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General Banking Law

Definition:

A bank is an entity, which is: A corporation engaged in the lending of funds obtained in
the form of deposit. (Sec.3)
The term deposit means the unpaid balance of money or its equivalent received by a bank in the
usual course of business and for which it has given or is obliged to give credit to a commercial,
checking, savings, time or thrift account or which is evidenced by passbook, check and/or
certificate of deposit, printed or issued in accordance with Bangko Sentral rules and regulations and
other applicable laws, together with such other obligations of a bank, which, consistent with
banking usage and practices, the Board of Directors shall determine and prescribe by regulations to
be deposit liabilities of the Bank: Provided, That any obligation of a bank which is payable at the
office of the bank located outside of the Philippines shall not be a deposit for any of the purposes of
this Act or included as part of the total deposits or of insured deposit: Provided, further, That,
subject to the approval of the Board of Directors, any insured bank which is incorporated under the
laws of the Philippines which maintains a branch outside the Philippines may elect to include for
insurance its deposit obligations payable only at such branch.
(As amended by P.D. 1940, 27 June 1984; R.A. 7400, 13 April 1992; R.A. 9302, 12 August 2004,
Sec. 2 RA 9576, amending Sec. 4 (f) of RA 3591 PDIC Charter, as amended by RA 9576, approved
April 29, 2009)
Note: The amount of deposit insurance in banks has been effectively increased from P 250,000 to P
500,000. Sec. 4 PDIC Law, RA 3591, as amended by RA 9576, approved April 29, 2009.

Relationship between Bank and its Depositors

Q. What is the Relationship Between Bank and Depositor


The relation is governed/covered by the law on loans. People v. Ong 204 SCRA 942 (1991)
Articles 1953 and 1980 of the Civil Code.
Art. 1953. A person who receives a loan of money of any other fungible thing acquires the
ownership thereof, and is bound to pay to the creditor an equal amount of the same kind and
quality.
Fundamental and familiar is the doctrine that the relationship between a bank and a client is one of
debtor-creditor. Under Art. 1953 of the Civil Code, a person who receives a loan or money or any
other fungible thing acquires the ownership thereof, and is bound to pay to the creditor an equal
amount of the same kind and quality. Art. 1980 provides that fixed, savings and current deposits of
money in banks and similar institution shall be governed by the provision concerning simple loan.
Allied Banking Corp. v. Lim Sio Wan 549 SCRA 504 (2007)
Ownership passes in Mutuum.
Art. 1980. Fixed, savings, and current deposits of money in banks and similar institutions shall be
governed by the provisions concerning simple loan. In other words, the relationship between the
bank and the depositor is that of a debtor and creditor. Moran v. CA 230 SCRA 799 (1994), Allied
Banking Corp. vs. Lim Sio Wan 549 SCRA 504

Debtor and Creditor relation, right to set-off, matter of privilege not an obligation.

The bank has the right to set-off the deposits in its hands for the payment of a depositors
indebtedness. Equitable PCI Bank v. Ng Sheung 541 SCRA 223 (2007)
Having the right to set-off the deposits, the bank; however, is under No Obligation to make an
application or set-off against the deposit accounts of borrower. This is a matter of privilege on the
part of the bank or an option to exercise, but not the obligation. Bank of PI v. CA 232 SCRA 302
(1994)

What kind of loan? Answer: A demand loan- you can demand payment anything by withdrawing.

Distinction of Banks from Quasi-banks and Trust entities.

Banks are entities engaged in the lending of funds obtained in the form of deposits. A Quasi-Bank
shall refer to a nonbank financial institution authorized by BSP to engage in quasi-banking functions
and to borrow funds from more than nineteen (19) lenders through the issuance, endorsement or
assignment with recourse or acceptance of deposit substitutes1 as defined in Section 95 of RA 7653
(New Central Bank Act) for the purpose of relending or purchasing of receivables and other
obligations.( Sec. 3 (c) RA 9474 Lending Company Regulation Act of 2007). Trust Entities are
corporation or a person duly authorized by the MB to engaged in trust business to act as trustee or
administer any trust or hold property in trust or on deposit for the use, benefit or behalf of others.
Distinguished from Lending Company, which shall refer to a corporation engaged in the granting of
loans from its own capital funds or from funds sourced from NOT MORE THAN NINETEEN (19)
PERSONS. RA 9474 Lending Company Regulation Act of 2007.)
Financial Intermediaries are persons or entities whose principal functions include the lending,
investing, or placement of funds or evidences of indebtedness or equity deposited with them,
acquired by them, or otherwise course through them, either for their own account or for the
account of others.
First Planters Pawnshop v. BIR 560 SCRA 606 (2008)

Banking Business Impressed with Public Interest

Citibank, N.A. v. Dinopol 635 SCRA 649


The business of banking is impressed with public interest and great reliance is made on the banks
sworn professional of diligence and meticulousness in giving irreproachable service. Thus, the Court
affirms the award of exemplary damages as a way of setting an example for the public good.
Citibank should have been more cautious in dealing with its clients since its business is imbued with
public interest.
The fiduciary nature of the relationship between the bank and the depositors must always be of
paramount concern. (PS Bank v. Chowking Food Corp. 557 SCRA 318 , July 4, 2008)
Metropolitan Bank v. Marias 625 SCRA 511 ( 2011)
Their business being affected with public interest and by nature of their functions, banks are under
obligation to treat the accounts of their depositors with meticulous care, always having in mind the
fiduciary narture of their relationship.
Bank of America v. Philippine Racing Club 594 SCRA 301 (2009)
Last Clear chance and contributory negligence (Art. 2179 ) was applied by the SC but still holds the
bank liable up to 60% of the loss.
Nevertheless, even if we assume that both parties were guilty of negligent acts that led to the
loss, petitioner will still emerge as the party foremost liable in this case. In instances where both
parties are at fault, this Court has consistently applied the doctrine of last clear chance in order to
assign liability.
In Westmont Bank v. Ong,21 we ruled:
[I]t is petitioner [bank] which had the last clear chance to stop the fraudulent encashment of the
subject checks had it exercised due diligence and followed the proper and regular banking
procedures in clearing checks. As we had earlier ruled, the one who had a last clear opportunity to
avoid the impending harm but failed to do so is chargeable with the consequences thereof.22
(emphasis ours)
1

Sec. 95 Definition of Deposit Substitutes. The term is defined as an alternative form of obtaining funds from the public, other than deposits, through
the issuance, endorsement, or acceptance of debt instruments for borrowers own account, for the purpose of relending or purchasing of receivables
and other obligations. These instruments may
include, but need not be limited to, bankers acceptances, promissory notes, participations, certificates of assignment and similar instruments with
recourse and purchase agreements.

In the case at bar, petitioner cannot evade responsibility for the loss by attributing negligence on
the part of respondent because, even if we concur that the latter was indeed negligent in presigning blank checks, the former had the last clear chance to avoid the loss. To reiterate,
petitioners own operations manager admitted that they could have called up the client for
verification or confirmation before honoring the dubious checks. Verily, petitioner had the final
opportunity to avert the injury that befell the respondent. Failing to make the necessary verification
due to the volume of banking transactions on that particular day is a flimsy and unacceptable
excuse, considering that the "banking business is so impressed with public interest where the trust
and confidence of the public in general is of paramount importance such that the appropriate
standard of diligence must be a high degree of diligence, if not the utmost diligence." 23 Petitioners
negligence has been undoubtedly established and, thus, pursuant to Art. 1170 of the NCC, 24 it must
suffer the consequence of said negligence.
In the interest of fairness, however, we believe it is proper to consider respondents own negligence
to mitigate petitioners liability. Article 2179 of the Civil Code provides:
Art. 2179. When the plaintiffs own negligence was the immediate and proximate cause of his
injury, he cannot recover damages. But if his negligence was only contributory, the immediate and
proximate cause of the injury being the defendants lack of due care, the plaintiff may recover
damages, but the courts shall mitigate the damages to be awarded.1avvph!1

Definition and Classifications of Banks under RA 8791

Universal Bank expanded commercial bank (commercial bank powers plus power of an
investment house and invest in non-allied enterprises. They have the highest capitalization
requirement.
2015 Bar
A Commercial bank wants to acquire shares in a cement manufacturing company. Do you think it
can do that? Why or why not? (2%)
Suggested Answer: No. A commercial bank has no power to acquire shares or invest in non-allied
enterprises.
Commercial Bank- Powers of ordinary or regular commercial banks, (accepting drafts, issuing
letters of credit; discounting and negotiating PN, drafts, bills of exchange, and other evidence of
debts, forex, accepting and creating demand deposits etc.) lower capitalization than Ubanks cannot
exercise powers of an investment house and invest in non-allied enterprises.
UniBanks and Comml. Banks can accept and create demand deposits.(liabilities of BSP &banks w/c
are denominated in Phil. Currency and are subject to payment in legal tender upon demand by
presentation of depositors check.
Thrift Banks- these are savings and mortgage banks, stock savings and loan associations, and
private development bank, which are governed by Thrift Bank Act RA 7906
Rural Banks Banks mandated to make needed credit available and readily accessible in the rural
areas on reasonable terms, govern by RA 7353.
RA 7353, has been amended by RA 10574, 23 July 2012.
Sec. 4 of RA 7353 is hereby amended to read as follows:
Sec. 4. No rural bank shall be operated without a Certificate of Authority from the Monetary Board
of the Bangko Sentral ng Pilipinas. Rural banks shall be organized in the form of stock corporations.
No less than forty percent (40%) of the voting stocks of a rural bank shall be owned by citizens of
the Philippines or corporations or associations organized under the laws of the Philippines at leas
sixty percent (60%) of whose capital is owned by such citizens. Non-Filipino citizens may own and
acquire or purchase up to sixty percent (60%) of the voting stocks in a rural bank. The percentage
of foreign-owned voting stocks shall be determined by the citizenship of the individual or corporate
stockholders of the rural bank. Upon consultation with the rural banks in the area, duly established
cooperatives and corporations primarily organized to hold equities in rural banks may organize a

rural bank and/or subscribe to the shares of stock of any rural bank: Provided, That a cooperative
or corporation owning or controlling the whole or majority of the voting stock of the rural bank shall
be subject to special examination and to such rules and regulations as the Monetary Board may
prescribed. If subscription of private shareholders to the capital stock of a rural bank cannot be
secured or

Cooperative banks- These are banks organized primarily to make financial and credit services
available to cooperative. RA 6938
Islamic bank Banks whose business dealings and activities are subject the basic principles and
ruling of Islamic Sharia . RA 6848
Other banks as determined by MB
Private and Government owned banks
The General Banking Act (RA 337) characterizes the terms banking institution and banks as
synonymous and inter-changeable and specifically includes commercial banks, savings bank and
mortgage banks, development banks, rural banks, stock savings and loan association, and
branches and agencies in the Philippines of foreign banks. RA 8791 also included cooperative
banks, Islamic banks, and other banks as determined by the Monetary Board in the classification of
banks. First Planters Pawnshop v. BIR 560 SCRA 606 (2008)
Who has the supervisory and regulatory powers over banks and quasi-banks, trust entities and
other financial institutions? BSP
Who can cause the prosecution of violations of banking laws?
BSP under RA 7653
Section 3. Responsibility and Primary Objective. 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 powers as provided in this Act and other
pertinent laws over the operations of finance companies and non-bank financial institutions
performing quasi-banking functions, hereafter referred to as quasi-banks, and institutions
performing similar functions.
The primary objective of the Bangko Sentral is to maintain price stability conducive to a balanced
and sustainable growth of the economy. It shall also promote and maintain monetary stability and
the convertibility of the peso.
Since Banking laws violations constitute a public offense, the prosecution of which is a matter of
public interest, anyone even private individuals can denounce such violations before the
prosecuting officers.
Perez v. MB 20 SCRA 592

What is the Bank of International Settlements?

It is an international organization based on Basle Switzerland which was established by the


Hague Agreement of Jan. 20, 1930. Its stockholders are central banks and not government.
It is called the bank for central banks.

BIS assists central banks in managing and investing their forex reserves.

It is also a service organization providing professional, organizational and material logistics


for central bank cooperation in all areas of common interest.

Basle Accord- is aimed at raising the standards of safety and soundness of in the worlds
banking business in a manner consistent with fair competition

Banks Power and Liabilities


Could bank issue no par value stocks? (Sec.9; See also Sec. 6, Corp. Code) NO 2
Could bank acquire its own shares (Sec.10) (Sec. 9, 37 and 81 of Corp. Code)
No Bank shall purchase or acquire shares of its own capital stock or accept its own shares as
security for a loan, except when authorized by the MB; provided in every case the stock so
purchased or acquired shall, within 6 months from the time of its purchase or acquisition, be sold
or disposed of at a public auction or private sale.
What is the total number of voting stocks of a domestic bank that could be owned?
Filipino individual and Domestic Non-Bank Corp-40% of the outstanding voting stock of a domestic
bank
Foreign Individual and Foreign Non-Bank Corp. 40 % ibid
RA 7721 An Act Liberalizing the Entry of Foreign Banks) Phil. Corp. listed in the PSE or long
standing for at least 10 years shall have the right to acquire or purchase at least 60% of voting
stock of domestic bank.
Under Sec. 73 RA 8791 foreign bank may own up to 100% of the voting stock of only 1 existing
domestic bank w/n 7 years from the effectivity of RA 8791 ( June 13, 2000)
Modes of Entry of Foreign Banks (Sec. 2, RA 7721, May 18, 1994)
Subject to the authority of the MB
1. Acquiring/purchasing 60% voting stock of an existing bank ((i) by acquiring, purchasing or
owning up to one hundred (100) percent of voting stock of existing bank; RA 10641, July 21, 2014)
2. Investing in up to 60% of the voting stock of a new banking subsidiary incorporated under the
laws of RP ((ii) by investing up to one hundred (100) percent of voting stock of new banking
subsidiary incorporated under the laws of the Philippines, RA 10641)
3. Establishing branches with full banking authority (same with RA 10641)
Provided that Foreign Bank may avail itself of only one (1) mode of entry.
Please note that these provisions have been amended by RA 10641 (July 21, 2014).
Under Sec. 2 of RA 10641, it provides:
Sec. 2. Modes of Entry.- The Monetary Board may authorize foreign banks to operate in the
2

Sec. 9, Treasury Shares, Sec. 6., Classification of shares. Banks, trust companies, insurance
companies, public utilities, and building and loan associations shall not be permitted to issue nopar value shares of stock.

Philippine banking system through any one of the following modes of entry:(i) by acquiring,
purchasing or owning up to one hundred (100) percent of voting stock of existing bank; (ii) by
investing up to one hundred (100) percent of voting stock of new banking subsidiary incorporated
under the laws of the Philippines, (iii) by establishing branches with full banking authority.

BANKS

Rural
Bank
Financing
Co.
Lending
Co.
Investme
nt House

OWNERSHIP/CAPITAL
STRUCTURE
FILIPINO
FOREIGN
(minimum)
(maximum)
100% (RA
10641)

40%
40%

60% ( RA
10574)
60% (RA 8556)

51%

49% (RA 9474)

40%

60% ( RA 8366)

POWERS/FUNCTIONS
(1) by acquiring, purchasing or owning up
to
one hundred percent (100%) of the voting
stock of an existing bank (2)by investing
in
up to one hundred percent (100%) of the
voting stock of a new banking subsidiary
incorporated under the laws of the
Philippines;
or (3) by establishing branches
with full banking authority.
Guidelines for approval. (1) MB shall (i)
ensure geographic representation and
complementation ; (ii) consider strategic
trade and investment relationships
between the Philippines and the country of
incorporation of the foreign bank (iii) study
the demonstrated capacity, global
reputation for financial innovations and
stability in a competitive environment of
the applicant (iv) see to it that the
reciprocity rights are enjoyed by the
Philippine banks in the applicants
country; (v) consider willingness to fully
share their technology.
Only established , reputable and
financially sound foreign banks shall be
allowed entry in accordance with Section 2
of RA 10641

2015 Bar
XXI. A foreign company has a distributor in the Philippines. The latter acts in his own name and
account. Will this distributorship be considered as doing business by the foreign company in the
Philippines? (3%)
No. Under the Foreign Investment Act (FIA RA 7042) appointing a representative or distributor in
the Philippines which transact business in its own name for its own account is not considered as
doing business in the Philippines.
XXII. ABC Corporation was organized in Malaysia but has a branch in the Philippines. It is entirely
owned by Filipino citizens. Can you consider ABC Corporation a Philippine national? (2%)

Suggested Answer:
It depends. If ABC Corporation is registered as doing business in the Philippines under the
Corporation Code and one hundred percent (100%) of the capital stock outstanding and entitled to
vote is wholly owned by Filipinos then ABC Corporation is a Philippine national as defined under RA
7042 (FIA).
XXIII. Raymond invested his money in securities issued by the Philippine government, through his
bank. Subsequently, the Bureau of Internal Revenue asked his bank to disclose his investments. His
bank refused the request for disclosure on the ground that the investments are confidential under
the Secrecy of Bank Deposits Law (Republic Act No. 1405, as amended). Is the bank's refusal
justified?
Defend your answer. (2%)
Suggested Answer:
Yes, the banks refusal is justified. The investment is in the form of securities issued by the
Philippine government. Sec. 2 of RA 1405 prohibits the examination and inquiry or looking into all
deposits of whatever nature with banks in the Philippines (including investments in bonds issued by
the
Foreign Stockholdings (Sec.11) Foreign individuals and non-bank corporations may own or control
up to 40% of voting stock of domestic bank. Rule shall apply to Filipinos and domestic non-bank
corporations.
Note that under RA 10641 amending RA 7721 ( Act Liberalizing the Entry and Scope of Foreign
Banks in the Phils.), foreign banks may now acquire up to 100% of voting stock of an existing
bank.
Grandfather Rule: Percentage of foreign-owned voting stocks in a bank shall be determined by
citizenship of individual stockholders in that bank. Citizenship of corporation which is a stockholder
in a bank shall follow the citizenship of the controlling stockholders of the corporation , irrespective
of the place incorporation.
Please note, that under RA 7942 Philippine Mining Act Sec. 3 (f) Foreign owned corporation means
any corporation, partnership, association, or cooperative duly registered in accordance with law in
which less than 50%
of the capital is owned by Filipino citizens. This means that a mining
corporation, the capital of which is owned 50% or more by Filipino citizens is considered Filipino
owned corporation.

RESTRICTION ON DOSRI
DOSRI Rules (Sec. 36) Directors Officers, Stockholders and Related Interest
Regulate the amount of credit accommodations to DOSRI. Prohibitions to Directors of Officers to
directly or indirectly , for himself or as the representative or agent of others to borrow from such
bank or act as guarantor, endorser or surety, obligor or incur any contractual liability , except the
transactions is in pare passu.3
DOSRI- Directors Officers, Stockholders and their related interests. Rules regulating the grant of
credit accommodations that bank may extend to its DOSRI. Credit accommodation should be pare
pasu (regular course of business and on terms not less favorable to the bank than those offered to
non-DOSRI).
Stockholdings in a bank deemed owned by family group/related interest
Stockholdings of individuals related to each other within the 4 th degree of consanguinity or affinity,
legitimate or common law shall be considered family groups or related interests. Such
relationships must be fully disclosed in all transactions by such individuals with the bank. Section
12, GBL RA 8791
Two or more corporations owned or controlled by the same family group or same group of persons
shall be considered related interests and must be fully disclosed in all transactions by such
corporations or related groups of persons with the bank. Section 13, GBL RA 8791
RA 7653 BSP Act
Section 26. Bank Deposits and Investments. Any director, officer or stockholder who, together
with his related interest, contracts a loan or any form of financial accommodation from: (1) his
bank; or (2) from a bank (a) which is a subsidiary of a bank holding company of which both his
bank and the lending bank are subsidiaries or (b) in which a controlling proportion of the shares 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, 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 Philippines. Any information obtained from an
examination of his deposits shall be held strictly confidential and may be used by the examiners
only in connection with their supervisory and examination responsibility or by the Bangko Sentral in
an appropriate legal action it has initiated involving the deposit account.
------------------------Sec. 23 of the Corp. Code corporate powers shall be exercised, and all business conducted and
all property controlled and held by the BOD.
Every director must own at least one (1) share of the capital stock of the corporation, which share
shall stand in his name on the Stock and Transfer Book.
The exception is Section 15 of the GBL (RA 8791) Independent Directors
Notwithstanding provisions of Corporation Code to the contrary, there shall be at least 5, and a
maximum of 15 members of the BOD of a bank, 2 of whom shall be independent directors.
Independent Director shall mean a person other than an officer or employee of the bank, its
subsidiaries or affiliates or related interests.
Non-Filipino citizens may become members of the BOD to the extent of foreign equity participation;
Meeting of the BOD may be conducted through modern technologies such as, but not limited to,
teleconferencing and video-conferencing.
Sec.15. of RA 8791 GBL
The provisions of the Corporation Code to the contrary notwithstanding, there shall be at least five
3

Equally, without preference

(5), and a maximum of fifteen (15) members of the board or directors of a bank, two( 2) of whom
shall be independent directors.
Independent director- is a person other than an officer or employee of the bank, its subsidiaries or
affiliates or related interest.
Independent director as defined under SRC RA 8799 (Sec.38) - person other than officer or
employee of the corporation, its parent or subsidiaries, or any individual having a relationship with
the corporation, which would interfere with the exercise of independent judgment in carrying out
the responsibilities of a director.
In case of bank merger or consolidation , number of directors shall not exceed twenty-one (21),
Sec. 17

What is fit and proper rule?


In order to maintain the quality of bank management and afford better protection to depositors and
the public in general , the MB shall:

prescribe, pass upon and review the qualifications and disqualifications of individuals
elected / appointed bank directors/ officers; ( In determining whether an individual is fit and
proper to hold position of a director/officer, due regard shall be given to his integrity,
experience, education, training, and competence)

after due notice to the BOD of the bank, the MB may disqualify , suspend, remove any bank
director/officer who commits or omits an act w/c render him unfit for the position.

Power to suspend or remove After due notice to the BOD of the bank, MB may disqualify, suspend
or remove any bank director or officer who commits or omits an act which render him unfit for the
position.
MB as an administrative agency, is legally bound to observe due process, although it is free from
the rigidity of certain procedural requirements, it is clear under Sec. 28 ( c) of RA 3779, that an
investigation or examination may be conducted with or without prior notice but always with
fairness and reasonable opportunity for the association or any of its officials to give their side.
Likewise, suspension of bank officers which is only preventive in nature would require no notice or
hearing, and until such time that the officers have proved their innocence, he may be preventively
suspended from holding office so as not to influence the conduct of investigation, and to prevent
commission of further irregularities.
Basuego v. CA 204 SCRA 473 (1999)
Could an elective and appointive public official serve as an officer of a private bank?
No, whether part-time or full-time, except under Rural Bank Act 7353 (director/officer/consultant)
save in cases where service is incident to financial assistance provided by the government or gocc.
What are SBL rules?
Single Borrowers Limit Rules Rules promulgated by BSP w/c regulate the total amount of loans,
credit accommodations and guarantees that may be extended by a bank to any person,
partnership, corporation or other entity. The rules seek to protect the bank from making excessive
loans to a single borrower by providing a ceiling of 20% of the net worth of the bank concerned,
subject to possible increase by an additional 10% under certain conditions.
DOSRI (Directors, Officers, Stockholders and their Related Interest) rules which regulate the
amount of credit accommodations that a bank may extend to its DOSRI. The banks credit
accommodation must be regular course of business and on terms not less favorable to the bank
than those offered to non-DOSRI.

Microfinancing
The grant of small loans (microfinance loan) to the basic sectors, as described in the Social Reform
and Poverty Alleviation Act of 1997 ( RA 8425), and other loans to the poor and low-income
households for their micro-enterpises and small businesses so as to enable them to raise their
income levels and improve their living standards. These loans are granted on the basis of the
borrowers cash flow and are typically unsecured.
Could bank acquire real estate? (Sec.51)
Yes, if it is necessary for its own use in the conduct of its business. Provided, however, that the
total investment in such real estate and improvements thereof including bank equipment, shall not
exceed 50% of combined capital accounts. Provided further that the equity investment if a bank in
another corporation engaged primarily in real estate shall be considered as part of the banks total
investment in real estate, unless otherwise provided by the MB.
Notwithstanding the limitations thereof under Section 52, banks may acquire, hold or convey real
property under the ff. circumstances:

1.
2.
3.

Such as shall be mortgaged to it in good faith by way of security for debts


Conveyed in satisfaction of debts previously contracted in the course of its dealings;
or
Such as it shall purchase at sales under judgments, decrees, mortgages, or trust
deeds held by it and such as it shall purchase to secure debts due it.

Any real property acquired or held under the above circumstances shall be disposed of w/n 5 years
or as may be prescribed by the MB.
Can a bank acquire real property by virtue of deed of transfer from its former employee in
satisfaction of a civil liability arising from the criminal offense of qualified theft?
No, since the debts referred to are those resulting from previously contracted in the course of its
dealings. Reg. of Deeds of Manila v. Chinabank 4 SCRA 1145
Single Borrowers Limit. These are rules promulgated by the BSP to regulate loans, credit
accommodations and guarantees that banks may extend to any person. The current limit is 20% of
the net worth of the bank, subject to possible increase of 10% under certain conditions.
Purpose: to protect banks from over exposure or making excessive loans to a single borrower.
What is the requisite for the stipulation on escalation clause of interest in the PN to be valid?
1. That there can be an increase in interest if increased by law or by the MB,and
2. It must include a provision for reduction of the stipulated interest in the event that the
applicable maximum rate of interest is reduced by law or the MB.
Interest rate of 5.5% or 66% pa. is contrary to morals hence void.
Medel et al v. CA, Nov. 27, 1998
Where the disclosure statements, as well as the credit agreements, do not provide for any increase
in the specified interest rates, none would be permitted.
New Sampaguita Builders Construction, Inc. v. PNB 435 SCRA 565
Degree of diligence required in banking.
-more than that of a good father of a family; highest degree of diligence
-banks liability as an obligor is not merely vicarious, but primary
- State recognizes the fiduciary nature of banking that requires high standards of integrity and

performance Sec. 2 RA 8791.


Strikes and Lockouts
Banking industry is indispensible to National InterestUnsettled after seven (7) calendar days shall be reported by BSP to DOLE Secretary who may
assume jurisdiction over the dispute or decide it or certify the same to NLRC for compulsory
arbitration.
The President may any time intervene and assume jurisdiction over such labor dispute in order to
settle or terminate the same.
Read PNB v. Pike 470 SCRA328
It bears emphasizing that negligence of banking institutions should never be countenancedthough its employees may be the ones negligent, a banks liability as an obligor is not merely
vicarious but primary, as banks are expected to exercise the highest degree of diligence in the
selection and supervision of their employees.
UNITED COCONUT PLANTERS BANK, petitioner, vs. TEOFILO C. RAMOS, respondent. 415 SCRA 596
G.R. No. 147800 Nov. 11, 2003
Banks and Banking: Loans; The business of a bank is one affected with public interest, for which
reason the banks should guard against loss due to negligence or bad faith; In approving the loan of
an applicant, the bank concerns itself with proper information regarding its debtors.- It bears
stressing that the petitioner is a banking corporation, a financial institution
RURAL BANK OF STA. IGNACIA, INC. vs. DIMATULAC 401 SCRA G.R. No. 142015 April 29,2003
Sales: Land Titles; Banks and Banking; Judicial Notice; The rule that persons dealing with
registered lands can rely solely on the certificate of title does not apply to banks; Judicial notice
may be taken of the common practice of banks, before approving a loan, to send a representative
to the premises of the land offered as collateral and duly investigate who are the true owners
thereof,- The rule that person dealing with registered lands can rely solely on the certificate of title
does not apply to banks. The degree of diligence required of banks is more than that of a good
father of a family; in keeping with their responsibility to exercise the necessary care and prudence
in dealing even with a registered or titled property. The business of a bank is affected with public
interest, holding in trust the money of the depositors, which the bank should guard against loss to
rely merely on the protective mantle of the land registration law, which is normally accorded only to
purchasers or mortgagees for value and in good faith. In the present case, while petitioner sent a
representative to verify the original TCT on file with the Register of Deeds, no ocular inspection of
the premise took place. Judicial notice may be taken of the common practice of banks, before
approving a loan, to send a representative to the premises of the land offered as collateral and duly
investigate who are the true owners thereof. Failure to do so is negligence on the part of a bank.
Had petitioner taken extra steps, time and effort in dealing with the property it purchased by
conducting proper ocular inspection of the premises, it could have discovered early the presence of
settlers therein who are land reform beneficiaries.
HEIRS OF EDUARDO MANLAPAT vs. COURT OF APPEALS 459 SCRA 412 G.R. No. 125585
Same; same; Banks and Banking; Banks their business being impressed with public interest, are
expected to exercise more care and prudence than private individuals in their dealings, even those
involving registered lands- the highest degree of diligence is expected, and high standards of
integrity and performance are even required of them.- The Cruzes resorted to such means to
protect their interest in the property that right fully belongs to them only because of the bank
officers acquiescence thereto. The Cruzes could not have secured a separate TCT in the name of
Ricardo without the banks approval. Banks, their business being impressed with public interest, are
expected to exercise more care and prudence than private individuals in their dealings, even those
involving registered lands. The highest degree is expected, and high standards of integrity and
performance are even required of it.

In Rural Bank of Compostela v. CA 271 SCRA 76, 88, April 8, 1997, we held that a bank failed to
observe due diligence was not mortgagee in good faith. In the words of the ponencia:
xxxx [T]the rule that persons dealing with registered lands can rely solely on the on the
certificate of title does not apply to banks.
Banks indeed, should exercise more care and prudence in dealing even with registered
lands, that private individuals, for their business in one affected with public interest, keeping in
trust money belonging to their depositors, which they should guard against loss by not committing
any act of negligence which amounts to lack of good faith by which they would be denied the
protective mantle of the land registration statute, Act [No] 496, extended only to purchasers for
value and in good faith, as well as mortgagees of the same character and descriptions.
xxx
Prudence dictates that a person signing a document in his official capacity (as bank manager in this
case) must closely read and meticulously study the contents of the said document affixing his
signature thereon. A bank is not without a legal staff or lawyer who prepares documents
concerning its business. The mistake committed by the bank's staff, which was admitted by
respondent Jimenez, was not a slight or minor infraction. It deprived petitioners of their property
which could ultimately result in their ejectment therefrom. Moreover, the bank's manager, Dr.
Jimenez, could not even explain why the mistake occurred.
xxx
The banking system has become an indispensable institution in the modern world and plays a vital
role in the economic life of every civilized society. Whether as mere passive entities for the safekeeping and saving of money or as active instruments of business and commerce, banks have
attained a ubiquitous presence among the people, who have come to regard them with respect and
even gratitude and most of all, confidence. (Simex International [Manila], Inc. vs. Court of Appeals,
G.R. No. 88013, March 19, 1990, 183 SCRA 360).

G.R. No. 100755 February 10, 1994

CRISTETA BAUTISTA, REMEDIOS MEJIA-BADUA, CATALINA MEJIA, LAURETA MEJIA, ROSITA MEJIA,
MILAGROS MEJIA, JUAN MEJIA, CANDIDA MEJIA, ADRIANA MEJIA, and FAUSTO MEJIA, petitioners,
vs.
MANGALDAN RURAL BANK, INC., THRU ITS PRESIDENT, DR. VICENTE JIMENEZ, REGISTER OF
DEEDS OF PANGASINAN, EFREN RODRIGUEZ: and THE HONORABLE COURT OF APPEALS,
respondent
BANKING LAWS
GENERAL CONCEPT
That the bank is under the supervision of the Bangko Sentral ng Pilipinas (BSP) and the
Philippine Stock Exchange (PSE) does not exempt it from complying with the continuing disclosure
requirements embodied in the assailed rules. As a bank, it is primarily subject to the control of the
BSP ; and as a corporation trading its securities in the stock market. It is under the supervision of
the SEC. These regulations are meant to assure full, fair, and accurate information for the
protection of the investors. (UNION BANK OF THE PHILIPPINES vs. SEC GR. No. 138949. June 6,
2001)
A bank can have no lien on its own stock for the indebtedness of the stockholders even when
the by-laws provide that the shares shall be transferable only on the books of the corporation and
that no such transfer shall be made if the holder of the shares is indebted to the corporation. For if
a banking corporations were given a lien on their own stock for the indebtedness of the
stockholders, the prohibition against granting loans or discounts upon the security of the stock
would become largely ineffective (FUA CUN vs. SUMMERS and CHINA BANKING CORP. GR No. L1944, March 27, 1923)
LIABILITY FOR DAMAGES

In approving the loan of an applicant, the bank concerns itself with proper information
regarding its debtors. UCPB, as a bank and a financial institution engaged in the grant of loans, is
expected to ascertain and verify the identities of the persons it transacts business with. (UNITED
COCONUT PLANTERS BANK vs. RAMOS. GR No. 147800. November 11, 2003.)
MORAL DAMAGES
Simex International (Manila), Inc. v. CA 183 SCRA 360 (1990)
Moreover, a corporation is not as a rule entitled to moral damages because, not being a natural
person, it cannot experience physical suffering or such sentiments as wounded feelings, serious
anxiety, mental anguish and moral shock. The only exception to this rule is where the corporation
has a good reputation that is debased, resulting in its social humiliation.
We shall recognize that the petitioner did suffer injury because of the private respondent's
negligence that caused the dishonor of the checks issued by it. The immediate consequence was
that its prestige was impaired because of the bouncing checks and confidence in it as a reliable
debtor was diminished. The private respondent makes much of the one instance when the
petitioner was sued in a collection case, but that did not prove that it did not have a good
reputation that could not be marred, more so since that case was ultimately settled. It does not
appear that, as the private respondent would portray it, the petitioner is an unsavory and
disreputable entity that has no good name to protect.
MORAL DAMAGES BASED ON ACTUAL INJURY
G.R. No. 177839
January 18, 2012
FIRST LEPANTO-TAISHO INSURANCE CORPORATION (now known as FLT PRIME INSURANCE
CORPORATION), Petitioner,
vs.
CHEVRON PHILIPPINES, INC. (formerly known as CALTEX [PHILIPPINES], INC.), Respondent.
Finally, we hold that the trial court correctly dismissed petitioners counterclaim for moral damages
and attorneys fees. The filing alone of a civil action should not be a ground for an award of moral
damages in the same way that a clearly unfounded civil action is not among the grounds for moral
damages.27 Besides, a juridical person is generally not entitled to moral damages because, unlike a
natural person, it cannot experience physical suffering or such sentiments as wounded feelings,
serious anxiety, mental anguish or moral shock. 28 Although in some recent cases we have held that
the Court may allow the grant of moral damages to corporations, it is not automatically granted;
there must still be proof of the existence of the factual basis of the damage and its causal relation
to the defendants acts. This is so because moral damages, though incapable of pecuniary
estimation, are in the category of an award designed to compensate the claimant for actual injury
suffered and not to impose a penalty on the wrongdoer.29 There is no evidence presented to
establish the factual basis of petitioners claim for moral damages.
Rudolf Lietz, Inc. v. Court of Appeals, G.R. No. 122463, December 19, 2005, 478 SCRA 451, 460.
Crystal v. Bank of the Philippine Islands, G.R. No. 172428, November 28, 2008, 572 SCRA 697,
705, citing People v. Manero, Jr., G.R. Nos. 86883-85, January 29, 1993, 218 SCRA 85, 96-97.
29
Id. at 706, citing Development Bank of the Phil. v. Court of Appeals, 451 Phil 563, 586-587
(2003).
27
28

MORAL DAMAGES CANNOT BE GRANTED TO CORPORATION


G.R. No. 128690 January 21, 1999
ABS-CBN BROADCASTING CORPORATION, petitioner,
vs.
HONORABLE COURT OF APPEALS, REPUBLIC BROADCASTING CORP, VIVA PRODUCTION, INC., and
VICENTE DEL ROSARIO, respondents.
The award of moral damages cannot be granted in favor of a corporation because, being an
artificial person and having existence only in legal contemplation, it has no feelings, no emotions,
no senses, It cannot, therefore, experience physical suffering and mental anguish, which call be
experienced only by one having a nervous system. 65 The statement in People v. Manero 66 and
Mambulao Lumber Co. v. PNB 67 that a corporation may recover moral damages if it "has a good

reputation that is debased, resulting in social humiliation" is an obiter dictum. On this score alone
the award for damages must be set aside, since RBS is a corporation.
65 Prime White Cement Corp. v. Intermediate Appellate Court, 220 SCRA 103, 113-114 [1993] LBC
Express Inc. v. Court of Appeals, 236 SCRA 602, 607 [1994]; Acme Shoe, Rubber and Plastic Corp.
v. Court of Appeals, 260 SCRA 714, 722 [1996].
66 Supra note 31.
67 130 Phil. 366 [1968].
BANKS FIDUCIARY DUTY TO DEPOSITORS
A banking corporation is liable to innocent third persons where the representation is made in
the course of its business by an agent acting within the general scope of his authority even though,
in the particular case, the agent is secretly abusing his authority and attempting to perpetrate a
fraud upon his principal or some other person, for his own ultimate benefit. ( PHILIPPINE BANKING
CORPORATION vs. COURT OF APPEALS and MARCOS GR No. 127469. January 15, 2004.)
RECEIVERSHIP
The appointment of a receiver operates to suspend the authority of a bank and of its
directors and officers over its property and effects, such authority being reposed in the receiver and
in this respect, the receivership is equivalent to an injunction to restrain bank officers from
intermeddling with the property of the bank in any way. The receiver only has authority to
administer the properties of the bank for the benefits of the creditors (ABACUS REAL ESTATE
DEVELOPMENT CENTER, INC. vs MANILA BANKING CORP. GR No. 162270, April 6, 2005.)
NEW CENTRAL BACK ACT
While admittedly the Central Bank Act gives vast and far reaching power to the conservator
of a bank. It must be pointed out that such powers must be related to the preservation of the asset
of the bank (the reorganization thereof) and the restoration of its viability. Such powers enormous
and extensive as they are, cannot extend to ex post facto repudiation of perfected transactions,
otherwise that would infringe against the non-impairment clause of the Constitution. (FIRST
PHIL___ BANK vs. GR No. 115849. January 24, 1996)
There is no requirement whether express or implied, that a hearing be first conducted before
a banking institution may be placed under receivership. On the contrary, the law is explicit as to the
conditions prerequisite to the action of the Monetary Board to forbid the institution to do business
in the Philippines and to appoint a receiver who will immediately take charge of the banks assets
and liabilities. The requirements are; (a) an examination made by the examining department of the
Central Bank; (b) report by said department to the Monetary Board; and (c) prima facie showing
that the bank is in a condition of insolvency or so situated that its continuance in business would
involve probable loss to its depositors or creditors.
The evident implication of the law, therefore, is that the appointment of a receiver may be
made by the Monetary Board without notice and hearing but its action is subject to judicial inquiry
to ensure the protection of the banking institution. Stated otherwise, due process does not
necessarily require a prior (BUHI vs. CA GR No. 61689. June 20, 1988)
EFFECT OF CLOSURE
The banks closure did not diminish the authority and powers of the designated liquidator to
effectuate and carry on the administration of the bank. The bank liquidator is allowed to continue
receiving collectibles and receivables or to pay off creditors claims and other transactions
pertaining to the normal operations of the bank. Among these transactions are the prosecution of
suits against debtors for collection and the foreclosure of mortgages. The bank is allowed to collect
interest rate on its loans while under liquidation, provided that the interests are legal. In fine, the
interest rate on the loan agreed upon between the parties is not excessive or unconscionable; and
that during the closure of respondent bank, it could still function as a bonding institution, hence,
could continue collecting interests from petitioners. (BACOLOR vs. BANCO FILIPINO SAVINGS AND
MORTGAGE BANK GR No. 148491. February 8, 2007)
INSOLVENCY OF BANK
Insolvency was defined as the inability of a banking institution to pay its liabilities as they fall
due in the ordinary course of business. Respondent CB found Genbank incapable to generate liquid
funds by itself in order to meet draw downs on its deposits and deposit-substitutes and to pay for

other maturing obligations, as well as advances from Central Bank.


Genbank cannot be allowed to adopt a statutory definition of insolvency, which was not set
forth in the law when Resolution No. 675 was issued. The Monetary Board actions could not have
run counter to a legal provision inexistent at the time when it issued the resolution in question
(GENERAL BANK AND TRUST COMPANY vs. CENTRAL BANK OF THE PHILIPPINES GR. No. 152551.
June 15, 2008.
JURISDICTION OVER ACTIONS AGAINST AN INSOLVENT BANK
The Monetary Board has exclusive jurisdiction over actions against insolvent banks. Regular
courts do not have jurisdiction over actions filed by claimants against an insolvent bank unless
there is a clear showing that the action taken by the BSP was in excess of jurisdiction or with grave
abuse of discretion. Disputed claims refer to all claims, whether they be against the assets of the
insolvent bank, for specific performance, breech of contract, damages, or whatever. Petitioners
claims falls within the ambit of a claim against the assets of the insolvent bank.
The disputed claim should be lodged in the liquidation proceedings by the petitioner as
creditor, since the closure of the bank has rendered all claims subsisting at that time moot which
can best be threshed out by the liquidation court and not the regular courts. (MIRANDA vs.
PHILIPPINE DEPOSIT INSURANCE CORP. ET. AL. GR No. 169334. September 8, 2006)
LIQUIDATION OF BANK VS. LIQUIDATION OF CORPORATION
The liquidation of RBBI is undertaken according to Sec. 30 of the New Central Act. The said
provision lays down the proceedings for receivership and liquidation of a bank. It is silent as
regards the securing of a tax clearance from the BIR. The omission cannot compel the Court to
apply by analogy the tax clearance requirement of the SEC since the dissolution of a corporation by
the SEC is totally different from the receiveship and liquidation of a bank by the BSP.
There are substantial differences in the procedure for involuntary dissolution and liquidation
of a corporation under the Corporation Code, and that of a banking corporation under the New
Central Bank Act, so that the requirements in one cannot simply be imposed in the other. (IN RE:
PETITION FOR ASSISTANCE IN THE LIQUIDATION OF THE RURAL BANK OF BOKOD (BENGUET),
INC (RBBI), PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC) vs. BUREAU OF INTERNAL
REVENUE (BIR). GR No. 158261. December 18, 2006)
DEPOSIT INSURANCE
The amount of deposit insurance in banks has been effectively increased to P 500,000. 00 (RA
3591 as amended by RA 9576, April 29, 2009)
1. After the mortgage property was extrajudicially foreclosed, and the certificate of sale was
issued and registered at the Office of the Registry of Deeds, the mortgagor filed an action for
annulment of mortgage.
a. The action tolls the running of the redemption period
b. The action does not interrupt the running of the redemption period
c. The mortgagor can still redeem the property even after the expiration the redemption
period
d. The mortgagor can redeem the property by paying the redemption price pursuant to
Section 6 of Act 3135

Answer: b (Vaca vs. CA 234 SCRA 146)

a. The redemption price once the real property is foreclosed judicially or extrajudicially is:
Redemption price pursuant to Section 78 of the General Banking Act (now Section 47 of
the General Banking law RA 8791) and Not the Redemption price pursuant to the Section
6 of Act 3135; or the Purchase price plus 1% interest per month up to the time of

redemption or as provided under Sec. 28, Rule 39;or Purchase price plus 2 % interest per
month to commence 60 days after the redemption from the first redemption

In Ponce de Leon v. Rehabilitation Finance Corp 146 SCRA 862)

In Ponce de Leon v. Rehabilitation Finance Corporation, 27 this Court had occasion to rule that
Section 78 of the General Banking Act had the effect of amending Section 6 of Act No. 3135 28
insofar as the redemption price is concerned when the mortgagee is a bank, as in this case, or a
banking or credit institution.29 The apparent conflict between the provisions of Act No. 3135 and the
General Banking Act was, therefore, resolved in favor of the latter, being a special and subsequent
legislation. This pronouncement was reiterated in the case of Sy v. Court of Appeals30 where we
held that the amount at which the foreclosed property is redeemable is the amount due under the
mortgage deed, or the outstanding obligation of the mortgagor plus interest and expenses in
accordance with Section 78 of the General Banking Act. 31 It was therefore manifest error on the
part of the Court of Appeals to apply in the case at bar the provisions of Section 30 Rule 39 of the
Rules of Court in fixing the redemption price of the subject foreclosed property.

27

146 SCRA 862 (1970).

SEC. 6. In all cases in which an extrajudicial sale is made under the special power herein before
referred to, the debtor, his successors in interest or any judicial creditor or judgment creditor of
said debtor, or any person having a lien on the property subsequent to the mortgage or deed of
trust under which the property is sold, may redeem the same at any time within the term of one
year from and after the date of sale; and such redemption shall be governed by the provisions of
sections four hundred and sixty-four to four hundred and sixty-six, inclusive, of the Code of Civil
Procedure (now Secs. 29, 30 and 34, Rule 39, Revised Rules of Court), insofar as these are not
inconsistent with the provisions of this Act.
28

29

See note 27, supra, p. 878.

30

172 SCRA 125 (1989).

Reiterated in the case of

G.R. No. 134068

December 25, 2001

UNION BANK OF THE PHILIPPINES,


petitioner,
vs.
COURT OF APPEALS, APOLONIA DE JESUS GREGORIO, LUCIANA DE JESUS GREGORIO, GONZALO
VINCOY, married to TRINIDAD GREGORIO VINCOY, respondents.

2. When the redemption period is about to expire, mortgagor offered to redeem the property by
tendering payment for the full amount of the redemption price. The mortgagee refuses the
amount of the tender of payment of redemption price because of disagreement as to the
redemption price.
a. Mortgagor may file an action within 1 year redemption period in order to preserve the
right of redemption
b. The mortgagor can still redeem the property even after the expiration the redemption
period
c. The action does not interrupt the running of the redemption period
d. The mortgagor can redeem the property by paying the redemption price pursuant to
Section 6 of Act 3135

Answer : a ( Hi-Yield Realty vs. CA 388 SCRA 655, Lee Chung Realty vs. CA 250 SCRA 596)

3. If the proceeds of the extra-judicial foreclosure sale of real estate mortgage turned out to be
less than or insufficient to pay the debt, the mortgagee can:
a. Sue /file an action to recover the deficiency from the mortgagor;
b. Mortgagee cannot sue for the deficiency, any agreement to the contrary is void;
c. The extrajudicial foreclosure sale extinguishes the obligation. Mortgagee cannot recover
the deficiency, notwithstanding any stipulation to the contrary;
d. The extrajudicial foreclosure should be published for three (3) consecutive weeks in a
newspaper of general circulation

Deficiency of Price, Recovery

In the case of EJF of REM, creditor bank is entitled to deficiency in case the price of the foreclosure
sale is less than the principal amount of loan, interest and expenses, if any. Same holds true with
Chattel Mortgage.

In pledge under Article 2115, sale of thing pledge extinguish the principal obligation, whether or
not the proceeds of the sale are equal to the amount of the principal obligation, interest and
expenses in a proper case. If price of sale is more than the said amount, the debtor shall not be
entitled to the excess unless it is otherwise agreed. Exception is n the case of legal pledge under
Article 2121, 546 ( necessary and useful expenses), 1731 (to work on movable) and 1994 (refers
to depositary)or pledge by operation of law.

Including Article 1914, right of agent to retain. Article 2004 right of hotel or in-keeper to retain.

How about if the proceeds is less, creditor is not entitle to recover the deficiency notwithstanding
any stipulation to the contrary.

4. A Universal Bank is:


a. Bank that can accept or create demand deposits without approval of the BSP;
b. Bank that can grant small loans to the basic sectors, as described in the Social Reform
Poverty Alleviation Act of 1997 /RA 8425;
c. Bank that has commercial bank powers in addition to power of an investment house and
invest in non-allied enterprises and the highest capital requirement.
d. Bank that has the power to accept drafts, issuing letters of credit, discounting and
negotiating PN, drafts, bills of exchange and other evidence of debts, forex, accepting and
creating demand deposits.

Answer: c

5. A Commercial Bank is:


a. Bank that can accept or create demand deposits without approval of the BSP;
b. Bank with powers of investment house and invest in non-allied enterprises
c. Bank which has the power make needed credit available and readily accessible in the
rural areas on reasonable terms;
d. Bank organized primarily to make financial and credits services to cooperative.

Answer: a

6. Filipino and Foreign individuals and Domestic Non-Bank Corporation wanted to acquire a

domestic bank.

a. Only 40% of the voting stock could be owned

b. Up to 60% of the voting stock could be owned

c. Up to 100% of the voting stock could be owned

d. Up to 50 % of the voting stock could be owned

Answer: a (sec. 11 RA 8791)

7. In granting loans and credit accommodations to its directors, officers stockholders and
related interest, bank may:

a. Regulate the loans and credit accommodations

b. Waive the Bank secrecy law

c. Extend as many loan and credit accommodations as long as the can afford;

d. Loans and credit accommodation must be in the regular course of business, with terms and
conditions which are equally and without preference

Answer: d. (Sec. 36 RA 8791)

8. The Right of Redemption of the juridical entity in extrajudicial foreclosure of real estate
mortgage by a bank quasi-bank and trust entity under the General Bank Act of 2000 or RA
8791

a. Right of Redemption is 1 year from the registration of the certificate of sale in the office of
the Register of Deeds;

b. Redemption period shall be made until, but not later than the registration of the certificate of
foreclosure sale with the applicable Register of Deeds which in no case shall be more than 3
months after foreclosure, whichever is earlier;

c. Redemption could be stayed by action assailing the validity of foreclosure sale;

d. Redemption could not be stayed by any action.

9.

A bank in order to save on labor cost, hired or outsourced casual and non-regular
employees

a. Bank is prohibited to outsourced casual or non-regular employees;

b. Bank is allowed to outsource casual or non-regular employees;

c. Bank can employ casual or non-regular employee only on short term basis involving non
banking functions or deposits transactions.

d. Bank can outsource inherent banking functions.

Answer: c (Sec. 55 RA 8791)


RA 7653 BSP
Section 58. Definition. For purposes of this Act, the term "demand deposits" means all those
liabilities of the Bangko Sentral and of other banks which are denominated in Philippine currency
and are subject to payment in legal tender upon demand by the presentation of checks.
Section 59. Issue of Demand Deposits. Only banks duly authorized to do so may accept funds or
create liabilities payable in pesos upon demand by the presentation of checks, and such operations
shall be subject to the control of the Monetary Board in accordance with the powers granted it with
respect thereto under this Act.
Section 60. Legal Character. Checks representing demand deposits do not have legal tender
power and their acceptance in the payment of debts, both public and private, is at the option of the
creditor: Provided, however, That a check which has been cleared and credited to the account of
the creditor shall be equivalent to a delivery to the creditor of cash in an amount equal to the
amount credited to his account.
RA 7653 BSP Act
Section 95. Definition of Deposit Substitutes. The term "deposit substitutes" is defined as an
alternative form of obtaining funds from the public, other than deposits, through the issuance,
endorsement, or acceptance of debt instruments for the borrower's own account, for the purpose of
relending or purchasing of receivables and other obligations. These instruments may include, but
need not be limited to, bankers acceptances, promissory notes, participations, certificates of
assignment and similar instruments with recourse, and repurchase agreements. The Monetary
Board shall determine what specific instruments shall be considered as deposit substitutes for the
purposes of Section 94 of this Act: Provided, however, That deposit substitutes of commercial,
industrial and other non-financial companies for the limited purpose of financing their own needs or
the needs of their agents or dealers shall not be covered by the provisions of Section 94 of this Act.
What is a draft? (Used normally in international commerce to effect payment)
A draft is a bill of exchange. It is an order written by an exporter /seller instructing an importer
/buyer or its agent to pay a specified amount of money at a specified time.
The person/business opening /initiating the draft is called the maker, drawer or originator. The
party to whom the draft is addressed is the drawee. The drawee is asked to honor the draft, i.e. to
pay the amount requested according to the stated terms. The drawee is either the buyer, in which
case the draft is called a Trade Draft, or buyers bank, in which case the draft is called a Bank Draft.

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