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1.

PDIC LAW (REPUBLIC ACT 3591, AS AMENDED)

Insurable Deposit – all deposits of any bank are insured with the
Philippine Deposit Insurance Corporation. Insured Deposits under
the law means the net amount due to any depositor for deposits in
an insured bank (after deducting any offsets) but should not exceed
P500,000.00. If the depositor has two or more accounts with the
same bank, the maximum coverage of P500,000.00 pertains to the
sum of all such accounts maintained in the same right and
capacity. (Sec 3 (g) of R.A. No. 3591 as amended by R.A. 9576

Requirements for claims:

When payment is made – The proceeds of the insurance shall be


paid by the PDIC to the depositor whenever the insured bank is
closed on account of insolvency. An insured bank shall be
deemed to have been closed on insolvency when ordered closed by
the Monetary Board of the BSP (Sec 10 (b), R.A. No. 3591 as
amended by R.A. No. 7400)

The liability of the PDIC for insured deposits rests upon the
existence of deposits with insured bank, not on the negotiability or
non-negotiability of the certificates evidencing these deposits. In
fact, the claimant cannot recover even if he can present a negotiable
certificate of deposit if there is actually no deposit. (PDIC vs CA)

The claim must be filed within 2 years from actual take over by
the receiver.

2. SECRECY OF BANK DEPOSITS

All deposits of whatever nature with banks or banking


institutions in the Philippines including investments in bonds
issued by the Government of the Philippines, its political
subdivisions and instrumentalities, are hereby considered as of an
absolutely confidential nature and may not be examined, inquired
or looked into by any person, government official, bureau or office.
(Sec. 2 RA No. 1405)

Exceptions:

1. When there is written permission of the depositor or investor;

2. Impeachment cases

3. Upon order of a competent court in cases of bribery or


dereliction of duty of public officials
4. Upon order of a competent court in cases where the money
deposited or invested is the subject of litigation

5. Upon order of the competent court or tribunal in cases


involving unexplained weath under the Anti-Graft and Corrupt
Practices Act of RA No. 1019 (Bangko Filipino vs Purisima)

6. Upon inquiry by the Commission of Internal Revenue for the


purpose of determining the net estate of a deceased depositor;

7. Upon the order of a competent court or in proper cases by the


Anti-Money Laundering Council where there is a probable
cause of money laundering and in some instances even
without court order (Sec 11 RA No. 9160)

8. Disclosure of the Treasurer of the Philippines for dormant


deposits for atleast ten (10) years under the Unclaimed
Balances Act (Sec. 2 RA No. 3936)

The above enumerated exceptions do not apply to foreign


currency deposits. There is only one exception under the Foreign
Currency Deposits Act. (Intengan vs Court of Appeals, Feb 15,
2002) and another provided under the Anti-Money Laundering Law:

1. written consent of depositor under Section 8 of the Foreign


Currency Deposit Act; and

2. upon order of the court (or even without court order in


proper cases) when there is probable cause of money
laundering as provided for under Section 11 of the Anti-
Money Laundering Act.

3. UNCLAIMED BALANCES

Include credits or deposits of money, bullion, security or other


evidence of indebtedness of any kind, and interest thereon with
banks, buildings and loan associations, and trust corporations, as
hereinafter defined, in favor of any person known to be dead or who
has not made further deposits or withdrawals during the preceding
ten (10) years or more (Sec. 1 Act No. 3936)

4. GENERAL BANKING LAWS

BANKS – entities engaged in the lending of funds obtained in the


form of deposits from the Public (Sec 3.1, General Banking Law)

Nature of Business – a bank has a vital role in providing an


environment conducive to the sustained national economy.
Banking is fiduciary in nature that requires high standards of
integrity and performance (Sec. 2 GBL)

Authority to incorporate and operate

a. A banking or quasi-banking corporations cannot be


incorporated without the authority from the BSP. The
Articles of Incorporation to be filed with the SEC should
be accompanied by the favorable recommendations of the
BSP, otherwise, it shall not be accepted or approved.
(Sec. 14 GBL)

b. An entity that is performing banking or a quasi banking


function cannot operated without a certificate or
authority from the BSP. (Sec. 6 GBL)

5. CLASSIFICATIONS OF BANKS

A. Universal Banks – banks that have the authority to exercise, in


addition to the powers authorized for a commercial bank, the
powers of an investment house and the power to invest in non-
allied enterprises.

B. Commercial Banks – banks that have, in addition to the general


powers incident to corporations, all such powers as may be
necessary to carry on the business of commercial banking, such as
accepting drafts and issuing letters of credit; discounting and
negotiating promissory notes, drafts, bills of exchange, and other
evident of debts; accepting or creating demand deposits; receiving
other types of deposits and deposit substitutes; buying and selling
foreign exchange and gold or silver bullion; acquiring marketable
bonds and other debt securities; and extending credit, subject to
such rules as the Monetary Board may promulgate.

C. Thrift Banks (RA 7906) – banks that include savings and


mortgage banks, private development banks, stock savings and loan
associations.

D. Rural Banks (RA 7353) – banks that created to make needed


credit available and readily accessible in the rural areas for
purposes of promoting comprehensive rural developments.

E. Cooperative Banks (RA 6938) – banks that primarily provide


financial, banking and credit services to cooperative organizations
and their members

F. Islamic Banks (RA 6848) – Charter of Al Amanah Islamic


Investment Bank of the Philippines
G. other classifications of banks as determined by the monetary
board of the BSP

6. LOAN FUNCTIONS OF BANKS

- A bank shall grant loans and other credit accommodations only


in amounts and for the periods of time essential for the effective
completion of the operations financed. Before granting a loan or
other credit accommodation, a bank must ascertain that the
debtor is capable of fulfilling his commitments to the bank.

- PAYMENTS. Amortization schedule of bank loans and other


credit accommodations shall be adapted to the nature of the
operations to be financed.

6.1SINGLE BORROWER’S LIMIT (SBL)

CEILING – the total amount of loans, credit extended by a


bank to any person, partnership, association, corporation or
other entity shall at no time exceed twenty five percent (25%)
of the net worth of such bank (as increased by BSP Circular
425). The basis for determining compliance with single-borrower
limit is the total credit commitment of the bank to the borrower.

The total amount of loans, credit accommodations and


guarantees prescribed in the preceding paragraph may be
increased by an additional ten percent (10%) of the net worth
of such bank provided the additional liabilities of any borrower
are adequately secured by trust receipts, shipping documents,
warehouse receipts or other similar documents transferring or
securing title covering readily marketable, non-perishable goods
which must be fully covered by insurance (Sec. 35,2 GBL)

6.2DOSRI ACCOUNTS

Restrictions (not total prohibition) are imposed on borrowings


and security arrangement by directors, officers, and
stockholders of the bank directors, officers, stockholders and
their related interests (hence the term DOSRI)

RESTRICTIONS UNDER THE GBL

DOSRI Accounts are subject to the following rules under


Section 36 of the GBL.
1. Procedural Requirement. The account should be upon written
approval of all the director of the lending bank excluding the
director concerned.
2. Arms length rule. The account should be upon terms not less
favorable to the bank than those offered to others.

3. Reportorial Requirement. The resolution approving the loan


shall be entered in the records of the bank and a copy of the
entry shall be transmitted forewith to the Supervising and
Examination Sector of the BSP.

7. ANTI MONEY LAUNDERING ACT.

Money Laundering – a crime whereby the proceeds from an


unlawful activity are transacted, thereby making them appear
to have originated from legitimate sources (Sec. 4 RA 9160 as
amended by RA No. 9194)

Covered transaction – a transaction in cash or other


equivalent monetary instrument involving a total amount in
excess of Five Hundred Thousand Pesos (500,000.00) within
one banking day.

Covered Entities – banks, non-banks, quasi-banks, trust


entities and all other institutions and their subsidiaries and
affiliates supervised or regulated by the Bangko Sentral Ng
Pilipias (BSP) Sec 3 (1)

Reporting of Covered and Suspicious Transactions –


Covered institutions shall report to the Anti-Money Laundering
Council (AMLC) all covered and suspicious transactions within
five (5) working days from occurrence thereof, unless the
Supervising Authority concerned prescribes a longer period
not exceeding ten (10) working days.

8. THE BANKO SENTRAL NG PILIPINAS (BSP)

Is the central monetary authority maintained by the State to


function and operate as an independent and accountable body
corporate in the discharge of its mandated responsibilities
concerning money, banking and credit. (Sec. 1 NCBA, R.A. 7653)

The New Central Bank Act vests the BSP with the sole power
and authority to issue currency within the territory of the
Philippines. No other person or entity, public or private, may put
into circulation notes, coins, or any other object or document
which, in the opinion of the Monetary Board, might circulate as
currency, nor reproduce or imitate the facsimile of Banko Sentral
notes without prior authority from the Bangko Sentral (Sec 30,
NCBA)

Conservatorship – (Sec. 29, NCBA) whenever, on the basis of


report submitted by the appropriate supervising or examining
department, the Monetary Board finds that a bank or a quasi bank
is in a state of continuing inability or unwillingness to maintain a
condition of liquidity deemed adequate to protect the interest of
depositors and creditors, the Monetary Board may appoint a
conservator with such powers as the Monetary Board shall deem
necessary. The conservatorship shall not exceed one (1) year.

Receivership and Liquidation (Sec 30, NCBA)

The PDIC, as the statutory receiver, of a bank, may be


appointed whenever upon report of the head of the supervising and
examining department, the Monetary Board finds that:

a. The bank is unable to pay its liabilities as they become due in


the ordinary course of business. Provided, that this shall not
include inability to pay caused by extraordinary demands induced
by financial panic in the banking community;

b. The bank has insufficient realizable assets, as determined by the


Bangko Sentral, to meet its liabilities; or

c.The bank cannot continue in business without involving probable


losses to its depositors or creditors; or

d. The bank has willfully violated 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 of the
institution.

CLOSE NOW-HEAR LATER SCHEME

No prior hearing is necessary in appointing a receiver and in


closing the bank. It is enough that subsequent judicial review is
provided for. Indeed, to require such previous hearing would not
only be impractical but would tend to defeat the very purpose of
the law when it invested the Monetary Board with such authority.
(Rural Bank of Lucena vs Arca)

9.Intellectual Property Law

The state recognizes that an effective intellectual and


industrial property system is: (1) vital to the development of
domestic and creative activity (2) facilitates transfers of technology
(3) attracts foreign investment and (4) insures market access for our
products.

9.1 The Law on Patents – patentable inventions refer to any


technical solution of a problem is any field of human activity
which is new, involves and inventive step and is industrially
applicable.

9.2 The Law of Trademark Service Mark and Trade Names


– a trademark is any visible sign capable of distinguishing the
goods (trademark) or services (service mark) of an enterprise
and shall include a stamped or marked container of goods. In
relation thereto, a trade name means the name or designation
identifying or distinguishing an enterprise.

9.3 The Law of Copyright – is confined to literary and artistic


works which are original intellectual creations in the literary
and artistic domain protected from the moment of creation.

Infringement – when there is piracy or substantial


reproduction. If so much is taken that the value of the original
work is substantially diminished or the labors of the original
author are substantially and to an injurious extent
appropriated by another.

10. SECURITIES REGULATIONS CODE (SRC) – (RA 8799)

Securities – are shares, participation or interest in a


corporation or in a commercial enterprise or profit making
venture and evidenced by a certificate, contract, instrument,
whether written or electronic in character.

How does the SRC protect the public who wishes to invest in
securities?

The law protects the public as follows:

a) the law requires full disclosure of information to the public


regarding the securities that are being offered and the issuers,
including the filing of and approval of the registration
statement and the approval of the prospectus. There is also a
continuing duty to regularly submit material information to
the SEC.

b) close monitoring of the securities and other circumstances


that may affect the same as well as the persons involved
including brokers, issuers, the exchange itself, etc. in order to
ensure compliance with pertinent laws and regulations

c) prohibiting and penalizing different fraudulent practices and


transactions

d) providing SEC with powers and functions (PSE vs CA)

11. COOPERATIVES - (RA 6938)

A cooperative is a duly registered association of persons, with


a common bond of interest, who have voluntarily joined together to
achieve a lawful common social or economic end, making equitable
contributions to the capital required and accepting a fair share of
the risks and benefits of the undertaking in accordance with
universally accepted cooperative principles.

12. INSOLVENCY LAW

The insolvency law seeks: (a) to effect equitable distribution of


the insolvent’s property among his creditors and (b) to discharge the
debtor from his liabilities so that he can start afresh with the
property set apart to him as exempt.

The Insolvency Law (Act No. 1956) which was passed in 1909,
remains to this date, the principal special legislation on the matter.
Act 1956 deals with three situations: (1) suspension of payments,
for a debtor who possesses sufficient property to cover all his debts
but foresees the impossibility of meeting them when they
respectively fall due; (2) voluntary insolvency for a debtor applying
to be discharged from his debts and liabilities amounting to the
then sizeable amount of 1000 pesos and (3) involuntary insolvency
or an adjudication of insolvency made on petition of three or more
creditors of an insolvent debtor

13. THE BOUNCING CHECK LAW (BATAS PAMBANSA BLG 22)

Any person who makes or draws and issued any check to


apply on account or for value, knowing at the time of issue that he
does not have sufficient funds in or credit with the drawee bank for
the payment of such check in full upon its presentment, which
check is subsequently dishonored for the same reason had not the
drawer, without any valid reason, order the bank to stop payment,
shall be punished by imprisonment of not less thirty days but not
more than one (1) year or by a fine of not less than but not more
than double the amount of the check which fine shall in no case
exceed Two Hundred Thousand Pesos, or both such fine and
imprisonment at the discretion of the court.

The same penalty shall be imposed upon any person who,


having sufficient funds in or credit with the drawee bank when he
makes or draws and issues a check, shall fail to keep sufficient
funds or to maintain a credit to cover the full amount of the check if
presented within a period of ninety (90) days from the date
appearing thereon, for which reason it is dishonored by the drawee
bank.

To all my students!

Please refer to the law indicated for further readings. You may also
refer to the Reviewer in Commercial Law by Sundiang and Aquino
for your reference.

Stay focused in reaching your dreams. As I said before, it is not a


question of whether you can or you cannot, rather, it is a question
of whether you will or you will not. However, this journey of
pursuing your dreams will need your undivided BEST.

God bless you all.

Lenon

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