Banking Law Reviewer (For Commercial Law Review, Banking Law c.

Responsibility and Primary Objective

Elective, and the Bar Examinations)
The Bangko Sentral shall provide policy directions in the areas of
money, banking, and credit. It shall have supervision over the
operations of banks and exercise such regulatory and examination
THE NEW CENTRAL BANK ACT
powers as provided in this Act and other pertinent laws over the
(R.A. No. 7653, as amended by R.A. No. 11211 quasi-banking operations of non-bank financial institutions. As may
be determined by the Monetary Board, it shall likewise exercise
regulatory and examination powers over money service businesses,
a. State Policies credit granting businesses, and payment system operators. The
Monetary Board is hereby empowered to authorize entities or persons
The State shall maintain a central monetary authority that shall to engage in money service businesses.
function and operate as an independent and accountable body
corporate in the discharge of its mandated responsibilities concerning The primary objective of the Bangko Sentral is to maintain price
money, banking and credit. In line with this policy, and considering stability conducive to a balanced and sustainable growth of the
its unique functions and responsibilities, the central monetary economy and employment. It shall also promote and maintain
authority established under this Act, while being a government- monetary stability and the convertibility of the peso.
owned corporation, shall enjoy fiscal and administrative autonomy. The Bangko Sentral shall promote financial stability and closely work
(Section 1) with the National Government, including, but not limited to, the
Department of Finance, Securities and Exchange Commission, the
Insurance Commission, and the Philippine Deposit Insurance
b. Creation of the Bangko Sentral ng Pilipinas Corporation.
There is hereby established an independent central monetary The Bangko Sentral shall oversee the payment and settlement systems
authority, which shall be a body corporate known as the Bangko in the Philippines, including critical financial market infrastructures,
Sentral ng Pilipinas. in order to promote sound and prudent practices consistent with the
The capital of the Bangko Sentral shall be Two hundred billion pesos maintenance of financial stability.
(₱200,000,000,000), to be fully subscribed by the Government of the In the attainment of its objectives, the Bangko Sentral shall promote
Republic of the Philippines, hereafter referred to as the Government: broad and convenient access to high quality financial services and
Provided, That the increase in capitalization shall be funded solely consider the interest of the general public. (Section 3)
from the declared dividends of the Bangko Sentral in favor of the
National Government. For this purpose, any and all declared
dividends of the Bangko Sentral in favor of the National Government d. Corporate Powers
shall be deposited in a special account in the General Fund, and
earmarked for the payment of Bangko Sentral’s increase in The Bangko Sentral is hereby authorized to adopt, alter, and use a
capitalization. Such payment shall be released and disbursed corporate seal which shall be judicially noticed; to enter into contracts;
immediately and shall continue until the increase in capitalization has to lease or own real and personal property, and to sell or otherwise
been fully paid. (Section 2) dispose of the same; to sue and be sued; and otherwise to do and
perform any and all things that may be necessary or proper to carry Data on individuals and firms, other than banks, gathered by the
out the purposes of this Act. Bangko Sentral shall not be made available to any person or entity
outside of the Bangko Sentral whether public or private except under
The Bangko Sentral may acquire and hold such assets and incur such
order of the court or under such conditions as may be prescribed by
liabilities in connection with its operations authorized by the
the Monetary Board: Provided, however, That the collective data on
provisions of this Act, or as are essential to the proper conduct of such
firms may be released to interested persons or entities: Provided,
operations.
finally, That in the case of data on banks, the provisions of Section 27
The Bangko Sentral may compromise, condone or release, in whole or of this Act shall apply. (Section 23)
in part, any claim of or settled liability to the Bangko Sentral,
regardless of the amount involved, under such terms and conditions
as may be prescribed by the Monetary Board to protect the interests of Supervision and Examination
the Bangko Sentral. (Section 5)
The Bangko Sentral shall have supervision over, and conduct regular
or special examinations of banking institutions and quasi-banks,
including their subsidiaries and affiliates engaged in allied activities.
e. Operations of the Bangko Sentral ng Pilipinas
For purposes of this section, a subsidiary means a corporation more
than fifty percent (50%) of the voting stock of which is directly or
Authority to Obtain Data and Information indirectly owned, controlled or held with power to vote by a bank or
quasi-bank and an affiliate means a corporation the voting stock of
The Bangko Sentral shall have the authority to require from any which, to the extent of fifty percent (50%) or less, is owned by a bank
person or entity, including government offices and instrumentalities, or quasi-bank or which is related or linked directly or indirectly to
or government-owned or -controlled corporations, any data, for such institution or intermediary through common stockholders or
statistical and policy development purposes in relation to the proper such other factors as may be determined by the Monetary Board.
discharge of its functions and responsibilities: Provided, That
disaggregated data gathered are subject to prevailing confidentiality The Bangko Sentral shall have regulatory authority over, and conduct
laws. The Bangko Sentral through the Governor or in his absence, a regular or special examinations of, entities which under this Act or by
duly authorized representative shall have the power to issue a special laws are subject to its jurisdiction.
subpoena for the production of the books and records for the
The Bangko Sentral shall establish a mechanism for issues arising
aforesaid purpose. Those who refuse the subpoena without justifiable
from bank examinations. It shall be independent and reports directly
cause, or who refuse to supply the Bangko Sentral with data required,
to the Monetary Board, without prejudice to the authority of the
shall be subject to punishment for contempt in accordance with the
Bangko Sentral and its Monetary Board to take enforcement and
provisions of the Rules of Court.
supervisory actions against supervised entities.

The department heads and the examiners of the supervising and/or

The authority of the Bangko Sentral to require data from banks shall examining departments are hereby authorized to administer oaths to
continue to be exercised pursuant to its supervisory powers set forth any director, officer, or employee of any institution under their
in this Act and other applicable laws. respective supervision or subject to their examination, and to compel
the presentation of all books, documents, papers or records necessary examiners only in connection with their supervisory and examination
in their judgment to ascertain the facts relative to the true condition of responsibility or by the Bangko Sentral in an appropriate legal action
any institution as well as the books and records of persons and it has initiated involving the deposit account. (Section 26)
entities relative to or in connection with the operations, activities or
transactions of the institution under examination, subject to the
provision of existing laws protecting or safeguarding the secrecy or Prohibitions
confidentiality of bank deposits as well as investments of private
persons, natural or juridical, in debt instruments issued by the In addition to the prohibitions found in Republic Act Nos. 3019 and
Government. 6713, personnel of the Bangko Sentral are hereby prohibited from:

No restraining order or injunction shall be issued by the court a. being an officer, director, lawyer or agent, employee,
enjoining the Bangko Sentral from examining any institution subject consultant or stockholder, directly or indirectly, of any
to supervision or examination by the Bangko Sentral, unless there is institution subject to supervision or examination by the
convincing proof that the action of the Bangko Sentral is plainly Bangko Sentral, except non-stock savings and loan
arbitrary and made in bad faith and the petitioner or plaintiff files associations and provident funds organized exclusively for
with the clerk or judge of the court in which the action is pending a employees of the Bangko Sentral, and except as otherwise
bond executed in favor of the Bangko Sentral, in an amount to be provided in this Act;
fixed by the court. The provisions of Rule 58 of the New Rules of b. directly or indirectly requesting or receiving any gift, present
Court insofar as they are applicable and not inconsistent with the or pecuniary or material benefit for himself or another, from
provisions of this section shall govern the issuance and dissolution of any institution subject to supervision or examination by the
the restraining order or injunction contemplated in this section. Bangko Sentral;
(Section 25) c. revealing in any manner, except under orders of the court, the
Congress or any government office or agency authorized by
law, or under such conditions as may be prescribed by the
Monetary Board, information relating to the condition or
Bank Deposits and Investments
business of any institution. This prohibition shall not be held
Any director, officer or stockholder who, together with his related to apply to the giving of information to the Monetary Board or
interest, contracts a loan or any form of financial accommodation the Governor of the Bangko Sentral, or to any person
from: (1) his bank; or (2) from a bank (a) which is a subsidiary of a authorized by either of them, in writing, to receive such
bank holding company of which both his bank and the lending bank information; and
are subsidiaries or (b) in which a controlling proportion of the shares d. borrowing from any institution subject to supervision or
is owned by the same interest that owns a controlling proportion of examination by the Bangko Sentral unless said borrowing is
the shares of his bank, in excess of five percent (5%) of the capital and transacted on an arm’s length basis, fully disclosed to the
surplus of the bank, or in the maximum amount permitted by law, Monetary Board, and shall be subject to such rules and
whichever is lower, shall be required by the lending bank to waive regulations as the Monetary Board may prescribe. (Section 27)
the secrecy of his deposits of whatever nature in all banks in the
Examination and Fees
Philippines. Any information obtained from an examination of his
deposits shall be held strictly confidential and may be used by the
The supervising and examining department head, personally or by
deputy, shall examine the operations of every bank and quasi-bank,
Conservatorship
including their subsidiaries and affiliates engaged in allied activities,
and other entities which under this Act or special laws are subject to Whenever, on the basis of a report submitted by the appropriate
Bangko Sentral supervision, in accordance with the guidelines set by supervising or examining department, the Monetary Board finds that
the Monetary Board taking into consideration sound and prudent a bank or a quasi-bank is in a state of continuing inability or
practices: Provided, That there shall be an interval of at least twelve unwillingness to maintain a condition of liquidity deemed adequate
(12) months between regular examinations: Provided, further, That to protect the interest of depositors and creditors, the Monetary Board
the Monetary Board, by an affirmative vote of at least five (5) may appoint a conservator with such powers as the Monetary Board
members, may authorize a special examination if the circumstances shall deem necessary to take charge of the assets, liabilities, and the
warrant. management thereof, reorganize the management, collect all monies
and debts due said institution, and exercise all powers necessary to
The institution concerned shall afford to the head of the appropriate
restore its viability. The conservator shall report and be responsible to
supervising and examining departments and to his authorized
the Monetary Board and shall have the power to overrule or revoke
deputies full opportunity to examine its books and records, cash and
the actions of the previous management and board of directors of the
assets and general condition and review its systems and procedures at
bank or quasi-bank.
any time during business hours when requested to do so by the
Bangko Sentral: Provided, however, That none of the reports and The conservator should be competent and knowledgeable in bank
other papers relative to such examinations shall be open to inspection operations and management. The conservatorship shall not exceed
by the public except insofar as such publicity is incidental to the one (1) year.
proceedings hereinafter authorized or is necessary for the prosecution
of violations in connection with the business of such institutions. The conservator shall receive remuneration to be fixed by the
Monetary Board in an amount not to exceed two-thirds (2/3) of the
Supervised institutions shall pay to the Bangko Sentral, no later than salary of the president of the institution in one (1) year, payable in
May 31 of each year, an annual supervision fee as may be prescribed twelve (12) equal monthly payments: Provided, That, if at any time
by the Monetary Board. In determining the amount of the annual within one-year period, the conservatorship is terminated on the
supervision fee, the Monetary Board shall consider the costs of ground that the institution can operate on its own, the conservator
supervision. (Section 28) shall receive the balance of the remuneration which he would have
received up to the end of the year; but if the conservatorship is
terminated on other grounds, the conservator shall not be entitled to
f. Monetary Board; Powers and Functions such remaining balance. The Monetary Board may appoint a
conservator connected with the Bangko Sentral, in which case he shall
not be entitled to receive any remuneration or emolument from the
Bangko Sentral during the conservatorship. The expenses attendant to
the conservatorship shall be borne by the bank or quasi-bank
concerned.
g. How the Bangko Sentral ng Pilipinas Handles Banks in Distress The Monetary Board shall terminate the conservatorship when it is
satisfied that the institution can continue to operate on its own and
the conservatorship is no longer necessary. The conservatorship shall 3591, as amended. The Monetary Board shall notify in writing,
likewise be terminated should the Monetary Board, on the basis of the through the receiver, the board of directors of the closed bank
report of the conservator or of its own findings, determine that the of its decision.
continuance in business of the institution would involve probable loss
The actions of the Monetary Board taken under this section or under
to its depositors or creditors, in which case the provisions of Section
Section 29 of this Act shall be final and executory and may not be
30 shall apply. (Section 29)
restrained or set aside by the court except on petition for certiorari on
the ground that the action taken was in excess of jurisdiction or with
such grave abuse of discretion as to amount to lack or excess of
Closure
jurisdiction. The petition for certiorari may only be filed by the
stockholders of record representing the majority of the capital stock
within ten (10) days from receipt by the board of directors of the
Receivership and Liquidation institution of the order directing receivership, liquidation or
Whenever, upon report of the head of the supervising or examining conservatorship. The designation of a conservator under Section 29 of
department, the Monetary Board finds that a bank or quasi-bank: this Act or the appointment of a receiver under this section shall be
vested exclusively with the Monetary Board. Furthermore, the
a. has notified the Bangko Sentral or publicly announced a designation of a conservator is not a precondition to the designation
unilateral closure, or has been dormant for at least sixty (60) of a receiver.
days or in any manner has suspended the payment of its
deposit/deposit substitute liabilities, or is unable to pay its The authority of the Monetary Board to summarily and without need
liabilities as they become due in the ordinary course of for prior hearing forbid the bank or quasi-bank from doing business
business: Provided, That this shall not include inability to pay in the Philippines as provided above may also be exercised over non-
caused by extraordinary demands induced by financial panic stock savings and loan associations, based on the same applicable
in the banking community; grounds. For quasi-banks and non-stock savings and loan
b. has insufficient realizable assets, as determined by the Bangko associations, any person of recognized competence in banking, credit
Sentral, to meet its liabilities; or or finance may be designated by the Bangko Sentral as a receiver.
c. cannot continue in business without involving probable losses (Section 30)
to its depositors or creditors; or
d. (d) has willfully violated a cease and desist order under
Section 37 of this Act that has become final, involving acts or h. Administrative Sanctions on Supervised Entities
transactions which amount to fraud or a dissipation of the
The imposition of administrative sanctions shall be fair, consistent
assets of the institution; in which cases, the Monetary Board
and reasonable. Without prejudice to the criminal sanctions against
may summarily and without need for prior hearing forbid the
the culpable persons provided in Sections 34, 35, and 36 of this Act,
institution from doing business in the Philippines and
the Monetary Board may, at its discretion, impose upon any bank,
designate the Philippine Deposit Insurance Corporation
quasi-bank, including their subsidiaries and affiliates engaged in
(PDIC) as receiver in the case of banks and direct the PDIC to
allied activities, or other entity which under this Act or special laws
proceed with the liquidation of the closed bank pursuant to
are subject to the Bangko Sentral supervision, and/or their directors,
this section and the relevant provisions of Republic Act No.
officers or employees, for any willful violation of its charter or
bylaws, willful delay in the submission of reports or publications hundred twenty (120) days after the date of suspension, said director,
thereof as required by law, rules and regulations; any refusal to officer or employee shall be reinstated in his position: Provided,
permit examination into the affairs of the institution; any willful further, That when the delay in the disposition of the case is due to
making of a false or misleading statement to the Board or the the fault, negligence or petition of the director or officer, the period of
appropriate supervising and examining department or its examiners; delay shall not be counted in computing the period of suspension
any willful failure or refusal to comply with, or violation of, any herein provided.
banking law or any order, instruction or regulation issued by the
The above administrative sanctions need not be applied in the order
Monetary Board, or any order, instruction or ruling by the Governor;
of their severity.
or any commission of irregularities, and/or conducting business in an
unsafe or unsound manner as may be determined by the Monetary Whether or not there is an administrative proceeding, if the institution
Board, the following administrative sanctions, whenever applicable: and/or the directors, officers or employees concerned continue with
or otherwise persist in the commission of the indicated practice or
a. fines in amounts as may be determined by the Monetary
violation, the Monetary Board may issue an order requiring the
Board to be appropriate, but in no case to exceed One million
institution and/or the directors, officers or employees concerned to
pesos (₱1,000,000) for each transactional violation or One
cease and desist from the indicated practice or violation, and may
hundred thousand pesos (₱100,000) per calendar day for
further order that immediate action be taken to correct the conditions
violations of a continuing nature, taking into consideration the
resulting from such practice or violation. The cease and desist order
attendant circumstances, such as the nature and gravity of the
shall be immediately effective upon service on the respondents.
violation or irregularity and the size of the institution:
Provided, That in case profit is gained or loss is avoided as a The respondents shall be afforded an opportunity to defend their
result of the violation, a fine no more than three (3) times the action in a hearing before the Monetary Board or any committee
profit gained or loss avoided may also be imposed; chaired by any Monetary Board member created for the purpose,
b. suspension of rediscounting privileges or access to Bangko upon request made by the respondents within five (5) days from their
Sentral credit facilities; receipt of the order. If no such hearing is requested within said
c. suspension of lending or foreign exchange operations or period, the order shall be final. If a hearing is conducted, all issues
authority to accept new deposits or make new investments; shall be determined on the basis of records, after which the Monetary
d. suspension of interbank clearing privileges; and/or Board may either reconsider or make final its order.
e. suspension or revocation of quasi-banking or other special
licenses. The Governor is hereby authorized, at his discretion, to impose upon
banks and quasi-banks, including their subsidiaries and affiliates
Resignation or termination from office shall not exempt such director, engaged in allied activities, and other entities which under this Act or
officer or employee from administrative or criminal sanctions. special laws are subject to Bangko Sentral supervision for any failure
to comply with the requirements of law, Monetary Board regulations
and policies, and/or instructions issued by the Monetary Board or by
The Monetary Board may, whenever warranted by circumstances, the Governor, fines not in excess of One hundred thousand pesos
preventively suspend any director, officer or employee of the (₱100,000) for each transactional violation or Thirty thousand pesos
institution pending an investigation: Provided, That should the case (₱30,000) per calendar day for violations of a continuing nature, the
be not finally decided by the Bangko Sentral within a period of one
imposition of which shall be final and executory until reversed, the required margin to the nature of the transaction to be financed.
modified or lifted by the Monetary Board on appeal. (Section 37) (Section 105)

i. Rules on bank deposits and investments by directors, officers, ii. Required security against bank loans
stockholders and their related interests
In order to promote liquidity and solvency of the banking system, the
Any director, officer or stockholder who, together with his related Monetary Board may issue such regulations as it may deem necessary
interest, contracts a loan or any form of financial accommodation with respect to the maximum permissible maturities of the loans and
from: (1) his bank; or (2) from a bank (a) which is a subsidiary of a investments which the banks may make, and the kind and amount of
bank holding company of which both his bank and the lending bank security to be required against the various types of credit operations
are subsidiaries or (b) in which a controlling proportion of the shares of the banks. (Section 106)
is owned by the same interest that owns a controlling proportion of
the shares of his bank, in excess of five percent (5%) of the capital and
surplus of the bank, or in the maximum amount permitted by law, iii. Portfolio ceilings
whichever is lower, shall be required by the lending bank to waive
the secrecy of his deposits of whatever nature in all banks in the Whenever the Monetary Board considers it advisable to prevent or
Philippines. Any information obtained from an examination of his check an expansion of bank credit, the Board may place an upper
deposits shall be held strictly confidential and may be used by the limit on the amount of loans and investments which the banks may
examiners only in connection with their supervisory and examination hold, or may place a limit on the rate of increase of such assets within
responsibility or by the Bangko Sentral in an appropriate legal action specified periods of time. The Monetary Board may apply such limits
it has initiated involving the deposit account. (Section 26) to the loans and investments of each bank or to specific categories
thereof.

In no case shall the Monetary Board establish limits which are below
j. Supervision and regulation of bank operations the value of the loans or investments of the banks on the date on
which they are notified of such restrictions. The restrictions shall be
applied to all banks uniformly and without discrimination. (Section
a. Loans and other credit accommodations 107)

b. Selective Regulation iv. Minimum capital ratios

The Monetary Board may prescribe minimum risk-based capital

adequacy ratios based on internationally accepted standards and may
i. Margin requirements against letters of credit
alter said ratios whenever it deems necessary. In the exercise of its
The Monetary Board may at any time prescribe minimum cash authority under this section, the Monetary Board may require banks
margins for the opening of letters of credit, and may relate the size of to hold capital beyond the minimum requirements commensurate to
then risk profile. (Section 108)
 It shall be unlawful for any official or employee of a banking
institution to disclose to any person other than those mentioned in
k. Rate of Exchange
Section two hereof any information concerning said deposits. (Section
The Monetary Board shall determine the exchange rate policy of the 3)
country.

The Monetary Board shall determine the rates at which the Bangko
3. Deposits Covered and Exceptions
Sentral shall buy and sell spot exchange, and shall establish deviation
limits from the effective exchange rate or rates as it may deem proper. All deposits of whatever nature with banks or banking institutions in
The Bangko Sentral shall not collect any additional commissions or the Philippines including investments in bonds issued by the
charges of any sort, other than actual telegraphic or cable costs Government of the Philippines, its political subdivisions and its
incurred by it. instrumentalities, are hereby considered as of an absolutely
confidential nature and may not be examined, inquired or looked into
The Monetary Board shall similarly determine the rates for other
by any person, government official, bureau or office, except upon
types of foreign exchange transactions by the Bangko Sentral,
written permission of the depositor, or in cases of impeachment, or
including purchases and sales of foreign notes and coins, but the
upon order of a competent court in cases of bribery or dereliction of
margins between the effective exchange rates and the rates thus
duty of public officials, or in cases where the money deposited or
established may not exceed the corresponding margins for spot
invested is the subject matter of the litigation. (Section 2)
exchange transactions by more than the additional costs or expenses
involved in each type of transactions. (Section 74)

4. Exceptions

See No. 3.

LAW ON SECRECY OF BANK DEPOSITS

(R.A. No. 1405, as amended) 5. Garnishment of Deposits, Including Foreign Deposits

All foreign currency deposits authorized under this Act, as amended

by PD No. 1035, as well as foreign currency deposits authorized
1. Purpose
under PD No. 1034, are hereby declared as and considered of an
It is hereby declared to be the policy of the Government to give absolutely confidential nature and, except upon the written
encouragement to the people to deposit their money in banking permission of the depositor, in no instance shall foreign currency
institutions and to discourage private hoarding so that the same may deposits be examined, inquired or looked into by any person,
be properly utilized by banks in authorized loans to assist in the government official, bureau or office whether judicial or
economic development of the country. (Section 1) administrative or legislative, or any other entity whether public or
private; Provided, however, That said foreign currency deposits shall
be exempt from attachment, garnishment, or any other order or
2. Prohibited Acts
process of any court, legislative body, government agency or any
administrative body whatsoever. (R.A. No. 6426)
2. Distinction of banks from quasi-banks and trust entities

6. Penalties for Violation

3. Bank Powers and Liabilities

a. Corporate Powers
GENERAL BANKING ACT

(R.A. No. 8791)

b. banking and Incidental Powers

1. Definition and Classification of Banks

Banks shall refer to entities engaged in the lending of funds obtained

4. Diligence required of banks in view of fiduciary nature of
in the form of deposits.
banking
Banks shall be classified into:

a. Universal banks;
b. Commercial banks;
c. Thrift banks, composed of: 5. Nature of bank funds and bank deposits
i. Savings and mortgage banks,
ii. Stock savings and loan associations, and
iii. Private development banks, as defined in the Republic
Act No. 7906 (hereafter the "Thrift Banks Act");
d. Rural banks, as defined in Republic Act No. 73S3 (hereafter 6. Grant of loans and security requirements
the "Rural Banks Act");
e. Cooperative banks, as defined in Republic Act No 6938
(hereafter the "Cooperative Code");
f. Islamic banks as defined in Republic Act No. 6848, otherwise
a. Ratio of net worth to total risk assets (Risk-Based Capital)
known as the "Charter of Al Amanah Islamic Investment Bank
of the Philippines"; and The Monetary Board shall prescribe the minimum ratio which the net
g. Other classifications of banks as determined by the Monetary worth of a bank must bear to its total risk assets which may include
Board of the Bangko Sentral ng Pilipinas. contingent accounts. For purposes of this Section, the Monetary Board
may require such ratio be determined on the basis of the net worth
and risk assets of a bank and its subsidiaries, financial or otherwise, as and guarantees as may be defined by the Monetary Board that may be
well as prescribe the composition and the manner of determining the extended by a bank to any person, partnership, association,
net worth and total risk assets of banks and their subsidiaries: corporation or other entity shall at no time exceed twenty percent
Provided, That in the exercise of this authority, the Monetary Board (20%) of the net worth of such bank. The basis for determining
shall, to the extent feasible conform to internationally accepted compliance with single borrower limit is the total credit commitment
standards, including those of the Bank for International of the bank to the borrower.
Settlements(BIS), relating to risk-based capital requirements: Provided
Unless the Monetary Board prescribes otherwise, the total amount of
further, That it may alter or suspend compliance with such ratio
loans, credit accommodations and guarantees prescribed in the
whenever necessary for a maximum period of one (1) year: Provided,
preceding paragraph may be increased by an additional ten percent
finally, That such ratio shall be applied uniformly to banks of the
(10%) of the net worth of such bank provided the additional liabilities
same category. In case a bank does not comply with the prescribed
of any borrower are adequately secured by trust receipts, shipping
minimum ratio, the Monetary Board may limit or prohibit the
documents, warehouse receipts or other similar documents
distribution of net profits by such bank and may require that part or
transferring or securing title covering readily marketable, non-
all of the net profits be used to increase the capital accounts of the
perishable goods which must be fully covered by insurance.
bank until the minimum requirement has been met The Monetary
Board may, furthermore, restrict or prohibit the acquisition of major
assets and the making of new investments by the bank, with the
exception of purchases of readily marketable evidences of c. Restrictions on bank exposure to directors, officers, stockholders,
indebtedness of the Republic of the Philippines and of the Bangko and their related interests
Sentral and any other evidences of indebtedness or obligations the No director or officer of any bank shall, directly or indirectly, for
servicing and repayment of which are fully guaranteed by the himself or as the representative or agent of others, borrow from such
Republic of the Philippines, until the minimum required capital ratio bank nor shall he become a guarantor, endorser or surety for loans
has been restored. In case of a bank merger or consolidation, or when from such bank to others, or in any manner be an obligor or incur any
a bank is under rehabilitation under a program approved by the contractual liability to the bank except with the written approval of
Bangko Sentral, Monetary Board may temporarily relieve the the majority of all the directors of the bank, excluding the director
surviving bank, consolidated bank, or constituent bank or concerned: Provided, That such written approval shall not be
corporations under rehabilitation from full compliance with the required for loans, other credit accommodations and advances
required capital ratio under such conditions as it may prescribe. granted to officers under a fringe benefit plan approved by the
Before the effectivity of rules which the Monetary Board is authorized Bangko Sentral. The required approval shall be entered upon the
to prescribe under this provision, Section 22 of the General Banking records of the bank and a copy of such entry shall be transmitted
Act, as amended, Section 9 of the Thrift Banks Act, and all pertinent forthwith to the appropriate supervising and examining department
rules issued pursuant thereto, shall continue to be in force. of the Bangko Sentral. Dealings of a bank with any of its directors,
officers or stockholders and their related interests shall be upon terms
not less favorable to the bank than those offered to others. After due
b. Single borrower's limit notice to the board of directors of the bank, the office of any bank
director or officer who violates the provisions of this Section may be
Except as the Monetary Board may otherwise prescribe for reasons of
declared vacant and the director or officer shall be subject to the penal
national interest, the total amount of loans, credit accommodations
provisions of the New Central Bank Act. The Monetary Board may order to influence such persons into approving a loan or other
regulate the amount of loans, credit accommodations and guarantees credit accommodation application.
that may be extended, directly or indirectly, by a bank to its directors,
officers, stockholders and their related interests, as well as
investments of such bank in enterprises owned or controlled by said e. Floating interest rates and escalation clauses
directors, officers, stockholders and their related interests. However,
the outstanding loans, credit accommodations and guarantees which
a bank may extend to each of its stockholders, directors, or officers
and their related interests, shall be limited to an amount equivalent to
their respective unencumbered deposits and book value of their paid- 7. Penalties for violations
in capital contribution in the bank: Provided, however, That loans,
credit accommodations and guarantees secured by assets considered
as non-risk by the Monetary Board shall be excluded from such limit:
Provided, further, That loans, credit accommodations and advances to
a. Fine, imprisonment
officers in the form of fringe benefits granted in accordance with rules
as may be prescribed by the Monetary Board shall not be subject to
the individual limit. The Monetary Board shall define the term
"related interests." The limit on loans, credit accommodations and
guarantees prescribed herein shall not apply to loans, credit b. Suspension or removal of director or officer
accommodations and guarantees extended by a cooperative bank to
its cooperative shareholders.

d. Prohibited acts of borrowers c. Dissolution of bank

No borrower of a bank shall

a. Fraudulently overvalue property offered as security for a loan

or other credit accommodation from the bank; PHILIPPINE DEPOSIT INSURANCE CORPORATION ACT
b. Furnish false or make misrepresentation or suppression of
material facts for the purpose of obtaining, renewing, or (R.A. No. 3591, as amended)
increasing a loan or other credit accommodation or extending
the period thereof;
c. Attempt to defraud the said bank in the event of a court action
to recover a loan or other credit accommodation; or
d. Offer any director, officer, employee or agent of a bank any
gift, fee, commission, or any other form of compensation in