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GENERAL BANKING LAW

R.A. NO 8791, LAW ON SECRECY OF DEPOSITS AND RELATED
LAWS
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What are banks?

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Banks are entities engaged in the lending of funds obtained in the form of
deposits from the public.
a) Required that banks are stock corp and funds are obtained from the public,
deposits of 20 or more persons.
b) Investment company that performs functions is not a bank. An investment
company engaged solely in investing, reinvesting or trading in securities is not
engaged in banking. However, an investment company which loans out the
money of its customers, collects the interests, and charges a commission to both
lender and borrower is engaged in banking.
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What are Quasi-Banks?

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Quasi-Banks are entities engaged in the borrowing of funds through the

issuance, endorsement or assignment with recourse or acceptance of deposit
substitutes for purposes of relending purchasing of receivable s and other
obligations.
1. Deposit substitutes are alternative forms of obtaining funds from the public,
other than deposits, through the issuance, endorsement, or acceptance of
debt instruments for the borrowers own account, for the purpose of
relending or purchasing of receivables and other obligations.
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What is the nature of the banking business?

Page 310 to 311
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A bank has a vital role in providing an environment conductive to the

sustained national economy. Banking is fiduciary in nature that requires high
standards of integrity and performance.
a) Consequences of nature of business:
1. It is subject heave and close supervision and/or regulation by the BSP.
2. It is required to exercise utmost diligence in the handling of deposits.
3. There are special rules on strikes and lockouts any strike or lockout involving
banks, if unsettled after 7 calendar days shall be reported by the BSP to the
Sec. of Labor who has 2 options: (1) he may assume jurisdiction over and
decide the dispute or (2) certify the same to the NLRC for compulsory
arbitration. The law also allows the President of the Philippines to, at any time,
intervene and assume jurisdiction over such labor dispute in order to settle or
terminate the same.
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Authority to Incorporate and Operate

Page 311
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a) A banking or quasi-banking corporation cannot be incorporated

without authority from the BSP. The Articles of Incorporation to be
filed with the SEC should be accompanied by the favorable
recommendation of the BSP, otherwise, it shall not be accepted or
approved.
b) An entity that is performing banking or a quasi-banking function
cannot operate without a certificate of authority from the BSP.
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What are the classification of banks?

Page 311
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a) Universal Banks
b) Commercial Banks
c) Rural banks
d) Thrift banks
e) Cooperative banks
f) Islamic Banks
g) Other classification of banks as determined by the MB of the BSP
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What is a Universal Bank?

Page 311
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Universal banks banks that have authority to exercise, in addition to the

powers and functions of commercial banks, powers of an investment house
and the power to invest in non-allied enterprises.
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What are Commercial Banks?

Page 311
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Commercial Banks banks that are given all such power necessary to engage
in commercial banking in addition to general corporate powers; commercial
banking includes the power to accept drafts, issue letters of credits,
discounting and negotiation of negotiable instruments and evidence of debt,
accept and create demand deposits and the like.
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Wha are Rural Banks?

Page 311
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Rural banks banks that are created to make needed credit available and
readily accessible in the rural areas for the purpose of promoting
comprehensive rural development.
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What are Thrift banks?

Page 312
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Thrift banks include savings and mortgage banks, private development

banks, and stock savings and loan associations.

(Islamic banks and other classifications)

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Distinctions in banking
Page 312
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1. As to capitalization
2. As to purpose
3. As to powers or functions
4. As to who can be directors
5. As to incorporators
6. As to foreign equity
7. As to necessity of public offering
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As to capitalization
Page 312
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As to capitalization They have different minimum capitalization

requirements.
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As to purpose
Page 312
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As to purpose Some of the banks have specific purposes and social functions.
For instance, Rural Banks are meant to hasten rural development.
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As to powers or functions
Page 312
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As to powers or functions There are functions and powers that are not
exercised by one that are exercised by one that are exercised by others. Some
banks may exercise certain powers only upon prior approval of the Monetary
Board. Thus: (i) only universal bank and commercial banks can create and
accept demand deposits without separate authority from the Monetary Board
while other banks must secure authority from the Monetary Board; (ii) only
universal banks may act as an investment house; (iii) generally, only universal
banks and commercial banks may be involved in quasi-banking functions.
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As to who can be directors

Page 312
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As to who can be directors Public officers can be directors of Rural Banks

while such officers are prohibited from being directors or officers of other
types of banks.
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As to incorporators
Page 312 to 313
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As to incorporators Consistent with the provisions of the Corporation Code,

incorporators of banks are natural persons. The exception is with respect to
rural banks which can be organized or established by cooperatives and
corporations primarily organized to hold equities in rural banks.
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As to foreign equity
Page 313
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As to foreign equity A rural bank must be wholly owned by Filipinos while

other banks require only 40% Filipino ownership of their voting stocks. (See,
however, R.A. No. 10641 allowing 100% ownership of Foreign Banks under certain
conditions).
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As to necessity of public offering

Page 313
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As to necessity of public offering Public offering of shares is necessary for

domestic banks seeking authority to act as universal bank while there is no
such requirement for other banks.
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FUNCTIONS OF BANKS
Basic Functions
Page 313
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1. Deposit Function
2. Loan Function
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FUNCTIONS OF BANKS
Other functions
Page 313