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Q: What is Bangko Sentral ng Pilipinas (BSP)?

A: The states central monetary authority; it is


the government agency charged with the
responsibility of administering the monetary,
banking and credit system of the country and is
granted the power of supervision and
examination over bank and nonbank financial
institutions performing quasibanking functions,
including savings and loan associations.
(Busuego vs. CA, G.R. No. L48955, June 30,
1987)
Q: What are the policies of the state with respect to the
creation of the BSP?

A:
The State shall maintain a central monetary authority that
shall function and operate as an independent and
accountable body corporate in the discharge of its
mandated responsibilities concerning money, banking and
credit.

In line with this policy, and considering its unique functions


and responsibilities, the central monetary authority
established under this Act, while being a governmentowned
corporation, shall enjoy fiscal and administrative autonomy
(Sec. 1.)
Q: What are the salient considerations on the creation of
BSP?

A:
It is established as an independent central monetary authority.
Its capital shall be P50,000,000,000, to be fully subscribed by
the Philippine Government.
The P10,000,000,000 of the capital shall be fully paid for by
the Government upon the effectivity of this Act and the balance
to be paid for within a period of 2 years from the effectivity of
this Act in such manner and form as the Government, through the
Secretary of Finance and the Secretary of Budget and
Management, may thereafter determine. (Sec. 2)
Q: What are the responsibilities of BSP:
1. To provide policy directions in the areas of
money, banking, and credit
2. To supervise bank operations
3. To regulate the operations of finance
companies and nonbank financial institutions
performing quasibanking functions, and similar
institutions. (Sec. 3)
Q: What are the primary objectives of BSP
A:
1. To maintain price stability conducive to a
balanced and sustainable growth of the
economy.
2. To promote and maintain monetary stability
and the convertibility of the peso. (Sec. 3)
Q: What are the function of BSP
1. Issuer of currency. (Sec. 4960)
2. Custodian of reserves. (Secs. 6466, 94, 103)
3. Clearing channel or house; especially where the PCHC does not operate .(Sec. 102)
4. Banker of the government the BSP shall be the official depository of the Government and shall
represent it in all monetary fund dealings (Secs. 110 116)
5. Financial advisor of the government (Secs. 123124) Under Article VII, Sec. 20 of the 1987
Constitution, the President may contract or guarantee foreign loans but with the prior concurrence of the
Monetary Board.
6. Source of credit (Secs. 6163, 8189,
109)
Supervisor of the banking system (Sec.

25
shall include the power to:
a. Examine, extending to enterprises wholly or majorityowned or controlled by the bank
(Sec. 7, RA 8791); this power may not be restrained by a writ of injunction unless there is
convincing proof that the action of the BSP is aplainly arbitrary (Sec. 25)
b. Place a bank under receivership or liquidation (Sec. 30)
c. Initiate criminal prosecution of erring officers of banks
8. Government agent (Secs. 117122)D
Q: What is the Monetary Board?
A: The body through which the
powers and functions of the
Bangko Sentral are exercised. (Sec
6)
Q: What are the powers and functions of the Monetary Board?

A:
Issue rules and regulations it considers necessary for the effective
discharge of the responsibilities and exercise of its powers
Direct the management, operations, and administration of the Bangko
Sentral, reorganize its personnel, and issue such rules and regulations as
it may deem necessary or convenient for this purpose

Establish a human resource management system

Adopt an annual budget for and authorize such expenditures by the


Bangko Sentral as are in the interest of the effective administration and
operations of the Bangko Sentral in accordance with applicable laws and
regulations
Indemnify its members and other officials of the Bangko Sentral, including
personnel of the departments performing supervision and examination
functions against all costs and expenses reasonably incurred by such
persons in connection with any civil or criminal action. (Sec 15)
Q: What is the function of the BSP on a
distressed bank?
A: Appointment of a conservator or
receiver or closure of the bank.
Q: Who is a conservator?
A: One appointed if the bank is in the state of illiquidity or the
bank fails or refuses to maintain a state of liquidity adequate
to protect its depositors and creditors. The bank still has more
assets than its liabilities but its assets are not liquid or not in
cash thus it cannot pay its obligation when it falls due. The bank,
not the Central Bank, pays for fees.
Q: What are the powers of a conservator?

A:
To take charge of the assets, liabilities, and the management thereof
Recognize the management
collect all monies and debts due said bank
Exercise all powers necessary to restore its viability with the power to
overrule or revoke the actions of the previous management and board
of directors of the bank or quasibank (First Philippine International
Bank vs. CA, G.R. No. 115849, Jan. 24, 1996).

To bring court actions to assail or repudiate contracts entered into by


the bank.
Q: When is conservatorship
terminated?
A: When Monetary Board is satisfied
that the institution can continue to
operate on its own and the
conservatorship is no longer
necessary.
Q: When may the Monetary Board close a bank or quasi bank?

A:
Cash Flow test Inability to pay liabilities as they become due in the
ordinary course of business (Sec. 30 [a] NCBA).
Balance sheet test Insufficiency of realizable assets to meet its
liabilities (Sec 30 [b] NCBA).
Inability to continue business without involving probable losses to its
depositors and creditors (Sec 30 [c] NCBA).
willful violation of a cease and desist order under Section 37 that has
become final, involving acts or transactions which amount to fraud or a
dissipation of the assets (Sec 30 [d] NCBA).
Notification to the BSP or public announcement of a bank holiday (Sec
53, GBL).
Suspension of payment of its deposit liabilities continuosly for more
than 30 days (Sec 53, GBL).
Persisting in conducting its business in an unsafe or unsound manner (Sec
56, GBL).
Q: What is the close nowhear later doctrine?
A: The law does not contemplate prior notice and hearing
before the bank may be directed to stop operations and
placed under receivership. The purpose is to prevent
unwarranted dissipation of the banks assets and as a valid
exercise of police power to protect the depositors, creditors,
stockholders and the general public. (Central Bank of the
Philippines v. CA, G.R. No. 76118 Mar. 30, 1993)
Q: Can the closure and liquidation of a bank, which is considered
an exercise of police power, be the subject of judicial inquiry?
A: Yes. While the closure and liquidation of a bank may be
considered an exercise of police power, the validity of such exercise
of police power is subject to judicial inquiry and could be set aside if
it is either capricious, discriminatory, whimsical, arbitrary, unjust or a
denial or due process and equal protection clauses of the Constitution
(Central Bank v. CA, G.R. No. L5003132, July 27, 1981).
Q: Upon maturity of the time deposit, the bank failed to remit. By
reason of punitive action taken by Central Bank, the bank has
been prevented from performing banking operations. Is the bank
still obligated to pay the time deposits despite the fact that its
operations were suspended by the Central Bank?
A: The suspension of operations of a bank cannot excuse
noncompliance with the obligation to remit the time deposits of
depositors which matured before the banks closure. (Overseas Bank
of Manila v. CA, G.R. No. 45886, Apr. 19, 1989)
Q: Who is a receiver?
A: One appointed if bank is already
insolvent which means that its liabilities
are greater than its assets.
Q: What are the duties of a receiver?

A:
The receiver shall immediately gather and take charge of all the
assets and liabilities of the institution.
Administer the same for the benefit of the creditors, and exercise the
general powers of a receiver under the Revised Rules of Court

Shall not, with the exception of administrative expenditures, pay or


commit any act that will involve the transfer or disposition of any
asset of the institution: Provided that the receiver may deposit or
place the funds of the institution in nonspeculative investments (Sec
30, NCBA).
Q: Is the receiver authorized to transact business in
connection with the banks assets and property?
A: No, the receiver only has authority to administer the same for
the benefit of its creditors. (Abacus Real Estate Development
Center, Inc. v. Manila Banking Corp, G.R. No. 162270, Apr. 6,
2005)
Q: Should the issue of whether or not the Monetary Boards
resolution is arbitrary be only raised in a separate action?
A: No. While resolutions of the Monetary Board forbidding a
bank to do business on account of a condition of insolvency and
appointing a receiver to take charge of the banks assets or
determining whether the bank may be rehabilitated or should
be liquidated are by law final and executory. However, they
can be set aside by the court on one specific ground if the
action is plainly arbitrary and made in bad faith. Such
contention can be asserted as an affirmative defense of a
counterclaim in the proceeding for assistance in liquidation.
(Salud v. Central Bank, G.R. No. L17630, Aug. 19, 1986)
Q: What is liquidation?
A: It is an act of settling a debt by
payment or other satisfaction. It is also the
act or process of converting assts into cash
especially to settle debts (Blacks Law
Dictionary).
Q: Can the liquidator of a distressed bank prosecute and
defend suits against the bank and foreclose mortgages for
and in behalf of the bank while the issue on receivership
and liquidation is still pending?
A: Yes. The Central Bank is vested with the authority to take
charge and administer the monetary and banking systems of
the country and this authority includes the power to examine
and determine the financial conditions of banks for the purpose
of closure on the ground of insolvency. Even if the bank is
questioning the validity of its closure, during the pendency of
the case the liquidator can continue prosecution suits for
collection and foreclosure of mortgages, as they are acts done
in the usual course of administration of the bank. (Banco Filipino
v. Central Bank, G.R. No. 70054, Dec. 11, 1991)
Q: An intracorporate case was filed before RTC. On the other
hand, another complaint was filed before BSP to compel a bank
to disclose its stockholdings invoking the supervisory power of
the latter. Is there a forum shopping?
A: None. The two proceedings are of different nature praying for
different relief. The complaint filed with the BSP was an invocation
of its supervisory powers over banking operations which does not
amount to a judicial proceeding. (Suan v. Monetary Board, A.C. No.
6377, Mar. 12, 2007)
Q: Where will the claims against the insolvent bank be filed?
A: Where liquidation is undertaken with judicial intervention, all
claims against the insolvent bank should be filed in the liquidation
proceeding. It is not necessary that a claim be initially disputed in a
court or agency before it is filed with the liquidation court. (Ong v.
CA, G.R. No. 112830, Feb. 1, 1996)
Q: What is the rule of promissory estoppel?
A: The doctrine was applied in one case where the SC held that the
CB may not thereafter renege on its representation and liquidate the
bank after majority stockholders of the bank complied with the
conditions and parted with value to the profit of CB, which thus
acquired additional security for its own advances, to the detriment of
the banks stockholders, depositors and other creditors. (Ramos v.
Central Bank of the Philippines, G.R. No. L29352, Oct. 4, 1971)
Q: Can a final and executory judgment against an insolvent bank
be stayed?
A: Yes, after the Monetary Bank has declared that a bank is
insolvent and has ordered it to cease operations, the assets of the
insolvent bank are held in trust for the equal benefit of all creditors.
One cannot obtain an advantage or preference
over another by attachment, execution or
otherwise. The final judgment against the bank
should be stayed as to execute the judgment
would unduly deplete the assets of the banks to
the obvious prejudice of other depositors and
creditors. (Lipana v. Development Bank of Rizal,
G.R. No. L73884, Sept. 24, 1987)
Q: What is Legal Tender?
A: All notes and coins issued by the Bangko
Sentral are fully guaranteed by the Republic
and shall be legal tender in the Philippines for
all debts, both public and private (Sec. 52)
Q: What is the legal tender power of coins?
A:
1. 1Peso, 5Peso and 10Peso coins: In
amounts not exceeding P1,000.00
2. 25 centavo coin or less: In amounts not
exceeding P100.00 (Circular No. 537, 2006)
Q: What are the rules on BSPs Authority to replace legal
tender?

A:
Notes and coins called in for replacement shall remain legal
tender for a period of one year from the date of call.
After that period, they shall cease to be legal tender during the
following year or for such longer period as MB may determine.
After the expiration of this latter period, the notes and coins
which have not been exchanged shall cease to be a liability of
BSP and shall be demonetized. (Sec. 57)
Q: What is the period of
replacement?
A: 1. Notes for any series or
denomination More than 5 years old
2. Coins More than 10 years old
Q: How is the Power to determine Rates of Exchange
exercised?

A:
The Monetary Board shall determine the rates at which the
Bangko Sentral shall buy and sell spot exchange, and shall
establish deviation limits from the effective exchange rate or
rates as it may deem proper.
The Monetary Board shall similarly determine the rates for other
types of foreign exchange transactions by the Bangko Sentral,
including purchases and sales of foreign notes and coins, but the
margins between the effective exchange rates and the rates thus
established may not exceed the corresponding margins for spot
exchange transactions by more than the additional costs or
expenses involved in each type of transactions.
Q: What actions does the Bangko Sentral take when international
stability of Peso is threatened?
A: Whenever the international reserve of the Bangko Sentral falls to
a level which the Monetary Board considers inadequate to meet the
prospective demands on the Bangko Sentral for foreign currencies, or
whenever the international reserve appears to be in imminent danger
of falling to such a level, or whenever the international reserve is
falling as a result of payments or remittances abroad which , in the
opinion of the Monetary Board, are contrary to the national welfare,
the Monetary Board shall:
1. Take such remedial measures as are appropriate and within the
powers granted to the Monetary Board, and the Bangko Sentral
2. Submit to the President of the Philippines and the Congress, and
make public a detailed report which shall includes, as a minimum, a
description and analysis of:
a. The nature and causes of the existing or imminent decline;
b. The remedial measures already taken or to be taken by the
Monetary Board

c. The monetary, fiscal or administrative measures further proposed


d. The character and extent of the cooperation required from other
government agencies for the successful execution of the policies of the
Monetary Board (Sec. 67).
Q: What are the emergency restrictions on the foreign
exchange operations?

A:
Temporarily suspending and restricting sales of foreign
exchange by the Bangko Sentral;
Subjecting all transactions in gold and foreign exchange to
license by the Bangko Sentral;
Requiring that any foreign exchange thereafter obtained by
any person residing or entity operating in the Philippines be
delivered to the Bangko Sentral or to any bank or agent
designated by the Bangko Sentral for the purpose, at the
effective exchange rate or rates (Sec. 72)