Bank closure and Liquidation

Bank Closure
Monetary Board of the BSP forbids the bank from doing business
Places the bank under receivership
Basis for closing the bank:
Section 30 of R.A. 7653 (The New Central Bank Act)
Section 53 of R.A. 8791 (The General Banking Law of 2000)
Grounds for Bank Closure
1. Bank is unable to pay its liabilities as they become due in the ordinary course of
business
2. Bank has insufficient realizable assets to meet its liabilities
3. Bank cannot continue without involving probable losses to its depositors or creditors
4. Bank has willfully violated a cease and desist order from the Monetary Board that has
become final, involving acts or transactions which amount to fraud or a dissipation of the assets
of the institution.
5. Bank notifies the Bangko Sentral or publicly announces a bank holiday, or in any
manner suspends the payment of its deposit liabilities continuously for more than thirty (30)
days.
The Monetary Board may summarily and without need for prior hearing forbid the bank from
doing business and designate PDIC as receiver.
Tasks of PDIC as Receiver
1. Immediately gather and take charge of all the assets and liabilities of the bank
Securing documents and vaults
Conducting cash count
Closing accounts with depository banks
Sending notices to the Registry of Deeds, borrowers, creditors, clients
2. Make an inventory of all the assets and liabilities of the bank
Conduct regular receivership activities
Administering the assets and liabilities of the bank liabilities
Exercising the general powers of a receiver
 3. PDIC may not transfer or dispose of any asset of the bank during receivership.
4. It may pay for administrative expenditures, and place the funds of the bank in non-
speculative investments.
Tasks of PDIC as Receiver
Determine whether the bank can be rehabilitated or not
Within 90 days from take take-over
Forward a report to the Monetary Board
Can be rehabilitated rehabilitated: Cannot be rehabilitated rehabilitated:
Determination for the resumption of Monetary Board shall -
business subject to prior approval of the notify the board of directors of the bank of
Monetary Board its findings
Direct PDIC to proceed with the liquidation

Liquidation Proceedings
1. PDIC files ex parte with the regional trial court, and without requirement of prior
notice or any other action,a petition for assistance in the liquidation of the bank.
2. Pursuant to a liquidation plan adopted by PDIC for general application to all closed
banks.
Upon acquiring jurisdiction, the court shall, upon motion by the receiver after due notice:
1. Adjudicate disputed claims against the bank.
2. Assist in the enforcement of individual liabilities of the stockholders, directors and
officers.
3. Decide on other issues as may be material to implement the liquidation plan adopted.
Powers of PDIC as Liquidator
1. Convert the assets of the bank to money
2. Pay creditors and other parties
3. Appoint and hire persons or entities as deputies and assistants
4. Bring suits to enforce liabilities to or recoveries of the bank
5. Defend any action against the bank
6. Institute such actions as may be necessary to collect and recover accounts and assets of
the bank.
Source: Yuvienco M D., Bank Liquidation in the Philippines
nfo.worldbank.org/etools/.../library/.../insolvencyeap2003/pdf/yuvienco