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Single Borrowers Limit

Total amount of loans, credits


accommodation and guarantees extended to
any person, partnership or corporation shall
not exceed 20% of net worth of bank
In Circular 425 of 2004 of BSP, the SBL was
increased to 25%
Exceptions to SBL:
1 MB may otherwise prescribe for reasons of
national interest
2. Deposit of rural banks with GOC financial
institutions such as LB, DBP and PNB
Basis for determining SBL is the total credit
commitment of bank to borrower
Loans - to all accounts under loan portfolio
Credit accommodations - to credit and
market risk exposure of banks arising from
accommodation other than the loan
Total credit commitment - include loans,
credit
accommodation, deferred letters of credit
less
margin deposits and guarantees
Total credit commitment can be increased
by 10% provided additional liabilities are
secured by trust receipts, shipping
documents or readily marketable Goods
Readily marketable goods articles of
commerce, agriculture or industry as
constant dealings in ready market and price
is easily ascertainable and disposable
Parent corporations total credit
commitment shall also include its
subsidiaries if it guarantees,
accommodate or subsidiary is merely a
department
of it
Wholesale lending of government banks
shall not
exceed 35% of net worth to participating
financial
institutions
PFI institutions for relending to end-user
borrowers
The end-user borrower shall be subject to
the 25% SBL
In municipalities where there are no
government
banks, deposits of rural and coop banks in
private
banks shall not be subject to SBL

Deposit in private depository bank used by


thrift,
rural and coop banks, with authority to
accept
demand deposits, after being cleared, shall
be
exempted from SBL
Bank guarantee irrevocable commitment
of a
bank binding to pay a sum of money in event
of
non-performance of third party
Credit Risk Transfer arrangement that
allows the bank to transfer the credit risk
associated with its loan or other credit
accommodation to a third party
Control of majority interest or controlling
interest
parent owns, directly or indirectly through
its subsidiaries, more than half of voting
power of
enterprise
Even if less than half of said voting power,
it shall still have controlling interest if:
1. Agreement with investors
2. Govern financial and operations
3. Can appoint majority of directors
4. Cast majority vote on meetings
Subsidiary corporation where more than
50% of the voting stock is owned by a parent
corporation
Bill of exchange drawn in good faith against
actually existing values drawn by a seller
on the
purchase for the price of commodity sold
Commercial paper owned by person
negotiating
the same paper arising from business
transaction
Exclusion from SBL:
1. Discount bills of exchange and discount
commercial paper
2. Credit accommodation to finance
importation of rice or corn up to 100% net
worth of bank
_ Must be approved by NEDA
3. Loans and credit accommodation
guaranteed by Industrial Guarantee and
Loan Fund
4. Liabilities of commercial paper issuer for
commercial paper held by UB as firm
underwriter. Only 180 days and not

exceed 5% from normal SBL


5. Loans and credit accommodations covered
by international or regional institutions
where Philippines is shareholder such as
ADB
6. Loans and credit accommodations with
valuation reserves provided that bank has
no unbooked valuation reserves
7. Loans and credit accommodations as a
result of underwriting agreement of debt
securities not exceeding 30 days
Violations
Monetary penalties 1/10 of 1% of excess
over
the ceiling but not exceed 30k per day
If bank resource is less than 50M, then only
a max
penalty of P500 shall be imposed
There will also be reprimand to
directors/officers
In subsequent offense, a 1k fine shall be
imposed
on the directors who approved it

There can also be suspension of


banks branching
privilege and rediscounting facility of BSP
Inclusion to Limit
The following shall be included
1. Maker, acceptor of paper discounted and
general indorser, drawer or guarantor
2. Individual who controls majority interest
in corporation
3. In case of corporation, all liabilities to
such bank of all subsidiaries it has
majority interest
4. Partnership, liabilities of members
Also includes parent coporations with
majority
interest
Exclusion to limit
1. Loans and credit accommodations secured
by
BSP or RP. State is always solvent
2. Loans and credit accommodations
guaranteed by
government
3. Loans and credit accommodations covered
by
assigned of deposits by lending bank
4. Loans and credit accommodations under
letters of
credit covered by margin deposits

5. Loans and credit accommodations


determined by
MB as non-risk items
Assignment of Credits
It is the agreement where the owner of
credit,
know as assignor, by legal cause, transfer his
credit to another, known as assignee without
need
of consent of debtor
Assignee acquires powers of assignor
There is no new obligation in assignment
However, there must be a notice given to
debtor so
that he will know whom to pay
Consent is not necessary in order that
assignment
may fully produce legal effects (Sison &
Sison vs.
Yap Tico and Avancea)
Pacto commisorio
Appropriating a thing given by pledge or
mortgage
It is not allowed. Encashment of deposit
certificates is not pacto commissorio
It is intended to protect the obligor against
being
overreached by creditor
Restriction on Bank Exposure to
Directors, Officers,
Stockholder and related interests
(DOSRI)
No DOSRI can directly or indirectly borrow
from
such bank or become a guarantor, indorser
or
surety for loan
Exception is when there is a written
approval of
the majority of all directors of the bank
excluding
the DOSRI concerned
Such approval is not required if it is under a
fringe
benefit plan approved by BSP
Directors include those named in
incorporations,
elected or filled
Officers shall include any person who
performs
function of management

Stockholder stockholder of record in the


books
of the bank
Related interest includes souse or relative
within
1st degree or by legal adoption. This includes
partnership, co-ownership of DOSRIs
Corporations where the above mentioned
owns
20% of subscribed capital, then the
prohibition
shall apply
Can also be less than 50% if the DOS sits as
representative of the bank in the board of
such
corporation
Effect of violation
The director or officer who violates may be
declared vacant and subject to penal
provisions of
NCBA
Limit on loans
MB can limit the valid loan given to DOSRI
provided that it shall be based on their
unencumbered deposits and book value of
their
paid in capital contribution
Exclusion to the Limit
Loans and credit accommodations
considered as
non-risk
Loans and credit accommodations to
officers in
for of fringe benefits
Limit on loans and credit accommodations
shall
not apply on those extended by coop bank to
its
coop shareholders

4. Director who acts as government


Representative

Applicability of DOSRI rules and


regulation to
government borrowing
Circular 547 of 2006 provides that DOSRI
rules
shall also apply to loans and credit
accommodations granted to RP, subdivisions,
instrumentalities and GOCCs
Exceptions would be:
1. Loans and credit accommodations that are
non-risk and not subject to ceiling
2. Those made by BSP
3. LGU due to full autonomy in their
propriety function

Safety deposit box


It is considered as a special kind of deposit
It cannot be an ordinary contract of lease
because
the absolute control and possession of safety
deposit box is not given to renters
The guard key remains with bank and
renters key
remain in customer
Where the renter keys are duplicated, the
bank is
not liable to either renters in case of loss
attributable to them

55.2. No borrower of a bank shall


(a) Fraudulently overvalue property offered
as security for a loan or other credit
accommodation from the bank;
(b) Furnish false or make misrepresentation
or suppression of material facts for the
purpose of obtaining, renewing, or 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 order to
influence such persons into approving a loan
or other credit accommodation application.
Other Banking Services
A bank may also perform the following
services:
1. Receive custody of funds, documents and
other valuable objects
2. Act as financial agent to buy and sell for
their customers
3. Make collection for accounts of other
4. Act as managing agent of investment
management accounts
5. Rent out safety deposit boxes
Bank shall perform 1-4 as a depositary or as
an
agent
It shall be duly separated from banks own
assets
and liabilities

The SC said that it can be considered as a


bailor
and bailee relationship
Duties of the parties may be defined by
them
The company renting safe-deposit boxed
cannot
exempt itself from liability due to fault of its
own
agents
In Sia vs. CA, a bank was held liable for not
immediately informing the customer that his
safety
deposit box was flooded which caused
damage to
the items of the customer
XII. Electronic transactions
BSP shall have full authority to regulate use
of
electronic devices in connection with bank
operations
XIII. Outsourcing of information technology
Bank may outsource information technology
systems and processes except inherent
banking
functions
Functions that are not outsourced:
1.Strategic planning for use of IT
2. Determination of system functionalities
3. Change management inclusive of quality
assurance
4. Service level and contract management
5. Security policy and administration
XIV. Outsourcing of other functions
Subject to prior approval of MB, banks may
outsource data imaging, storage, retrieval
and
other related systems
Banks may outsource credit card services
XV. Credit Card Transactions
General policy
BSP shall develop consumer credit through
innovative products
Definition of terms
Credit card any card, plate, coupon book
or
other credit device for the purpose of
obtaining
money, property, labor or credit

Credit card receivables total outstanding


balance
of cardholders
Minimum amount due - minimum amount
that
cardholder needs to pay on due date
Default non-payment of minimum amount
due
within two cycle dates
Acceleration clause gives bank the right to
demand obligation in full in case of default
Risk management system
System that shall safeguard interests,
banks and
subsidiary credit card companies
Minimum requirements
Before issuing credit cards, banks must
exercise
proper diligence by ascertaining applicant
possess
good credit standing and are financially
capable to
fulfil payments
All applications must go under strict credit
risk
assessment process
Information to be disclosed
Banks shall disclose to each prospective
cardholder non-financial charges, percentage
of
interests, interest rate per annum,
instalment
details, default fees, etc.
Accrual of interest earned
Interest accrued shall be reserved and no
accrual
shall be allowed 90 days after credit card
receivable has become past due
Finance charges interest charged to
cardholder
Deferral charges
Parties can agree to a deferral of all or
partly of
unpaid instalments and will subsequently
collect
deferral charge
Late payment and penalty fees
No late payment or penalty fee shall be
collected
unless it is fully disclosed in the contract
Confidentiality if information
Banks shall keep strictly confidential data
on
cardholder except when there is consent,
exchange

of information with other credit card


companies,
disclosure to collecting agent
Suspension, termination of effectivity
and reactivation
banks shall formulate parameters for such
Inspection of records covering credit
card truncations
banks shall make available for inspection
credit
card information to BSP
Offset
Banks can offset their obligations with
cardholder
with the latters debts provided there is
notice
Handling of complaints
bank shall give cardholder 20 days to
examine
charges and after 2 billing cycles, bank can
correct
error
Unfair collection practices
banks shall resort to legally permissible
means to
collect amount due under credit card
agreement
There shall be no use of threat or violence
to
coerce payment and no false representation
Additional deposit does not increase
credit limit
Contract of adhesion
Contract between cardholders and credit
card
companies are contract of adhesion becomes
they
are prepared only by one party and the other
party
only signifies
Blanket freedom from liability is invalid
The credit card company cannot excuse
itself from
liability completely as with blanket of
freedom
XVI. Rules of Price tags
One price tag requirement
Every retailer is required to display price
tag to
indicate price of good or service
Price tag must be written clearly indicating
the
price including VAT. Service charge shall not
be

included in price tag


Mode of payment
It is necessary to consider business
practices
relative to mode of payment under Price Tag
Law
When consumer pays in cash, he shall only
pay the
price indicated
When consumer pays through
credit/ATM/debit
card, he shall only pay price indicated in tag
When retailer offers consumer option to pay
in
cash or card, the same is allowed provided
that
options are disclosed by separate
information but
not on the price tag
Price that indicates separate cash price and
regular
cash price is not allowed
Price tag that indicates separate price tag
and card
price is also not allowed
Prohibition against surcharging
Retailers who honor credit/ATM/debit cards
for
payment shall not require payment of
surcharge
over and above the price tag.
CHAPTER 5 Prohibited Transactions
and Cessation
of Banking Business
I. Prohibited Transactions
Prohibited to act as insurer
Bank shall not directly engage in insurance
business as insurer
Insurance act shall include making
insurance
contract, surety contract, doing business of
reinsurance
Fact that no profit is derived shall not be
deemed
conclusive to show that there is no insurance
business
Prohibited acts
No director shall:
1. Make false entries in any bank report
2. Without order of court, disclose to an
unauthorized persons an information
relative to funds or properties in custody

of customers
3. Accept gifts, fees or commission in
connection for approval of loan
4. Overvalue a security for purpose of
influencing actions of bank
5. Outsource inherent banking functions
_ This is to ensure secrecy of bank
Deposits
Prohibition against Outsourcing Certain
Banking
Functions
Outsourcing inherent banking function shall
refer to any contract between the bank and
service provider for the latter to supply, or
any
act whereby the latter supplies, the
manpower
to service the deposit transaction of the
former.

accumulated earnings tax (10% of said


income) by
NIRC
IV. Unauthorized advertisement or
business representation
No persons or corporation shall engage in
banking
business shall advertise that it has a
business of a
bank, quasi-bank or trust entity

II. Conducting business in an unsafe or


unsound manner
To determine whether act or omission is
considered unsafe or unsound for banking,
the
following shall be considered:
1. Resulted in material damage or abnormal
risk to stability, solvency of bank
2. Resulted damage in depositors, creditors,
investor or public
3. Cause undue injury or unwarranted
benefits to any party
4. Involves entering contract manifestly
disadvantageous to bank regardless if DO
will profit
MB can take action and exclude erring bank
from
Clearing
III. Prohibition on dividend declaration
No bank shall declare dividends greater
than its
accumulated net profits on hand, deducting
its
losses and bad debts
The bank shall also not declare dividends if
at time
there is:
o Clearing account in BSP is overdrawn
o Deficient in require liquidity floor for 5 or
more consecutive days
o Does not comply with liquidity standards
o Committed major violation
Banks are entities exempted from
improperly

Secrecy of Bank deposits


Purposes
a. to give encouragement to the people to
deposit their money in banking institutions;
b. to discourage private hoarding so that the
same may be properly utilized by banks in
authorized loans to assist in the economic
development of the
country.
All deposits of whatever nature with an
Association in the Philippines are herby
considered as of an absolutely confidential
nature and may not be examined,
inquired

or looked into by any person,


government official, bureau or office
except upon;
1. written permission of the depositor;
2. in case of impeachment;
3. upon order of a competent court in cases
of bribery or dereliction of duty of public
officials;
4. in cases, where the money deposited or
invested is the subject matter of the
litigation.
All deposits of whatever nature with bas
including
investment bonds are considered absolutely
confidential and may not be examined,
inquired or
looked into even by government officials
It shall also apply to foreign currency
deposits
with the only exception of written permission
In Islamic banks that only exceptions are:
(1)
inspection of bank auditor, (2) written
permission
by depositor (3) subject matter of litigation
Accounts can be garnished to insure
satisfaction of
judgment as there is no real inquiry and
some
disclosure are merely incidental
Congress not intended for debtors to
escape
General exemption against garnishment
shall not
apply to foreign transients
Foreign currency deposits of a foreigner
who was
convicted of crime of rape may be garnished
to
satisfy judgment
Under RA 1405 and Anti-Money Laundering
Act,
the secrecy of deposits do not apply
BSP can also inquire in deposits for periodic
and
special examinations
Ombudsman has the In-Camera Inspection
power
to look into deposits provided that there is a
pending case is court and 1.) the account
must be
properly identified 2.) inspection limited to
the

subject matter
CIR can also look into deposits to determine
gross
estate of a decedent or he has applied for
compromise tax liability
Foreign Currency Deposits
Any person, natural or juridical may
deposit with such any bank in good standing
designated by BSP, foreign currencies which
are acceptable as part of
international reserve, except those which
are
required by BSP to be surrendered
Such banks can accept deposits and
accept foreign
currencies in trust
1. Numbered accounts for recording and
servicing of deposits are allowed
--The depository bank shall
1. Maintain at all times a 100% foreign
currency cover for their liabilities
2. 15% of such must be in the form of
foreign currency deposit with BSP
3. The balance shall be in form of foreign
currency loans/securities which are
shortterm
maturities and readily marketable
4. Such loans can be extended to domestic
enterprises to cover the 100% foreign
currency cover
--Depository banks under the expanded
foreign
currency deposit system shall be exempt
from the
15% requirement of deposit with BSP
--There is no restriction on withdrawals by
depositor
of his deposit of the same abroad except
does
arising from contract of depositor and bank

Chap 11 Anti- Money Laundering ( RA 9160)


I. CONCEPTS
A. Policies
i. To protect and preserve the integrity and confidentiality
of bank accounts
ii. Ensure that the Philippines shall not be used as a money
laundering site for
the proceeds of any unlawful activity.
iii. Cooperation in transnational investigation and
prosecution of persons
involved in money laundering
B. Covered Institutions
i. Banks, non-banks, quasi-banks, trust entities ad all other
institutions
regulated by the BSP
ii. Insurance companies and all other institutions regulated
by the insurance
commission
iii. Securities, brokers, salesmen, investment house and
other entities
managing securities or service as agent, advisor, consultant
iv. Mutual funds, closed-end investment company, common
trust fund and preneed
companies
v. Foreign exchange corporations, money changers, money
payments,
remittance, and transfer companies
vi. Those administering or dealing in currency,
commodities, financial
derivatives or other monetary instruments or property
supervised by the
SEC
C. Covered and Suspicious transaction
i. Transaction in cash or monetary instrument exceeding
P500,000 in one
banking day
ii. Suspicious transactions regardless of the amount
a. No legal or trade obligation, purpose or economic
justification
b. Client is not properly identified
c. Amount is not commensurate with the clients financial
capacity
d. Structured transactions to avoid being the subject of
reporting
required under the act
e. Those which deviate from the profile of the client or past
transactions
f. Related to any unlawful activity or offense

g. Any transaction that is similar to any of the foregoing


D. Monetary instrument
i. Coins/currency of legal tender of the Phil. Or any country
ii. Drafts, checks and notes
iii. Securities or negotiable instruments, bonds, commercial
papers, deposit
certificates, trust certificates, custodial receipts, trading
orders, transaction
tickets, confirmation of sale money market instruments
iv. Other similar instruments when title passes to another by
endorsement,
assignment or delivery
E. Unlawful Activities
i. Kidnapping for ransom under Art.267 of RPC
iii. Sec.3 par b, c, e, g, h, I of the Anti-Graft and Corrupt
Practices Act
iv. Plunder under RA 7080
v. Robbery and extortion under Arts. 294-296, 299-302 of
the RPC
vi. Jueteng and Masiao under PD 1602
vii. Piracy on high seas under RPC and PD 532
viii. Qualified theft under Art.310 of RPC
ix. Swindling under Art.315 of RPC
x. Smuggling under RA 455 and 1937
xi. Violations of Electronic Commerce Act of 2000
xii. Hijacking and other violations of RA 6235
xiii. Destructive arson and murder under RPC
xiv. Fraudulent practices under Securities Regulation Code
of 2000
xv. Felonies or offenses of similar nature punishable under
penal laws of other
countries
F. Money Laundering Offense- is a crime whereby the
proceeds of an unlawful
activity are transacted, thereby making them appear to
have originated from
legitimate sources. It can be committed by the ff:
i. Any person knowing that any monetary instrument or
property represents,
involves, or relates to, the proceeds of any unlawful
activity, transacts or
attempts to transact said monetary instrument or property
ii. Any person knowing any monetary instrument or
property represents,
involves, or relates to, the proceeds of any unlawful
activity, performs or
fails to perform any act as a result of which he facilitates
the offense of
money laundering referred to above
iii. Any person knowing that any monetary instrument or
property is required to
be disclosed and filed with the Anti-Money Laundering
Council, fails to do so
II. Jurisdiction and Prosecution
A. Jurisdiction
i. Private persons- RTC
ii. Public persons and private persons in conspiracy with
the formerSandiganbayan

B. Prosecution
i. Any person may be charged of both money laundering
and the unlawful
activity
ii. Any proceeding relating to the unlawful activity shall be
given precedence
over the prosecution of any offense or violation w/o
prejudice to the
freezing and other remedies
III. Anti-Money Laundering Council
A. Composition
i. Governor of he BSP as chairman
ii. Commissioner of the Insurance Commission
iii. Chairman of the SEC
B. Functions
i. Require and receive covered or suspicious transaction
reports from covered
institutions
ii. Issue orders addressed to the supervising authority of the
institution to
determine the true owner of a covered or suspicious
transaction report or
request assistance on the basis of substantial evidence
iii. Institute civil forfeiture proceedings through the OSG
iv. Cause the filing of complaints with the DOJ or
Ombudsman
v. Investigate suspicious and covered transactions
vi. Apply before the CA ex parte, for the freezing of any
monetary instrument or
property
vii. Implement measures as may be necessary to counteract
money laundering
viii. Receive and take action any request of assistance from
foreign states in
their own anti-money laundering operations
ix. Develop educational programs on the effects, methods,
and means to
prevent money laundering
x. Enlist assistance from government instrumentality for
any anti-money
laundering operation
xi. Impose administrative sanctions for violation of laws,
rules, regulations and
orders issued pursuant thereto
xii. Establish a secretariat
a. Member of the Bar
b. 35 years of age
c. GMC
d. Unquestionable integrity and known probity
IV. Prevention of Money Laundering
A. Customer Identification
i. Institutions shall establish and record the true identity of
its clients based on
office documents
ii. Maintain a system of verifying the identity and legal
existence of their
clients
iii. Anonymous, fictitious an similar accounts are
prohibited

iv. Peso and foreign currency non-checking accounts shall


be allowed which
will be subject to test by the BSP to determine the existence
and identity of
the owners
B. Record Keeping
i. Records of transactions shall be maintained and stored
from 5 years from
the date of transaction
ii. For closed accounts, its records shall also be stored for 5
years from the
date it was closed
C. Reporting of Covered and Suspicious Transaction
i. Shall be reported to AMLC within 5 working days from
the occurrence
thereof, unless supervising authority prescribes a longer
period not
exceeding 10 days
ii. Should a transaction be determined a a covered and
suspicious transaction,
it shall be required to report the same
iii. Such reporting shall not be considered as a violation of
RA 1405, RA 6426,
RA 8791, but are prohibited to communicate to any other
person
iv. In case of violation of the prohibition above, they shall
be criminally liable
v. Reporting to the AMLC is also prohibited to be disclosed
to the media or any
other person or entity
D. Freezing of Monetary Instrument or Property
i. To the CA, upon application ex parte by the AMLC and
after determination
that probable cause exists, may issue a freeze order
ii. Such order shall be for 20 days unless extended by the
Court
E. Authority to inquire into bank deposits
i. The AMLC may inquire upon order of any competent
court when it has been
established that:
a. There is probable cause that the deposit or investment s
related
to any unlawful activity; or
b. A money laundering offense
ii. No court order shall be required in the following
activities
a. Kidnapping for ransom
b. Violations of Dangerous Drug Act of 2002
c. Hijacking and other violations of RA 6235
d. Destructive arson and murder including those perpetrated
by terrorists