Banking Laws

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Definition and Classification of Banks Nature of Banking Business

Debtor-Creditor Relationship Fiduciary Duty Impressed with Public Interest Diligence Required of Banks Cases Assigned

Nature of Bank Funds and Bank Deposits

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of Loans Requirements:

and

Security

Ratio of net worth to total risk assets Single Borrowers Limit Restrictions on Bank Exposure to DOSRI

The Monetary Board will prescribe the minimum ratio which the net worth of a bank must bear to its total risk assets. If there is non-compliance, MB may:
Limit or prohibit distribution of net profits and require the same to be used to increase capital accounts until the minimum ratio is achieved. Restrict or prohibit acquisition of major assets and new investments until minimum required capital ratio is achieved.

Total amount of loans, credit accommodations and guarantees that may be extended to any person, partnership, association, corporation or other entity shall at no time exceed 25% of the net worth of a bank. Exceptions:
MB otherwise prescribe for reasons of national interest. Deposits of rural banks with government-owned ot controlled financial institutions.

Total amount may be increased by an additional 10% provided the additional liabilities of any borrower is adequately secured. Exception
Otherwise provided by the MB.

No director or officer of any bank shall directly or indirectly, for himself or as the representative or agent of others, borrow from such bank nor shall he become a guarantor, indorser or surety for loans form such bank or others or in any manner be an obligor or incur any contractual liability to the bank except with the written approval of the majority of all directors of the bank, excluding the director concerned.

Banking Laws

Basic Policy: Promote and safeguard the interest of the depositing public by way of providing permanent and continuing insurance coverage on all insured deposits. Deposit: any unpaid balance of money or its equivalent received by the bank in the usual course of business and for which it has given or its obliged to give credit to a commercial, checking, savings, time or thrift account, or which is evidenced by a passbook check and /or certificate of deposit.

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Statutory Liability. PDIC is governed primarily by the provisions of the law creating it. Hence, liability is statutory and rests upon the existence of deposits with the insured bank. Case: PDIC vs. CA, December 22, 1997. Payment. Whenever a bank is closed by the MB, PDIC shall pay insured deposits:
By cash or By making available to each depositor a transferred deposit in another insured bank in an amount equal to insured deposit of such depositor.

Insured Deposit means the amount due to any depositor for deposits in an insured bank net of any obligation of the depositor to the insured bank as of the date of closure, but not to exceed P500,000.00. In determining such amount, all deposits in the bank maintained in the same right and capacity for the benefit of the depositor either in his own name or in the name of others shall be added together.

Joint Account regardless of whether the conjunction used is and, or, and/or, shall be insured separately from any individually-owned deposit account. Accounts held jointly by two or more natural persons or two or more juridical persons or entities, the maximum insured deposit shall be divided into as many equal shares are there are persons unless a different sharing is stipulated.

If account is held by a juridical person jointly with one or more natural person, the maximum insured deposit shall be presumed to belong entirely to the juridical person. The aggregate of the interest of each co-owner over several joint accounts, whether owned by the same or different combinations of individuals, juridical persons or entities, shall likewise be subject to the maximum insured deposit of Five Hundred Thousand Pesos (P500,000.00).

No owner/holder of any negotiable certificate of deposit shall be recognized as a depositor unless his name is registered as owner/holder thereof in the books of the issuing bank. That, in case of a condition that threatens the monetary and financial stability of the banking system as determined by the Monetary Board, the maximum deposit insurance cover may be adjusted in such amount, for such a period, and/or for such deposit products, as may be determined by a unanimous vote of the Board of Directors in a meeting called for the purpose and chaired by the Secretary of Finance, subject to the approval of the President of the Philippines.

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Prescription. 2 years from actual takeover of the closed bank by the receiver or failure to enforce claim within 2 years after the 2 year period to file a claim unless otherwise waived by PDIC Notice. To creditors by whatever means the BOD deemed appropriate. Publication. Notice is published once a week for 3 consecutive weeks in a newspaper of general circulation or a newspaper circulated where the closed bank are located if appropriate. Delay. Failure to settle claim within 6 months from date of filing of claim. Responsible director, officers of employees of PDIC shall upon conviction be imprisoned from 6 months to 1 year. Exception: Validity of claim requires resolution of issues or facts by another agency.

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Effect of Payment by PDIC. Subrogation of rights of the depositor against the closed bank to the extent of such payment. TRO and Injunction. No other court except CA may issue against PDIC SC may issue restraining order or injunction when the matter is of extreme urgency involving a constitutional issue. Provided, the party applying shall furnish a bond in an amount fixed by the court in favor of PDIC if the court should finally decide that the applicant was not entitled to relief sought.