specific tasks orresponsibilities to any full. render opinions& decisions& or rulings&

hich shall be final and e#ecutoryuntil reversed or modified by the 0&on matters regarding application orenforcement of las pertaining to

institutions supervised by the S" andlas pertaining to 'uasi

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in preliminary discussions ith anymultilateral banking or financial

institution on any negotiations forthe 8ovt ithin or outside the "hils.

uring the negotiations& he mayinstead be represented by a

permanent negotiator. (Sec. 1@)

9. De"#$% G-e+*-+(')

The 8overnor of the S"& ith the

approval of the 0& shall appoint not

more than eputy 8overnors hoshall perform duties as may be

assigned to them by the 8overnorand the oard.

Dn the absence of the 8overnor& a

eputy 8overnor designated by the8overnor shall act as chief e#ecutiveof the S" and shall e#ercise the

poers and perform the duties ofthe 8overnor. Jhenever the

8overnment is unable to attendmeetings of government boards or

councils in hich he is an e# officiomember pursuant to provisions of

special las& a eputy 8overnor asmay be designated by the 8overnorshall be vested ith authority toparticipate and e#ercise the right to

vote in such meetings. (Sec. $1)

OPERATIONS OF THE BSP

I

SUPERVISIONAND EXAINATION

The S" shall have supervision

over& and conduct periodic orspecial e#aminations of& banking

institutions and 'uasi

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are subsidiaries or (b) in hich acontrolling proportion of the shares

is oned by the same interest thatons a controlling proportion of the

shares of his bank&in e#cess of >H of the capital and

surplus of the bank& or in the ma#imumamount permitted by la& hichever isloer& shall be re'uired by the lending

bank to aive the secrecy of his depositsof hatever nature in all banks in the"hilippines.9(Sec. $=)

9. E3*$-* *! Fee'

The supervising and e#amining

department head& personally orby deputy& shall e#amine the

books of every bankinginstitution once in every 1$months& and at such other timesas the 0 by an affirmative vote

of > members& may deem

e#pedient and to make a reporton the same to the 0E"rovided& That there shall be an

interval of at least telve 1$months beteen annuale#aminations.

The bank concerned shall afford

to the head of the appropriatesupervising and e#aminingdepartments and to hisauthorized deputies full

opportunity to e#amine itsbooks& cash and available assetsand general condition at any

time during banking hourshen re'uested to do so by theS"E "rovided& hoever& Thatnone of the reports and otherpapers relative to such

e#aminations shall be open toinspection by the public e#cept

insofar as such publicity isincidental to the proceedings

hereinafter authorized or isnecessary for the prosecution of

violations in connection ith thebusiness of such institutions.

anking and 'uasi C-*'e+$-+

Jhenever& on the basis of a report

submitted by the appropriatesupervising or e#aminingdepartment& the 0 finds that abank or a O is in a state ofcontinuing inability or unillingness

to maintain a condition of li'uiditydeemed ade'uate to protect theinterest of depositors and creditors&the 0 may appoint a conservator

ith such poers as the 0 shalldeem necessary toE

a. take charge of the assets&

liabilities& and the managementthereof&

b. reorganize the management&c. collect all monies and debts due

said institution& andd. e#ercise all poers necessary to

restore its viability. (Sec. $;)

2. Pe+-! -> C-*'e+$-+'h"

The conservatorship shall note#ceed 1 year. (Sec. $;)The 0 shall terminate theconservatorship hen it is satisfied

that the institution can continue to

operate on its on and theconservatorship is no longernecessary. The conservatorship

shall likeise be terminated shouldthe 0& on the basis of the report ofthe conservator or of its onfindings& determine that the




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continuance in business of theinstitution ould involve probable

loss to its depositors or creditors&in hich case the provisions of

Section : shall apply. (Sec. $;)

3. C-*'e+$-+

The conservator shall report andbe responsible to the 0 and shallhave the poer to overrule orrevoke the actions of the previous

management and board ofdirectors of the bank or 'uasi $heRe&ee+

The receiver shall immediatelygather and take charge of all theassets and liabilities of the

institution& administer the samefor the benefit of its creditors& ande#ercise the general poers of areceiver under the 5evised 5ules of

9ourt but shall not& ith thee#ception of administrative

e#penditures& pay or commit anyact that ill involve the transfer or

disposition of any asset of theinstitutionE "rovided& That the

receiver may deposit or place thefunds of the institution in non Te&h*&, Pe+'-**e,

The S" shall promote and

sponsor the training of technicalpersonnel in the field of money

and banking. (Sec. $)11

. O"e+$* De"+$e*$'

The 0 shall& in accordance ith

its authority under this Act&determine and provide for suchoperating departments and

other offices& including a public11 :o#ard this end$ the &S is here"y authoriDed to

defray the costs of study$ at ho!e or a"road$ of *ualifiede!ployees of the &S$ of pro!ising university graduatesor of any other *ualified persons #ho shall "e deter!ined"y proper co!petitive ea!inations. :he 8& shallprescri"e rules and regulations to govern the trainingprogra! of the &S.

information office& of the S" as itdeems convenient for the proper

and efficient conduct of theoperations and the

accomplishment of the ob*ectivesof the S". The functions and

duties of such operatingdepartments and other officesshall be determined by the 0.

(Sec. @)

C. Re"-+$' *! P#2,&$-*'

The S" shall publish a general

balance sheet shoing thevolume and composition of its

assets and liabilities as of the lastorking day of the month ithin

si#ty (=:) days after the end ofeach month e#cept for the monthof ecember& hich shall besubmitted ithin ninety (;:) days

after the end hereof. (Sec. ;)

The 0 shall publish and submitthe folloing reports to the

"resident and to the 9ongressE

not later than ;: days after the

end of each 'uarter& an analysisof economic and financialdevelopments& including the

condition of net internationalreserves and monetary

aggregates

ithin ;: days after the end of

the year& the preceding yearPs

budget and profit and lossstatement of the S" shoing inreasonable detail the result of itsoperations

1$: days after the end of each

semester& a revie of the state ofthe financial system and

as soon as practicable& abnormal

movements in monetaryaggregates and the general price

level& and& not later than F$ hoursafter they are taken& remedialmeasures in response to suchabnormal movements. (Sec. ;)

>. A**#, Re"-+$

efore the end of 0arch of eachyear& the S" shall publish andsubmit to the "resident and the9ongress an annual report on thecondition of the S" including a

revie of the policies andmeasures adopted by the 0




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during the past year and ananalysis of the economic and

financial circumstances hichgave rise to said policies and

measures. The annual reportshall also include a statement of

the financial condition of theS" and a statistical appendi#.1$

(Sec. C:)

The S" shall publish anotherversion of the annual report interms understandable to thelayman. (Sec. C:)1

=. P+->$'= L-''e' *! S"e&,A&&-#*$'

Jithin the : days folloing the

end of each fiscal year1C& theS" shall determine its net

profits or losses. Dn thecalculation of net profits& the

S" shall make ade'uate

alloance or establish ade'uatereserves for bad and doubtfulaccounts. (Sec. C)

Jithin the first =: days

folloing the end of each fiscalyear& the 0 shall determine

and carry out the distribution ofthe net profits& in accordance

ith the folloing ruleE >:H ofthe net profits shall be carried

to surplus and the remaining>:H shall revert back to the

1, :he statistical appendi shall present$ as a

!ini!u!$ the follo#ing data% (a) the !onthly !ove!ent of!onetary aggregates and their co!ponents+ (") the!onthly !ove!ent of purchases and sales of foreignechange and of the international reserves of the &S+ (c)the "alance of pay!ents of the hilippines+ (d) !onthlyindices of consu!er prices and of i!port and eportprices+ (e) the !onthly !ove!ent$ in su!!ary for!$ ofeports and i!ports$ "y volu!e and value+ (f) the !onthly!ove!ent of the accounts of the &S and of other "an's+(g) the principal data on govern!ent receipts andependitures and on the status of the pu"lic de"t$ "othdo!estic and foreign+ and (h) the tets of the !aor legaland ad!inistrative !easures adopted "y the overn!entand the 8& during the year #hich relate to the functions oroperations of the &S or of the financial syste!. (Sec.0)

13 7ailure to co!ply #ith the reportorial

re*uire!ents pursuant to this article #ithout ustifia"lereason as !ay "e deter!ined "y the 8& shall cause the

#ithholding of the salary of the personnel concerned untilthe re*uire!ents are co!plied #ith. (Sec. 0)

:he "alance sheets and other financial state!entsof the &S shall "e signed "y the officers responsi"le fortheir preparation$ "y the overnor$ and "y the auditor ofthe &S. (Sec. 1)

1:he fiscal year of the &S shall "egin on Eanuary

first and end on 5ece!"er thirtyfirst of each year. (Sec.,)

%ational Treasury& e#cept asotherise provided in the

transitory provisions of this Act.(Sec. CC)

"rofits or losses arising from any

revaluation of the S"Ps net

assets or liabilities in gold orforeign currencies ith respect tothe "hilippine peso shall not be

included in the computation of theannual profits and losses of theS". Any profits or losses arisingin this manner shall be offset byany amounts hich& as a

conse'uence of such revaluations&are oed by the "hilippines toany international or regionalintergovernmental financial

institution of hich the "hilippinesis a member or are oed by theseinstitutions to the "hilippines.Any remaining profit or loss shall

be carried in a special frozenaccount hich shall be named

Q5evaluation of Dnternational5eserveQ and the net balance of

hich shall appear either amongthe liabilities or among the assets

of the S"& depending on hetherthe revaluations have producednet profits or net losses. The5evaluation of Dnternational

5eserve account shall be neithercredited nor debited for anypurposes other than thosespecifically authorized in this

section. (Sec. C>)1>

F. *626 A#!$-+

The 9hairman of the 9GA shall act

as the e# officio auditor of theS" and& as such& he isempoered and authorized toappoint a representative ho

shall be the auditor of the S"and& in accordance ith la& fi#his salary& and to appoint and fi#salaries and number of personnel

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to assist said representative inhis ork. The salaries and

other emoluments shall be paidby the 9GA. The auditor of the

S" and personnel under himmay be removed only by the

9hairman of the 9GA. (Sec. CF)

The representative of the

9hairman of the 9GA must be a

9"A ith at least 1: yearse#perience as such. %o relativeof any member of the 0 or the9hairman of the 9GA ithin the

=th degree of consanguinity oraffinity shall be appointed such

representative. (Sec. CF)

IIIPROHIBITIONS

ON BSP PERSONNEL

Dn addition to the prohibitions found in 5A

:1; (Anti years& orboth& in the discretion of the court. (Sec.

C)

. F,'e S$$ee*$

The illful making of a false or misleading

statement on a material fact to the 0 orto the e#aminers of the S" shall be

punished by a fine of not less than"1::&::: nor more than "$::&:::& or by

imprisonment of not more > years& or

both& at the discretion of the court. (Sec.>)

9. V-,$-* -> Th' A&$ *! O$he+B*

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Jhenever a bank or O& or henever

any person or entity illfully violates thisAct or other pertinent banking las

being enforced or implemented by theS" or any order& instruction& rule or

regulation issued by the 0& the personor persons responsible for such violationshall unless otherise provided in this

Act be punished by a fine of not lessthan ">:&::: nor more than "$::&:::or by imprisonment of not less than $years nor more than 1: years& or both&at the discretion of the court.

Jhenever a bank or O persists incarrying on its business in an unlaful orunsafe manner& the oard may& ithoutpre*udice to the penalties provided in

the preceding paragraph of this sectionand the administrative sanctionsprovided in Sec. F& take action underSec. :. (Sec. =)

. A!*'$+$e S*&$-*' -* B*

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The respondents shall be afforded anopportunity to defend their action in a

hearing before the 0 or any committeechaired by any 0 member created for

the purpose& upon re'uest made by therespondents ithin > days from their

receipt of the order. Df no such hearingis re'uested ithin said period& theorder shall be final. Df a hearing is

conducted& all issues shall be determinedon the basis of records& after hich the0 may either reconsider or make finalits order. (Sec. F)

8. D,% F*e'

The 8overnor is hereby authorized& athis discretion& to impose upon banking

institutions& for any failure to complyith the re'uirements of la& 0regulations and policies& and4orinstructions issued by the 0 or by the

8overnor& fines not in e#cess of "1:&:::a day for each violation& the imposition

of hich shall be final and e#ecutoryuntil reversed& modified or lifted by the

0 on appeal. (Sec. F)

Pe'-= C#++e*&%=Le, Te*!e+= *!

B*< De"-'$

A&&-#*$'

I

PESO

The unit of monetary value in the "hilippinesis the Qpeso&Q hich is represented by the

sign Q".Q The peso is divided into 1:: e'ualparts called Qcentavos&Q hich arerepresented by the sign Qc.Q (Sec. C@)

II

CURRENCY

The ord QcurrencyQ is hereby defined&

for purposes of this Act& as meaning all"hilippine notes and coins issued or

circulating in accordance ith theprovisions of this Act. (Sec. C;)

The 0& ith the approval of the "resident

of the "hilippines& shall prescribe thedenominations& dimensions& designs&

inscriptions and other characteristics ofnotes issued by the S"E "rovided&hoever& That said notes shall state thatthey are liabilities of the S" and are fully

guaranteed by the 8overnment of the5epublic of the "hilippines. Said notesshall bear the signatures& in facsimile& ofthe "resident of the "hilippines and of the

8overnor of the S". Similarly& the 0&ith the approval of the "resident of the

"hilippines& shall prescribe the eight&fineness& designs& denominations and

other characteristics of the coins issued bythe S". Dn the minting of coins& the 0

shall give full consideration to theavailability of suitable metals and to theirrelative prices and cost of minting. (Sec.>)

The 0 shall prescribe the amounts of

notes and coins to be printed and minted&respectively& and the conditions to hich

the printing of notes and the minting ofcoins shall be sub*ect. The 0 shall have

the authority to contract institutions&mints or firms for such operations. Alle#penses incurred in the printing of notesand the minting of coins shall be for the

account of the S". (Sec. >C)

The S" shall e#change& on demand and

ithout charge& "hilippine currency of any

denomination for "hilippine notes andcoins of any other denomination

re'uested. Df for any reason the S" istemporarily unable to provide notes or

coins of the denominations re'uested& itshall meet its obligations by delivering

notes and coins of the denominationshich most nearly appro#imate thosere'uested. (Sec. >>)

The S" shall ithdra from circulation

and shall demonetize all notes and coins

hich for any reason hatsoever are unfitfor circulation and shall replace them by

ade'uate notes and coinsE "rovided&hoever& That the S" shall not replace

notes and coins the identification of hichis impossible& coins hich sho signs offiling& clipping or perforation& and notes

hich have lost more than $4> of theirsurface or all of the signatures inscribedthereon. %otes and coins in suchmutilated conditions shall be ithdranfrom circulation and demonetized ithout

compensation to the bearer. (Sec. >=)




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The S" may call in for replacement

notes of any series or denominationhich are more than > years old andcoins hich are more 1: years old.%otes and coins called in for

replacement in accordance ith thisprovision shall remain legal tender for aperiod of 1 year from the date of call.After this period& they shall cease to be

legal tender but during the folloingyear& or for such longer period as the 0may determine& they may be e#changedat par and ithout charge in the S"

and by agents duly authorized by theS" for this purpose. After the

e#piration of this latter period& the notesand coins hich have not been

e#changed shall cease to be a liability ofthe S" and shall be demonetized. The

S" shall also demonetize all notes andcoins hich have been called in andreplaced. (Sec. >F)

IIIEXCLUSIVE ISSUE POWER

The S" shall have the sole poer and

authority to issue currency& ithin theterritory of the "hilippines. %o other

person or entity& public or private& mayput into circulation notes& coins or anyother ob*ect or document hich& in theopinion of the 0& might circulate as

currency& nor reproduce or imitate thefacsimiles of S" notes ithout priorauthority from the S". The 0 mayissue such regulations as it may deem

advisable in order to prevent thecirculation of foreign currency or ofcurrency substitutes as ell as toprevent the reproduction of facsimiles of

S" notes. The S" shall have theauthority to investigate& make arrests&

conduct searches and seizures inaccordance ith la& for the purpose of

maintaining the integrity of thecurrency.

7iolation of this provision or any

regulation issued by the S" pursuantthereto shall constitute an offense

punishable by imprisonment of not lessthan > years but not more than 1:

years. Dn case the 5"9 provides for agreater penalty& then that penalty shall

be imposed. (Sec. >:)

IV

LIABILITY FOR NOTES AND COINS

%otes and coins issued by the S"

shall be liabilities of the S" and may beissued only against& and in amounts note#ceeding& the assets of the S". Said

notes and coins shall be a first andparamount lien on all assets of the S".

The S"Ps holdings of its on notes

and coins shall not be considered as part

of its currency issue and& accordingly&shall not form part of the assets orliabilities of the S". (Sec. >1)

V

LEGAL TENDER POWER

All notes and coins issued by the S" shall befully guaranteed by the 8overnment of the5epublic of the "hilippines and shall be legal

tender in the "hilippines for all debts& bothpublic and privateE "rovided& hoever& That&

unless otherise fi#ed by the 0& coins shallbe legal tender in amounts not e#ceeding ">:

for denominations of $> centavos and above&and in amounts not e#ceeding "$: for

denominations of 1: centavos or less. (Sec.>$)

VIDEAND DEPOSITS

?or purposes of this Act& the term

Qdemand depositsQ means all those

liabilities of the S" and of other bankshich are denominated in "hilippine

currency and are sub*ect to payment in

legal tender upon demand by thepresentation of checks. (Sec. >@)

Gnly banks duly authorized to do so may

accept funds or create liabilities payable inpesos upon demand by the presentation

of checks& and such operations shall besub*ect to the control of the 0 in

accordance ith the poers granted itith respect thereto under this Act. (Sec.>;)

9hecks representing demand deposits do

not have legal tender poer and theiracceptance in the payment of debts& both

public and private& is at the option of thecreditorE "rovided& hoever& That a check

hich has been cleared and credited tothe account of the creditor shall bee'uivalent to a delivery to the creditor ofcash in an amount e'ual to the amount

credited to his account. (Sec. =:)




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ONETARYADINISTRATION

BY THE BSP

IDOESTIC ONETARY

STABILIATION

The 0 shall endeavor to control any

e#pansion or contraction in monetaryaggregates hich is pre*udicial to theattainment or maintenance of price

stability.1=(Sec. =1)

Jhenever abnormal movements in the

monetary aggregates& in credit& or inprices endanger the stability of the"hilippine economy or important sectorsthereof& the 0 shall take such remedial

measures as are appropriate and ithinthe poers granted to the 0 and the

S" under the provisions of this Act andsubmit to the "resident of the "hilippines

and the 9ongress& and make public& adetailed report hich shall include& as a

minimum& a description and analysis ofE(1) the causes of the rise or fall of themonetary aggregates& of credit or ofprices ($) the e#tent to hich the

changes in the monetary aggregates& incredit& or in prices have been reflected inchanges in the level of domestic output&employment& ages and economic

activity in general& and the nature andsignificance of any such changes and() the measures hich the 0 hastaken and the other monetary& fiscal or

administrative measures hich it

recommends to be adopted.

167or purposes of this article and of this Act$ the 8&

shall for!ulate definitions of !onetary aggregates$ creditand prices and shall !a'e pu"lic such definitions and anychanges thereof. (Sec. 6,)

Jhenever the monetary aggregates& or

the level of credit& increases or decreasesby more than 1>H& or the cost of livinginde# increases by more than 1:H& inrelation to the level e#isting at the end of

the corresponding month of the precedingyear& or even though any of these'uantitative guidelines have not beenreached hen in its *udgment the

circumstances so arrant& the 0 shallsubmit the reports mentioned in thissection& and shall state therein hether&in the opinion of the oard& said changes

in the monetary aggregates& credit or costof living represent a threat to the stability

of the "hilippine economy or of importantsectors thereof.

The 0 shall continue to submit periodic

reports to the "resident of the "hilippinesand to 9ongress until it considers that themonetary& credit or price disturbances

have disappeared or have beenade'uately controlled. (Sec. =)

IIINTERNATIONAL ONETARY

STABILIATION

The S" shall e#ercise its poers under

this Act to preserve the international valueof the peso and to maintain itsconvertibility into other freely convertible

currencies primarily for& although notnecessarily limited to& current paymentsfor foreign trade and invisibles. (Sec. =C)

Dn order to maintain the international

stability and convertibility of the "hilippinepeso& the S" shall maintain internationalreserves ade'uate to meet anyforeseeable net demands on the S" for

foreign currencies. Dn *udging theade'uacy of the international reserves&the 0 shall be guided by the prospectivereceipts and payments of foreign

e#change by the "hilippines. The oardshall give special attention to the volumeand maturity of the S"Ps on liabilities inforeign currencies& to the volume and

maturity of the foreign e#change assets

and liabilities of other banks operating inthe "hilippines and& insofar as they areknon or can be estimated& the volume

and maturity of the foreign e#changeassets and liabilities of all other persons

and entities in the "hilippines. (Sec. =>)




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The international reserves of the S"

may include but shall not be limited tothe folloing assetsE1. gold and$. assets in foreign currencies in the

form ofE documents andinstruments customarily employedfor the international transfer offunds

. demand and time deposits incentral banks& treasuries andcommercial banks abroad foreigngovernment securities and foreign

notes and coins. (Sec. ==)

The 0 shall endeavor to hold the

foreign e#change resources of the S" infreely convertible currencies moreover&

the oard shall give particularconsideration to the prospects ofcontinued strength and convertibility ofthe currencies in hich the reserve is

maintained& as ell as to the anticipateddemands for such currencies. The 0

shall issue regulations determining theother 'ualifications hich foreign

e#change assets must meet in order tobe included in the international reserves

of the S". The S" shall be free toconvert any of the assets in itsinternational reserves into other assetsas described in subsecs (a) and (b) of

Sec. ==. (Sec. ==)

Jhenever the international reserve of

the S" falls to a level hich the 0considers inade'uate to meet

prospective net demands on the S" forforeign currencies& or henever the

international reserve appears to be inimminent danger of falling to such a

level& or henever the internationalreserve is falling as a result of paymentsor remittances abroad hich& in theopinion of the 0& are contrary to the

national elfare& the 0 shallE1. take such remedial measures as are

appropriate and ithin the poersgranted to the 0 and the S"

under the provisions of this Act and$. submit to the "resident of the

"hilippines and to 9ongress adetailed report hich shall include&

as a minimum& a description andanalysis ofE

a. the nature and causes of thee#isting or imminent decline

b. the remedial measures alreadytaken or to be taken by the 0

c. the monetary& fiscal oradministrative measures further

proposed andd. the character and e#tent of the

cooperation re'uired from othergovernment agencies for the

successful e#ecution of thepolicies of the 0.

Df the resultant actions fail to check the

deterioration of the reserve position of theS"& or if the deterioration cannot bechecked e#cept by chronic restrictions one#change and trade transactions or bysacrifice of the domestic ob*ectives of a

balanced and sustainable groth of theeconomy& the 0 shall propose to the"resident& ith appropriate notice of the9ongress& such additional action as it

deems necessary to restore e'uilibrium inthe international balance of payments ofthe "hilippines. The 0 shall submitperiodic reports to the "resident and to

9ongress until the threat to theinternational monetary stability of the

"hilippines has disappeared. (Sec. =F)

IIINSTRUENTS OF BSP ACTION

Dn order to achieve the primary ob*ective ofprice stability& the 0 shall rely on its moralinfluence and the poers granted to it under

this Act for the management of monetaryaggregates. (Sec. =@)

A. P#+&h'e' * G-,!

The S" may buy and sell gold in anyform& sub*ect to such regulations as

the 0 may issue. The purchases andsales of gold authorized by thissection shall be made in the nationalcurrency at the prevailing

international market price asdetermined by the 0. (Sec. =;)

. P#+&h'e' * G-,! *! F-+e*E3&h*e

The S" may buy and sell foreignnotes and coins& and documents andinstruments of types customarily

employed for the internationaltransfer of funds. The S" mayengage in future e#change operations.The S" may engage in foreign




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e#change transactions ith thefolloing entities or persons onlyE

1. bankinginstitutions operating in the

"hilippines$. the 8overnment&

its political subdivisions instrumentalities

. foreign or

international financialinstitutionsC. foreign

governments and theirinstrumentalities and

>. other entities orpersons hich the 0 is herebyempoered to authorize asforeign e#change dealers&

sub*ect to such rules andregulations as the 0 shallprescribe. (Sec. F:)

Dn order to maintain the

convertibility of the peso& the

S" may& at the re'uest of anybanking institution operating inthe "hilippines& buy any

'uantity of foreign e#changeoffered& and sell any 'uantity offoreign e#change demanded& bysuch institution& provided that

the foreign currencies so offeredor demanded are freelyconvertible into gold or InitedStates dollars. This re'uirement

shall not apply to demands forforeign notes and coins. (Sec.

F:)

The S" shall effect its

e#change transactions beteen

foreign currencies and the"hilippine peso at the ratesdetermined in accordance iththe provisions of Section FC of

this Act.1F(Sec. F:)

1; Sec ;. /change Rates. B :he 8& shall

deter!ine the echange rate policy of the country.:he 8& shall deter!ine the rates at #hich the &S

shall "uy and sell spot echange$ and shall esta"lishdeviation li!its fro! the effective echange rate or ratesas it !ay dee! proper. :he &S shall not collect anyadditional co!!issions or charges of any sort$ other than

actual telegraphic or ca"le costs incurred "y it.:he 8& shall si!ilarly deter!ine the rates for other

types of foreign echange transactions "y the &S$including purchases and sales of foreign notes and coins$"ut the !argins "et#een the effective echange rates andthe rates thus esta"lished !ay not eceed thecorresponding !argins for spot echange transactions "y!ore than the additional costs or epenses involved ineach type of transactions.

The S" shall endeavor to

maintain at all times a netpositive foreign asset position sothat its gross foreign e#change

assets ill alays e#ceed itsgross foreign liabilities. Dn theevent that the e'uivalent amountin pesos of the foreign e#change

liabilities of the S" e#ceed ticethe e'uivalent amount in pesos ofthe foreign e#change assets ofthe bank& the S" shall& ithin =:

days from the date the limit ise#ceeded& submit a report to the

9ongress stating the origin ofthese liabilities& and the manner

in hich they ill be paid. (Sec.F1)

The S" shall avoid the

ac'uisition and holding of

currencies hich are not freelyconvertible& and may ac'uire such

currencies in an amounte#ceeding the minimum balance

necessary to cover currentdemands for said currencies only

hen& and to the e#tent that&such ac'uisition is considered bythe 0 to be in the nationalinterest. The 0 shall determine

the procedures hich shall applyto the ac'uisition and dispositionby the S" of foreign e#changehich is not freely utilizable in the

international market. (Sec. F)

9. Ee+e*&% Re'$+&$-*' -* E3&h*eO"e+$-*'

Dn order to achieve the primary

ob*ective of the S" as set forth inSec. of this Act& or protect the

international reserves of the S" inthe imminence of& or during ane#change crisis& or in time of nationalemergency and to give the 0 and

the 8overnment time in hich to takeconstructive measures to forestall&combat& or overcome such a crisis oremergency& the 0& ith the

concurrence of at least > of itsmembers and ith the approval of the

"resident of the "hilippines& maytemporarily suspend or restrict sales

of e#change by the S"& and maysub*ect all transactions in gold and

foreign e#change to license by theS"& and may re'uire that any foreign




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e#change thereafter obtained by anyperson residing or entity operating

in the "hilippines be delivered to theS" or to any bank or agent

designated by the S" for thepurpose& at the effective e#change

rate or ratesE "rovided& hoever&That foreign currency deposits madeunder 5A =C$= (?9I ,a) shall be

e#empt from these re'uirements.(Sec. F$)

. O"e+$-*' /$h F-+e* E*$$e'

The 0 may authorize the S" to

grant loans to and receive loansfrom foreign banks and other foreignor international entities& both public

and private& and may engage in

such other operations ith theseentities as are in the nationalinterest and are appropriate to its

character as a central bank. TheS" may also act as agent orcorrespondent for such entities.Ipon authority of the 0& the S"

may pledge any gold or other assetshich it possesses as securityagainst loans hich it receives fromforeign or international entities.

(Sec. F>)

IIIREGULATION OF FOREIGN

EXCHANGE OPERATIONS OF THEBANKS

Dn order that the S" may at all

times have foreign e#change resourcessufficient to enable it to maintain theinternational stability and convertibilityof the peso& or in order to promote the

domestic investment of bank resources&the 0 may re'uire the banks to sell tothe S" or to other banks all or part of

their surplus holdings of foreigne#change. Such transfers may bere'uired for all foreign currencies or foronly certain of such currencies&according to the decision of the 0. The

transfers shall be made at the rates

established under the provisions of Sec.FC of this Act. (Sec. F=)

The 0 may& henever

arranted& determine the net assets and

net liabilities of banks and shall& in makingsuch a determination& take into accountthe bankPs netorth& outstandingliabilities& actual and contingent& or such

other financial or performance ratios asmay be appropriate under thecircumstances. Any such determination ofnet assets and net liabilities shall be

applied in all banks uniformly and ithoutdiscrimination. (Sec. F=)

The 0 may re'uire the banks to

maintain a balanced position beteentheir assets and liabilities in "hilippine

pesos or in any other currency orcurrencies in hich they operate. Thebanks shall be granted a reasonableperiod of time in hich to ad*ust their

currency positions to any suchre'uirement. (Sec. FF)1@

Dn order to restrain the banks

from taking speculative positions ith

respect to future fluctuations in foreigne#change rates& the 0 may issue suchregulations governing bank purchases andsales of non

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shape or form& and in foreign e#changehether entered into or undertaken by

them directly or through agents& or tosubmit such data as may be re'uired on

operations or activities giving rise to orin connection ith or relating to a gold

or foreign e#change transaction. The0 shall prescribe the forms on hichsuch declarations must be made. The

accuracy of the declarations may beverified by the S" by hateverinspection it may deem necessary.(Sec. @:)

IVLOANS TO BANKING AND OTHER

FINANCIAL INSTITUTIONS

8uiding "rinciples. The

rediscounts& discounts&

loans and advanceshich the S" isauthorized to e#tend tobanking institutions

under the provisions ofthe present article ofthis Act shall be used toinfluence the volume of

credit consistent iththe ob*ective of pricestability. (Sec. @1)

A. N-+, C+e!$ O"e+$-*'

Authorized Types of

Gperations. Sub*ect to the

principle stated in the precedingsection of this Act& the S" maynormally and regularly carry onthe folloing credit operations

ith banking institutionsoperating in the "hilippinesE

1. 9ommercial credits. N The

S" may rediscount&

discount& buy and sell bills&acceptances& promissorynotes and other credit

instruments ith maturitiesof not more than 1@: days

from the date of theirrediscount& discount or

ac'uisition by the S" andresulting from transactions

related toE

the importation&

e#portation& purchase orsale of readily saleablegoods and products& ortheir transportation ithinthe "hilippines

the storing of non)

5e'uired Security Against ank ,oans.Dn order to promote li'uidity andsolvency of the banking system& the 0may issue such regulations as it maydeem necessary ith respect to the

ma#imum permissible maturities of theloans and investments hich the banks

may make& and the kind and amount ofsecurity to be re'uired against the

various types of credit operations of thebanks. (Sec. 1:=)

"ortfolio 9eilings. Jhenever the 0

considers it advisable to prevent or

check an e#pansion of bank credit& it

may place an upper limit on the amountof loans and investments hich thebanks may hold& or may place a limit on

the rate of increase of such assets ithinspecified periods of time. The 0 may

apply such limits to the loans andinvestments of each bank or to specific

categories thereof. Dn no case shall the 0establish limits hich are belo the value

of the loans or investments of the bankson the date on hich they are notified of

such restrictions. The restrictions shall beapplied to all banks uniformly and ithout

discrimination. (Sec. 1:F)

0inimum 9apital 5atios. The 0 may

prescribe minimum ratios hich thecapital and surplus of the banks must bearto the volume of their assets& or tospecific categories thereof& and may alter

said ratios henever it deems necessary.(Sec. 1:@)

RELATED PROVISIONS IN RA 791

(GENERAL BANKING ACT OF 000)

M#cept as the 0 may otherise

prescribe& loans and other credit

accommodations against real estate shallnot e#ceed F>H of the appraised value of

the respective real estate security& plus=:H of the appraised value of the insuredimprovements& and such loans may bemade to the oner of the real estate or to

his assignees. (Sec F)

M#cept as the 0 may otherise

prescribe& loans and other creditaccommodations on security of chattels

and intangible properties such as patents&trademarks& trade names& and copyrightsshall not e#ceed F>H of the appraised

value of the security& an such loans andother credit accommodation may be madeto the title

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end& the 0 may& henever it deems ite#pedient& make suggestions or

recommendations to such corporationsfor the more effective coordination of

their policies ith those of the S".(Sec. 1:;)

BSPS FUNCTIONS ASBANKER AND FINANCIALADVISOR OF THE GOVT

IFUNCTION AS BANKER

OF THE GOVT

The S" shall act as a banker of the

8overnment& its political subdivisions

and instrumentalities. (Sec. 11:)

A. Re"+e'e*$* $he

G-e+*e*$

Jith the Dnternational 0onetary?und (D0?). The S" shall represent

the 8overnment in all dealings&negotiations and transactions iththe D0? and shall carry suchaccounts as may result from

"hilippine membership in& oroperations ith& the D0?. (Sec. 111)

Jith Gther ?inancial Dnstitutions. NThe S" may be authorized by the8overnment to represent it indealings& negotiations ortransactions ith the Dnternational

ank for 5econstruction andevelopment and ith other foreignor international financial institutionsor agencies. The "resident may&

hoever& designate any of his otherfinancial advisors to *ointly

represent the 8overnment in suchdealings& negotiations or

transactions. (Sec. 11$)

. O>>&, De"-'$+%

The S" shall be the official

depository of the 8overnment& itspolitical subdivisions andinstrumentalities as ell as of

government

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its political subdivisions andinstrumentalities. (Sec. 11=)

IIARKETING AND STABILIING

SECURITIES FOR THE ACCOUNT

OF THE GOVT

A. The I''#e *! P,&* ->G-e+*e*$ Se+$e'

Dssue of 8overnment Gbligations. Theissue of securities representingobligations of the 8overnment& itspolitical subdivisions or

instrumentalities& may be made throughthe S"& hich may act as agent of& andfor the account of& the 8overnment orits respective subdivisions or

instrumentality& as the case may be."rovidedE

That the +SP shall not 'uaranteethe placement o said securities,and shall not subscribe to their issuee1cept to replace its maturin'holdin's o securities 0ith the sametype as the maturin' securities.(Sec. ##-)

0ethods of "lacing 8overnmentSecurities. The S" may place thesecurities through direct sale to financialinstitutions and the public. The S" shall

not be a member of any stock e#changeor syndicate& but may intervene therein

for the sole purpose of regulating theiroperations in the placing of government

securities. (Sec. 11@)

The 8overnment& or its politicalsubdivisions or instrumentalities& shall

reimburse the S" for the e#pensesincurred in the placing of the aforesaid

securities. (Sec. 11@)

Servicing and 5edemption of the "ublicebt. The servicing and redemption of

the public debt shall also be effectedthrough the S". (Sec. 11;)

. BSP S#""-+$ -> $he G-e+*e*$Se+$e' +

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gold and foreign e#change resourcesand obligations of the nation and on the

effects of the proposed operation on thebalance of payments and on monetary

aggregates. (Sec. 1$)

Jhenever the 8overnment& or any of its

political subdivisions orinstrumentalities& contemplates

borroing ithin the "hilippines& theprior opinion of the 0 shall likeise bere'uested in order that the oard mayrender an opinion on the probable

effects of the proposed operation onmonetary aggregates& the price level&

and the balance of payments. (Sec. 1$)

5epresentation on the %ational

Mconomic and evelopment Authority(%MA). Dn order to assure effectivecoordination beteen the economic&financial and fiscal policies of the

8overnment and the monetary& creditand e#change policies of the S"& the

eputy 8overnor designated by the8overnor of the S" shall be an e#

officio member of the %MA oard. (Sec.1$C)

PRIVILEGES ANDPROHIBITIONS

A. P+,ee'

1. Ta# M#emptions. The S" shallbe e#empt for a period of > yearsfrom the approval of this Act from

all national& provincial& municipaland city ta#es& fees& charges andassessments. This e#emption shallapply to all property of the S"& tothe resources& receipts&

e#penditures& profits and income ofthe S"& as ell as to all contracts&deeds& documents and transactionsrelated to the conduct of the

business of the S"E "rovided&hoever& That said e#emptions shall

apply only to such ta#es& fees&charges and assessments for hich

the S" itself ould otherise beliable& and shall not apply to ta#es&

fees& charges& or assessmentspayable by persons or other entitiesdoing business ith the S"E"rovided& further& That foreign loans

and other obligations of the S"shall be e#empt& both as to principaland interest& from any and all ta#es

if the payment of such ta#es has beenassumed by the S". (Sec. 1$>)

$. M#emption f rom 9ustoms uties.

The importation and e#portation bythe S" of notes and coins& and of

gold and other metals and theimportation of all e'uipment neededfor bank note production& minting of

coins& metal refining and othersecurity printing operations shall befully e#empt from all customs dutiesand consular fees and from all otherta#es& assessments and charges

related to such importation ore#portation. (Sec. 1$=)

3. Applicability of the 9ivil Service

,a (9S,). Appointments in the S"&

e#cept as to those hich are policyO>>&e+' (BSP C+,+ : J 001)

An officer shall have the folloing

minimum 'ualificationsE

At least $1 years of age

At least a college graduate& or

have at least > years e#perience

in banking or trust operations orrelated activities or in a fieldrelated to his position andresponsibilities& or have

undergone training in banking ortrust operations acceptable to theappropriate supervising ande#amining department of the S"E

"rovided& hoever& That trustofficers shall have at least $ yearsof actual e#perience or training intrust operations or fund

management or other relatedfields and

0ust be fit and proper for the

position he is beingproposed4appointed to. Dn

determining hether a person isfit and proper for a particular

position& the folloing matters mustbe consideredE

- integrity4probity- competence

- education- diligence and

- e#perience4training.

The dis'ualifications for directors

mentioned for shall likeise apply

to officers& e#cept that stated inDtems b.$ (persons ho refuse tofully disclose the e#tent of theirbusiness interest ) and b.F

(directors dis'ualified for failure toobserve4discharge their duties and

responsibilities).

M#cept as may be authorized& the

spouse or a relative ithin the $nd

degree of consanguinity or affinityof any person holding the positionof 9hairman& "resident& M#ecutive7ice "resident or any position of

e'uivalent rank& 8eneral 0anager&Treasurer& 9hief 9ashier or 9hief

Accountant is dis'ualified fromholding or being elected or

appointed to any of said positions inthe same bank4'uasi

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To maintain the 'uality of bank

management and afford betterprotection to depositors and the public ingeneral& the 0 shall prescribe& passupon and revie the 'ualifications and

dis'ualifications of individuals elected orappointed bank directors or officers anddis'ualify those found unfit. After duenotice to the board of directors of the

bank& the 0 may dis'ualify& suspend orremove any bank director or officer hocommits or omits an act hich renderhim unfit for the position. Dn

determining hether an individual is fitand proper to hold the position of a

director or officer of a bank& regard shallbe given to his integrity& e#perience&

education& training& and competence.(Sec. 1=)

The suspension of bank officers hich is

only preventive in nature ould re'uire

no notice or hearing& and until such timethat the officers have proved their

innocence& they may be preventivelysuspended from holding office so as not

to influence the conduct of investigation&and to prevent the commission of

further irregularities. (+use'o v "&1;;;)

As a general rule& a banking corporation

is liable for the rongful or tortuous acts

and declarations of its officers or agentsithin the course and scope of their

employment. A bank ill be held liablefor the negligence of its officers or

agents hen acting ithin the courseand scope of their employment. Dt may

be liable for the tortuous acts of itsofficers even as regards that species of

tort of hich malice is an essentialelement. A bank holding out its officersand agents as orthy of confidence illnot be permitted to profit by the frauds

these officers or agents ere enabled toperpetrate in the apparent course oftheir employment nor ill it bepermitted to shirk its responsibility for

such frauds& even though no benefit mayaccrue to the bank therefrom. Df anofficer or official of a bank in his officialcapacity receives money to satisfy an

evidence of indebtedness lodged for hisbank collection& the bank is liable for his

misappropriation of such sum. (P/+an v "& $::1)

G--! G-e+**&e (BSP C+,+ 7;J001)

The position of a bank4'uasi$' -> D+e&$-+' *! O>>&e+'

To protect the funds of depositors and

creditors& the 0 may regulate the

payment by the bank to its directors andofficers of compensation& alloance& fees&

bonuses& stock options& profit sharing andfringe benefits only in e#ceptional cases

and hen the circumstances arrant&such as but not limited to the folloinginstances hen a bank is1. under comptrollership or

conservatorship or$. found by the 0 to be conducting

business in an unsafe or unsoundmanner

. found by the 0 to be in anunsatisfactory financial condition.(Sec. 1@)

P+-h2$-* *'$ P#2,& O>>&,'

%o appointive or elective public official&

hether full

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C-*!#&$ -> B-+! -> D+e&$-+' ee$*'

The meetings of the board of directors

may be conducted through moderntechnologies such as& but not limited to&

teleconferencing and video)

B*< B+*&he'

Iniversal or commercial banks may

open branches or other offices ithin oroutside the "hils. upon prior approval of

the S". ranching by all other banksshall be governed by pertinent las.(Sec. $:)

A bank authorized to establish branches

or other offices shall be responsible forall business conducted in such branchesand offices to the same e#tent and inthe same manner as though such

business had all been conducted in the

head office. A bank and its branches andoffices shall be treated as one unit. (Sec.$:)

A bank may& sub*ect to prior approval of

the 0& use any or all of its branches asoutlets for the presentation and4or saleof the financial products of its allied

undertaking or of its investment houseunits. (Sec. $:)

B* De*! De"-'$'

A bank other than a I or cannot accept orcreate demand deposits e#cept upon prior

approval of& and sub*ect to such conditionsand rules as may be prescribed by the0onetary oard. (Sec. )

T%"e' -> De"-'$'

1. Time eposit N Dnterest rate stipulateddepending on the number of days. uring

this period& the money deposited cannotbe ithdran. 6igh interest rates.

$. Savings eposit N Inder the fine print& ifyou deposit today& you cannot ithdra

the amount until =: days later. ank paysan interest rate& but not as high as time

deposits.. emand eposits 4 9urrent Accounts N

%o interest is paid by the bank becausethe depositor can take out his funds any

time. Dt is called demand deposit becausethe depositor can ithdra the money hedeposited on the very same day hen he

deposited it. (7illanueva)

% ,, B*

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GRE A bank cannot accept or createdemand deposits e#cept upon prior approval

of& and sub*ect to such conditions and rulesas may be prescribed by the 0. (Sec. )

E3&E Is and s

B*) 9onversely& the depositor has every

right to apply his deposit in a bank againsthis loan from such bank. (!P v. "& 1;F>)(0orales 7illanueva cites Serrano v. +&1;@: Ppl v. On'& 1;;1)

P+e'#"$-* -> O/*e+'h" -> De"-'$'

Dt is presumed that money deposited in

a bank account belongs to the person inhose name the deposit account is

opened. A bank is *ustified in paying outthe money to the depositor or upon his

order& and cannot be liable to any otherperson ho turned out to he the trueoner of the funds deposited. Thus& itas held in 8ulton /ron Eors o vhina +anin' orp (1;:)& Thespecialized function of a bank is to serveas a place of deposit for money& to keepit safely hile on deposit& and to pay it

out& upon demand& to the person hoeffected the deposit or upon his order.A bank is not a guardian of trust fundsdeposited 4 it in the sense that it must

see to their proper application& not is itits business to pry into the uses to hichmoney on deposit in its vault are beingput and so long as it serves its function

and pays the money out in good faith tothe person ho deposited it& or upon his

order& 4out knoledge or notice that itis in fact assisting in the

misappropriation of the fund& the bank illbe protected. As is ell saidK it ould

seriously interfere 4 commercialtransactions to charge banks 4 the duty

of supervising the administration of trustfunds& hen& in due course of business&

they receive checks and drafts in properform dran upon such funds in theircustody. The la imposes no such duty

upon them.B %ote hoever that there is alimitation in this regard as persurvivorship agreements. (0orales)

O2,$-* -> B*-+O#$'$*!* L-*

A bank is under no duty or obligation to make

an application or set

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renter is that of bailer and bailee thebailment being for hire and mutual benefiit.

(" "'ro4industrial Fev. orp. v. "= 1;@reiterated in Sia v. "& 1;;& according to7illanueva)

B O+!e+ -> C,-'#+e

Dn case a bank or O notifies the S" orpublicly announces a bank holiday& or in anymanner suspends the payment of its depositliabilities continuously for more than :days& the 0 may summarily and ithout

need for prior hearing close such bankinginstitution and place it under receivership ofthe "hil. eposit Dnsurance 9orp. ("D9).(Sec. >)

LOANS

R'

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The basis for determining compliance

ith S, is the total credit commitmentof the bank to the borroer. (Sec. >.1)

Inless the 0 prescribes otherise& the

total amount of loans& creditaccommodations and guarantees

prescribed in the preceding paragraphmay be increased by an additional 1:Hof the net orth of such bank provided

the additional liabilities of any borroerare ade'uately secured by trust receipts&shipping documents& arehouse receiptsor other similar documents transferringor securing title covering readily

marketable& non.$)

Dnclusions . The above prescribed ceilings

shall includeE

a. the direct liability of the maker oracceptor of paper discounted ith orsold to such bank and the liability ofa general indorser& draer or

guarantor ho obtains a loan or

other credit accommodation from ordiscounts paper ith or sells papersto such bank

b. in the case of an individual hoons or controls a ma*ority interestin a corporation& partnership&association or any other entity& the

liabilities of said entities to suchbank

c. in the case of a corporation& allliabilities to such bank of all

subsidiaries in hich suchcorporation ons or controls a

ma*ority interest andd. in the case of a partnership&

association or other entity& theliabilities of the members thereof to

such bank. (>.)

* ven i a parent corporation,partnership, association, entity or anindividual 0ho o0ns or controls amaAority interest in such entities hasno liability to the ban, the :+ may

prescribe the combination o theliabilities o subsidiary corporations ormembers o the partnership,association, entity or such individualunder certain circumstances, includin'

but not limited to any o the ollo0in'

situationsa. the parent corporation&

partnership& association& entity

or individual guarantees therepayment of the liabilities

b. the liabilities ere incurred forthe accommodation of the

parent corporation or anothersubsidiary or of the partnership or

association or entity or suchindividual or

c. the subsidiaries though separateentities operate merely as

departments or divisions of asingle entity. (>.C)

!! 9ertain types of contingentaccounts of borroers may beincluded among those sub*ect tothese prescribed limits as may bedetermined by the 0. (>.F)

!!! ,oans and other credit

accommodations& depositsmaintained ith& and usualguaranteed by a bank to any otherbank or non.=)

M#clusions . ?or purposes of this Section&

loans& other credit accommodations andguarantees shall e#cludeE

a. loans and other creditaccommodations secured byobligations of the S" or of the "hil.

8ovtb. loans and other credit

accommodations fully guaranteed bythe govt as to the payment of

principal and interestc. loans and other credit

accommodations covered byassignment of deposits maintained in

the lending bank and held in the"hils.

d. loans& credi

19_RAs_249to322

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