1.

Functions of a commercial bank

1) Drafts; accept
2) Letters of credit; issue
3) Negotiable instrument and evidence of debt; discounting and negotiation
4) Demand deposit; create
2. Rural banks
1) Public officers can be directors

3. Distinction of banks
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

4. UB and CB may create and accept demand deposits without separate authority from the MB
5. Only natural persons can incorporate. But in rural banks, it can be established by cooperatives
and corporations
6. Other banks require only 40% Filipino ownership of the voting stock. A rural must be wholly
owned by Filipinos
7. Distinction of banks

8. 2 basic functions of a bank

1)
2)

9. Other functions of a bank

1)
2)
3)
4)
5) Safety deposit box

10. Prohibited acts

1)
2)
11. Consequence of being a simple loan or deposit function of a bank
1)
 2)
3)
4)
12. Can minors be depositors? If yes what are the requirements?
1)
2)
3)
4)

13. Married woman are they allowed to open a bank account?

14. Kinds of deposits (DITS NOW)

1) Demand deposit
2) interests
3) Time deposit
4) Savings account
5) Negotiable order of withdrawal

15. Instance when presentation of passbook may be dispensed with in withdrawing from a saving
account

16. Types of account an individual can open

1)
2)
17. Survivorship agreement. – it is a stipulation contained in a joint account. The terms is that,
while alive, anyone of them can withdraw. If one of them dies, all of the balance will be
transferred to the one who survived

18. Is anonymous account prohibited?

19. Exceptions to secrecy of peso deposits

1) W
2) I
3) O -B
4) O- D
5) O - L
6) E
7) A
8) A
 9) D
10) R
11) H

20. Exceptions to foreign currency deposits

1) W
2) Anti-money laundering, sec 11
3) Human Security Act, sec 27 and 28

21. Crimes committed where AMLA is not required to obtain court order to inquire into banks
1) Kidnapping
2) Dangerous drugs
3) Hijacking
4) Destructive arson
5) Murder
6) Terrorism

22. Why is there no violation of secrecy law in garnishment?

1) Because the deposit is not actually disclosed. It is only to ascertain that there is a fund
there to satisfy the judgment. The intent of legislator in crafting secrecy law does not
cover garnishment

23. Deposits that are exempt from garnishment

1) FCD
2) Provision for family for four months

24. What is a deposit?

1) It is the money received by bank in its usual course of business

25. In negotiable certificate of deposit, the owner or holder thereof shall be recognized as the
depositor, only if his name is registered as owner or holder in the books of the issuing bank

26. Insured deposit. – is the amount due to a bondafide depositor for his legitimate deposits in an
insured bank.

The insured deposit is net of any obligation of the depositor to the bank as of the date of closure
but not to exceed 500,000 pesos
27. Requirement for maximum deposit insurance to be adjusted?
1) Threat in stability of banking has been determined by MB
2) Approved by PDIC board, by a unanimous vote
3) Approved by the president of the Philippines

28. Deposits not covered by insurance

1) In excess of insured deposit of 500,000
2) If deposit is payable outside the Phil
3) Investment products
4) Fictitious or fraudulent accounts
5) Those emanate from unsound banking practice
6) Those that are determined to be the proceeds of unlawful activity
7) Those that resulted from splitting of deposits
8) When the head office of a foreign bank makes a money placement in its branch in the
Philippines (reason: payable outside the Philippines)
9) Inter-branch deposits (because they are considered as one)

(EU IF UP SMI)

Keyword
1) Excess
2) Outside
3) Investment
4) Fictitious
5) Unsound
6) Proceeds
7) Splitting
8) Money
9) Inter-branch

29. What is splitting of deposits?

There is a deposit which has an outstanding balance of more than 500,000 and it was under the
name a person. It is broken down and transferred to two or more accounts, in the name of
persons or entities who have no beneficial ownership in the transferred deposits.

Such transfer was made 120 days before or during a bank declared holiday or 120 days before
MB issued a closure order. The purpose is to avail the maximum insurance coverage

It is a criminal act and the deposits are not entitled to any insurance payment

30. Rules in determination of amount

 1) Joint account is insured separately from individual account
2) Divided in as many equal shares if it is a joint account; unless there is a different sharing
agreement stipulate in the document of deposit
3) If joint account between juridical and individual, presumed entirely to the juridical
person

31. Prescription for filing of claims with PDIC?

1) Two years from actual take over by the receiver

32. Unclaimed balances. - If one has a deposit in a bank , and it remained untouched for 10 years, it
can be escheated in favor of th government. But there should be notice to the depositor. The
bank then is required to report to the Treasurer of the Phil those deposits. Then treasurer will
inform solicitor general. Solicitor general will initiate escheat proceedings

33. Rules in granting a loan

1) Only in amount and for period essential for the completion of project
2) Follow safe and sound banking practice
3) Determine capacity to pay of the debtor

34. What is single’s borrower limit?

It is a ceiling
It is the total amount of loans, credit accommodations and guaranties that a bank can extend to
any person or entity. It should not exceed 25% of the net worth of the bank. The basis for
compliance is the total commitment of the bank to the borrower

25% may be increased to 10% that the additional liabilities are adequately secured. It could be
by a trust receipt, warehouse receipt, or other similar documents covering readily marketable
non-perishable goods, which must be fully covered by insurance.

35. DOSRI accounts

It is a restriction for borrowings of DOS and their related interests.
To fall under DOSRI transaction, Art 26 of NCBA provides for requisites:
1) Person is a DOSRI
2) He contracts a loan or other financial accommodation
3) He contracted it from (1) his bank; (2) a subsidiary bank; (3) a bank controlled by his
bank in terms of share
 4) That the loan accommodation either singly or combined is in excess of 5% of the capital
and surplus of the lending bank or in the maximum amount permitted by law,
whichever is lower

Restrictions under GBL

1) P
2) A
3) R
4) A
5) I

36. Restrictions under NCBA

1) Waive secrecy
2) Subject to examination but only in connection with the supervisory functions of BSP.
Meaning info obtained will be held strictly confidential

37. Collaterals -- 75% 60% 75%

1) 75 - appraised value of real property
2) 60 – appraised value of improvement
3) 75% - appraised value of chattel

38. Prohibited acts of borrower

1) Overvalue property; offered as security
2) Falsely represent material facts; just to obtain, renew or increase loan
3) Attempt to defraud the bank; in case of a court action to recover the loan
4) Offer a gift; to influence decision of bank officer to approve loand

39. Foreign corporations and non-bank corporations may own or control a domestic bank up to 40%
of its voting stock
40. To know if it is foreign owned, look at the citizenship of individual stockholders.
41. Controlling stockholders is more than 50% of the voting stock
42. Foreign banks may now acquire 100% of the voting stocks of an existing bank
43. Stockholdings of family groups or related interests
1) It is not prohibited but should be disclosed in all transactions
2) Without prejudice to the 40% requirement under Sec 11 of GBL
44. Directors and officers
1) 5-15 directors are allowed
2) 2 must be independent
 3) 21 directors in case merged or consolidated bank
4) Non Filipino can become members of the board, but only to the extent of foreign
participation allowed
5) Appointive or elective public official cannot be a director; unless in a rural bank
45. Meetings
1) Can be conducted through modern technologies

46. Qualifications
1) Fit and proper rule. – there are qualification and there are also disqualifications
2) Intelligence, education, training, experience and competence shall be considered

47. How banks regulate to maintain liquidity and security

1) Minimum ratio between net worth of bank vs total risk asset should be preserved
2) There are limits of loans, credit accommodations or guarantees
3) Restrictions on DOSRI
4) Restrictions on collateral
5) Restrictions on unsecured loan
6) There are prescribed maturity dates
7) Restrictions on dividend declaration

48. When is dividend declaration by a bank prohibited?

1) Dividend cannot be greater than the accumulated net profits on hand (after deducting
therefrom its losses and bad debts)
2) If its clearing account with BSP is overdrawn
3) If it is deficient in the required liquidity floor
4) If it does not comply with liquidity standards prescribed by BSP
5) If it has committed a major violation as determined by BSP

49. Yes, bank can own real properties. But only those properties necessary in the conduct of its
business. Also, the total investment in the real property and its improvements, including bank
equipment, should not exceed should not exceed 50% of combined capital account

50. If the bank has an equity investment in a realty corporation, that will be considered as an
investment by the bank in a real estate

51. As a rule, the bank can only invest in real estate if it is necessary in the conduct of its business.
But its total investment should not exceed 50% of the combined capital accounts
 But if it is a property mortgaged to it in good faith; conveyed to satisfy debts previously
contracted; purchased at sales under judgment; then the bank can validly acquire, hold or
convey these real properties

These properties has to be disposed by the bank within a period of 5 years

After 5 years, and those properties were not disposed, they would form part of bank’s
investment in real property which should not exceed 50% of the combined capital accounts

52. Loans without collateral

Yes, the BSP may extend loans to the bank without collateral. It is for a period of 7 days, and
only for the purpose of providing liquidity

53. Emergency loans are loans granted by BSP to banks. It may only be released upon approval of 5
members of the monetary board. The amount of the loan should not exceed 50% of its total
deposits and deposit substitutes
54. Conservatorship – balikan kay Aquino

Trust operations of bank

1. The banks can engage in the business of trust, but with prior authority from the BSP through its
monetary board

2. What is a trust business.

Trust business. - it is any activity resulting from trustee-trustor relationship (trusteeship). It

involves the appointment of a trustee by a trustor, to administer, hold, or manage funds or
properties of the trustor for the benefit or advantage of the trustor or of others called the
beneficiaries

3. What are the powers of a trust entity? (ME WE AC)

1) Mortgage and bond (issued by municipality, corporation or aby body politic); act as
trustee, accept and execute any trust
2) Estate of minor; act as G-R-T-D (guardian, receiver, trustee or depositary) ; under the
order and appointment of the court
3) Will; can act as an executor if he is named as such therein
 4) Estate of deceased person; act as administrator; with or without a will.
5) Any estate; real or personal; accept and execute any trust
6) Common trust fund; establish and manage

4. Yes, the trust business of banks should be kept separate and distinct from the general business
of banks

That means all the funds, properties and assets received in its capacity as trust entity should be
kept separate and distinct, including all accounts. They cannot be integrated or comingled with
the properties or accounts of the bank’s general business.

5. What is BSP?

It is the central monetary authority maintained by the state to function and operate as an
independent and accountable body corporate, concerning money, banking, credit and other
mandated responsibilities

6. What are the responsibilities and objectives of BSP

3 primary objectives
1. Price stability; maintain
2. Monetary stability; promote and maintain
3. Convertibility of peso; promote and maintain

Basic functions (POO CRI FROB F)

1) Policy directions
2) Operations; supervisory power
3) Operations; regulatory powers
4) Currency; issue
5) Regulations; issue
6) Investigate; power to / arrests; make / searches and seizure; conduct - to maintain
integrity of currency
7) Foreign exchange; engage in; to maintain price stability
8) Rediscounting; discounts; loan and advances; make; to influence volume of credit
9) Open market transactions; engage in
10) Banker of the government; act as
11) Securities; engage in marketing and stablization
12) Financial advisor of the government; act as

7. PDIC
8. 3 primary functions of PDIC
1) Deposit insurer
2) Co regulators of banks
3) Receiver and liquidator of closed banks
9. PDIC has the power to examine and power to investigate banks
10. Distinguish power of examination of PDIC and its power of investigation
1) In examination, PDIC evaluates the current status of bank; determines its compliance
with the set standards . It involves intrusion into a bank’s record
2) An investigation is conducted on the basis of a complaint or a finding of a certain act or
omission from the final report. It is not a general evaluation of the bank, but zeroes in
on specific acts or omissions which are uncovered in the examination or cited in the
complaint. It is a less invasive assessment
3) Examination requires prior consent from monetary board; while an investigation does
not require it

11. Prior consent of BSP is not necessary for investigation

1) Time is of the essence; it is prudent to expedite the proceedings
2) It is based on a previous examination, which has already the approval of the monetary
3) It may allow unscrupulous individuals to cover their tracks

12. Effects of rehabilitation

1) Suspension of powers and benefits
i. Effective immediately upon take over of a receiver
ii. Powers and function of the board are suspended
iii. All allowances, remunerations and pre diems are like suspended
iv. AOI and by laws are likewise suspended

2) Properties in custodia legis

i. therefore its assets shall not be subject to attachment, garnishment,
execution,levy and other court processes

3) PDIC acts as a receiver

13. Powers of a receiver

1) Collect loans and other claims of the closed bank
2) Modify, compromise or restructure such terms and conditions of such loans or claims as
may be advantageous to the creditors and claimants of the closed bank
3) Can negotiate for reduction of interest, if the stipulated interest is unusually high
14. Acts punishable under anti money laundering
1) Transacts (MP RIR PAUA)
2) Converts (transfers, disposes of, moves, acquires,
possesses, uses) - CTD MAP U
3) Conceals / disguises; true nature, source, location,
movement, disposition, or ownership of or rights with respect to said MIP
4) Attempts or conspires to commit (1) (2) (3)
5) Performs or fails to perform; facilitated
6) Failure to report; to AMLC a covered or suspicious transcaction; committed by covered
entities;

15. What is money laundering?

It is a crime committed by any person, knowing that any MP RIR PAUA, commits any of the
following acts:

TCC APF

16. Covered transaction

17. Suspicious transaction (JIFS PUA)

1) No underlying or legal justification
2) Not properly identified
3) Financial capacity not commensurate with the amount involved
4) Structured in a way to avoid being the subject ot reporting requirements
5) Deviates from the profile; circumstance relating to the transaction
6) Transaction is related to an unlawful activity or offense
7) Similar or analogous to the foregoing

18. Ways to prevent money laundering

1) Customer identification
2) Record keeping
3) Reporting of covered and suspicious transactions

19. Requisites of a valid freeze order

1) Ex parte petition by AMLC
2) probable exist as determined by CA
3) freeze order is effective immediately
 4) freeze order should not exceed six months, depending upon the circumstances of each
case

* If no case has been filed within the period as determined by the court, the freeze
order is ipso fact lifted

RA 10365 – an act further strengthening the anti money laundering -- READ!!

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