5.c. corporation law-banking laws

8/3/2019 5.c. Corporation Law-Banking Laws

1/73

c.Banking Laws

(General Terms andProvisions)

I.General Banking Law of

2000(RA 8!")

#ec$ion " % General Provisions

".0". L&'G TITLAn act providing for the regulation of andorganization and operations of banks, quasi-banks, trust entities and for other purposes.

".02. LA# PRI*ARIL+ APPLI,ABLT& -IR'T BA'/#

1. The General Banking La !GBL"governs

a. #niversal Banks !#B" !esp. $ecs.%&-%'"

b. (o))ercial Banks !*B" !esp.$ecs. %+-&%"

%. The GBL has suppletor application to

a. Thrift Banks !pri)aril governedb A +/0, the Thrift Banks Act"

b. ural Banks !pri)aril governedb A &&, the ural Banks Act"

c. (ooperative Banks !pri)aril

governed b A 0+&', the(ooperative (ode" !$ec. 1"1

&. The entr of foreign banks in the 2hil.through the establish)ent of branchesshall be governed b the provisions ofthe 3oreign Banks Liberalization Act.

14otes on $ec 15 617 3or puposes of prescribing

the )ini)u) ratio hich the net orth of a thrift bank)ust bear to its total risk assets, the provisions of$ection && 6should be $ec. &87 of the GBL shall govern.6%7 Although $ec. 1 provides that 9:sla)ic banks shallbe governed b special las.; :t does not include ThriftBanks in the enu)eration of Banks to hich the GBLhas application

The conduct of offshore bankingbusiness in the 2hil. shall be governedb 2< 1/&8, the =>ffshore Banking$ste)


2/73

can even e?ercise the poers of aninvest)ent house. !orales"

".05. 67A#IBA'/#3 -I'-

9Cuasi-banks= !CB" refer to entities

engaged in the borroing of fundsthrough the issuance, endorse)ent or

assign)ent ith recourse or acceptance ofdeposit substitutes !as defined in $ec. +A 0&, the 4e (entral Bank Act" forpurposes of relending or purchasing ofreceivables and other obligations. !last parof $ec. 8"

This is an inherent poer of #Bs and *Bs.

Thus the do not require separatelicensing or authorization for this purpose.Thus, the can take 9deposit substitutes;for re-lending. !orales"

".09. -PIT #7B#TIT7T#


3/73

".08. R7L &' BA'/I'G &PRATI&'#

4o person or entit shall engage inbanking operations or quasi-bankingfunctions ithout authorit fro) the B$2.2ersons or entities found to be perfor)ingbanking or quasi-banking functions

ithout authorit fro) the B$2 shall besubIect to appropriate sanctions under the4(BA and other applicable las. !$ec. 0"&

4o person, association, or corporation

unless dul authorized to engage in the

equire)ents 51. Jither a thrift bank or a

rural bankF%. (apital should be oned b

private persons, )ultilateral entities or aco)bination thereofF

&. :n the case of a rural bank,the )ini)u) paid-in capital shall be 2)illion or the applicable e?istingcapitalization require)ent for a ne rural

bank, hichever is higher. Thecapitalization require)ent under e?istingregulations shall appl to thrift banksF

8. >rganizers )ust have thecapacit to engage in )icrofinancing5

a. At least %/K ofthe paid-in capital )ust beoned b persons or entitiesith track record in)icrofinancing.

b. aIorit of theboard of directors havee?perience in )icrofinancingith at least one )e)berhaving actual bankinge?perience.

c. ust have as a

)ini)u), an adequate loantracking sste)

3The deter)ination of hether a person or entit

is perfor)ing banking or quasi-banking functionsithout Bangko $entral authorit shall be decided bthe B. To resolve such issue, the B )a, through

the appropriate supervising and e?a)ining depart)entof the B$2, e?a)ine, inspect or investigate the booksand records of such person or entit. #pon issuance ofthis authorit, such person or entit )a co))ence toengage in banking operations or quasi-bankingfunctions and shall continue to do so unless suchauthorit is sooner surrendered, revoked, suspended orannulled b the B$2 in accordance ith this Act orother special las. The depart)ent head and thee?a)iners of the appropriate supervising ande?a)ining depart)ent are hereb authorized toad)inister oaths to an such person, e)ploee, officer,or director of an such entit and to co)pel thepresentation or production of such books, docu)ents,papers or records that are reasonabl necessar toascertain the facts relative to the true functions and

operations of such person or entit. 3ailure or refusal to

business of a bank, CB, trust entit, orsavings and loan association shall advertiseor hold itself out as being engaged in thebusiness of such bank, CB, trust entit, orassociation, or use in connection ith itsbusiness title, the ord or ords =bank=,=banking=, =banker=, =CB =, =quasi-banking=, =quasi-banker=, =savings and loanassociation=, =trust corporation=, =trust

co)pan= or ords of si)ilar i)port ortransact in an )anner the business of ansuch bank, corporation or association. !$ec.08"

An entit authorized b the B$2 to perfor)

#B or *B functions shall likeise have the

authorit to engage in quasi-bankingfunctions. !$ec. 0"

".0!. A7T1&RIT+ & T1 B#P

A. #:;ervision

The operations and activities of banks shall besubIect to supervision of the Bangko $entral.=$upervision= shall include the folloing5

1. The issuance of rules of conduct or theestablish)ent of standards of operationfor unifor) application to all institutionsor functions coveredF

%. The conduct of e?a)ination todeter)ine co)pliance ith las andregulationsF

&. >verseeing to ascertain that las andregulations are co)plied ithF

8. egular investigation !not oftener than

once a ear" to deter)ine hether aninstitution is conducting its business ona safe or sound basisF

. :nquiring into the solvenc and liquiditof the institutionF or

0. Jnforcing pro)pt corrective action.!$ec. 8"

* Te BSP sall also ave supervisionover !Bs" trust entities and oter#inancial institutions $ic underspecial la$s are su%&ect to BSPsupervision' (Sec' )

The B$2 shall, hen e?a)ining a bank,

have the authorit to e?a)ine an enterprise

co)pl ith the required presentation or production ofsuch books, docu)ents, papers or records ithin areasonable ti)e shall subIect the persons responsibletherefor to the penal sanctions provided under the 4(BA.

!$ec. 0"

UP LAW BAROPS 2007

ONE UP LAW

3 of 73


4/73

hich is holl or )aIorit-oned orcontrolled b the bank. !$ec. "

B. Polic< -irec$ion

The B$2 shall provide policy direction in theareas of )one, banking and credit. 3or thispurpose, the B )a prescribe ratios,

ceilings, li)itations, or other for)s ofregulation on the different tpes of accountsand practices of banks and CBs hich shall, tothe e?tent feasible, confor) to internationallaccepted standards, including those of theBank for :nternational $ettle)ents !B:$". Theonetar Board )a e?e)pt particularcategories of transactions fro) such ratios,ceilings and li)itations, but not li)ited toe?ceptional cases or to enable a bank orquasi-bank under rehabilitation or during a)erger or consolidation to continue inbusiness ith safet to its creditors,depositors and the general public. !$ec. "

(. A:$=ori$< of B#P over B:ilding and1ome Associa$ions

ithin a period of & ears fro) the effectivitof the GBL, the B$2 shall phase out andtransfer its supervising and regulator poersover building and loan associations to theo)e :nsurance and Guarant (orporationhich shall assu)e the sa)e. !$ec. +8"

#ec$ion 2 % &rgani>a$ion3*anagemen$ and Adminis$ra$ion of

Banks3 6:asiBanks and Tr:s$n$i$ies

2.0". ,&'-ITI&'# &R T1&RGA'I?ATI&' & BA'/# A'- 6B#

The onetar Board )a authorize theorganization of a bank or quasi-bank subIectto the folloing conditions5

1. entit )ust be a stock corporation and

)ust onl issue par value stocksF8

4$ec +. :ssuance of $tocks. M The B )a

prescribe rules and regulations on the tpes of stock abank )a issue, including the ter)s thereof and rightsappurtenant thereto to deter)ine co)pliance ith lasand regulations governing capital and equit structureof banks5 2rovided, That banks shall issue par value

stocks onl.

%. its funds )ust be obtained fro) thepublic, hich shall )ean %/ or )orepersonsF and

3. )ini)u) capital require)ents

prescribed b the B for each categorof banks )ust be satisfied !$ec. '"

2.02. ,RTII,AT & A7T1&RIT+ T&RGI#TR

The $J( shall not register the articles ofincorporation or the b-las of an bank, or

an a)end)ent thereto, unless acco)paniedb a certificate of authorit issued b the B,under its seal. $uch certificate shall not beissued unless the B is satisfied fro) theevidence sub)itted to it that5

1. all require)ents of e?isting las andregulations to engage in the businessfor hich the applicant is proposed tobe incorporated have been co)pliedithF

%. the public interest and econo)icconditions, both general and local,Iustif the authorizationF and

&. the a)ount of capital, the financing,organization, direction andad)inistration, as ell as the integritand responsibilit of the organizers andad)inistrators reasonabl assure thesafet of deposits and the publicinterest. !$ec. 18"

2.0. P#LI#T- BA'/I'G ,&RP&RATI&'

#7B@,T T& #, RP&RT&RIAL R7L#

A co))ercial banking corporation listed in the2$J )ust adhere not onl to the banking andother allied special las, but also to the rulespro)ulgated b the $J(, the govern)ent entittasked not onl ith the enforce)ent of theevised $ecurities Act, but also the supervisionof all corporations, partnerships or associationshich are grantees of govern)ent-issuedpri)ar franchises andDor licenses or per)its to

5 $ec. '. 4o ne co))ercial bank shall be

established ithin & ears fro) the effectivit of this Act.:n the e?ercise of the authorit granted herein, the Bshall take into consideration their capabilit in ter)s oftheir financial resources and technical e?pertise andintegrit. The bank licensing process shall incorporate anassess)ent of the bankEs onership structure, directorsand senior )anage)ent, its operating plan and internalcontrols as ell as its proIected financial condition and

capital base.

UP LAW BAROPS 2007

ONE UP LAW

4 of 73


5/73

operate in the 2hils.. That such bankinginstitution is under the supervision of B$2 and2$J, does not e?e)pt it fro) co)pling iththe continuing discluse require)entse)bodied in the $A ules. The bank ispri)aril subIect to the control of B$2F and asa corporation trading its securities in the stock)arket, it is under the supervision of $J(.There is no over-supervision hereF each

regulating authorit operates ithin thesphere of its poersF the stringentrequire)ent i)posed are understandable,considering the para)ount i)portance givento the interests of the investing public. !nion

Ban o# te Pils' v S+C, %//1"

2.0. PR&1IBITI&' &' TRA#7R+#T&,/#

4o bank shall purchase or acquire shares ofits on capital stock or accept its on sharesas a securit for a loan, e?cept hen

authorized b the B5 2rovided, That in evercase the stock so purchased or acquired shall,ithin 0 )onths fro) the ti)e of its purchase

or acquisition, be sold or disposed of at apublic or private sale. !$ec. 1/"

2.05. R#TRI,TI&'# &' &RIG'#T&,/1&L-I'G#

3oreign individuals and non-bank corporations)a on or control up to 8/K of the votingstock of a do)estic bank. This rule shall applto 3ilipinos and do)estic non-bank

corporations. !$ec. 11"

2.09. GRA'-AT1R R7L

The percentage of foreign-oned votingstocks in a bank shall be deter)ined b thecitizenship of the individual stockholders inthat bank. The citizenship of the corporationhich is a stockholder in a bank shall follothe citizenship of the controlling stockholdersof the corporation, irrespective of the place ofincorporation. !$ec. 11"

B#P ,irc:lar 259 (2000)Section 1. 3oreign individuals and non-bankcorporations )a on or control up to 8/K ofthe voting stock of a do)estic bank5 2rovided,That the aggregate foreign oned voting

stocks shall not e?ceed 8/K of the outstandingvoting stock of the bank.Section 2. A 3ilipino individual and a do)esticnon-bank corporation )a each on up to 8/Kof the voting stock of a do)estic bank. Thereshall be no aggregate ceiling on the onershipb such individuals and corporations in ado)estic bank.Section 3. The citizenship of the corporation

hich is a stockholder of a bank shall follo thecitizenship of the controlling stockholders of thecorporation, irrespective of the place ofincorporation. The ter) =controllingstockholders= shall refer to individuals holding)ore than /K of the voting stock of thecorporate stockholder.#ection 4The right of 2hilippine corporations,hoever, under $ec. ' of A %1 !ActLiberalizing the Jntr of 3oreign Banks", to it5

,- - - Any ri.t" privile.e or incentive.ranted to #orei.n %ans or teirsu%sidiaries or a##iliates under tis Act" sall%e e/ually en&oyed %y and e-tended under

te sae conditions to Pilippine %ans'Pilippine corporations $ose sares o#stocs are listed in te PS+ or are o# lon.standin. #or at least 10 years sall ave teri.t to ac/uire" purcase or o$n up to0 o# te votin. stoc o# a doestic%an',

shall continue to be in force and effect.

2.0. -I#,LR T&,/1&L-I'G# & A*IL+ GR&7P#&R RLAT- I'TR#T#

$tockholdings of individuals related to eachother ithin the fourth degree ofconsanguinit or affinit, legiti)ate orco))on-la, shall be considered fa)ilgroups or related interests and )ust be

full disclosed in all transactions b such anindividual ith the bank. !$ec. 1%"

To or )ore corporations oned or

controlled b the sa)e fa)il group orsa)e group of persons shall be consideredrelated interests and )ust be full disclosedin all transactions b such corporations orrelated groups of persons ith the bank.!$ec. 1&"

UP LAW BAROPS 2007

ONE UP LAW

5 of 73


6/73

B#P ,irc:lar 2 (2002)#$ock=oldings of amil< Gro:;s orRela$ed In$eres$s. :ndividuals related toeach other ithin the 8th degree ofconsanguinit or affinit, hether legiti)ate,illegiti)ate or co))on-la, shall beconsidered fa)il groups or related interestsbut )a each on up to 8/K of the votingstock of a do)estic bank5 2rovided, That said

relationship )ust be full disclosed in alltransactions b such individual or fa)il groupith the bank.,or;ora$e #$ock=oldings. %D)orecorporations oned or controlled b the sa)efa)il group or sa)e group of persons shallbe considered related interests but )a eachon up to 8/K of the voting stock of ado)estic bank5 2rovided, That saidrelationship )ust be full disclosed in alltransactions b such corporations or relatedgroups of persons ith the bank.

A natural person and a corporation or

corporations hich are holl-oned,

or a )aIorit of the voting stock ofhich is oned, b hi) )a on onlup to a co)bined 8/K of the votingstock of a do)estic bank.

Jver natural person acquiring shares

cu)ulativel a)ounting to at least %Kof the total subscribed capital of ado)estic bank )ust disclose allrelevant infor)ation on all personsrelated to hi) ithin the 8th degree ofconsanguinit or affinit as ell ascorporations, partnerships orassociations here he has controllinginterests. A corporation acquiringshares a)ounting to at least %K of thetotal subscribed capital of a do)esticbank )ust disclose its controllingstockholder or group of stockholders asell as the corporations, partnershipsor associations here such controllingstockholder or group of stockholdershave controlling interest.

,eilings on s$ock=oldings in acoo;era$ive ank. The equitinvest)ent of an cooperative in an(ooperative Bank shall not e?ceed 8/Kof the subscribed capital stock of such

(ooperative Bank. An arrange)ent, such as voting trust

agree)ent or pro?, hich vests onan person or corporation the right tovote or control voting stocks in banks,if such agree)ent in itself, or in relationith another previous si)ilar

agree)ent or previous sale or transfershall result in the acquisition of control,in e?cess of the prescribed li)itations isunlaful and void.

Transfers re:iring ;rior *one$ar< Boarda;;roval.!a" An sale or transfer or series of sales or

transfers hich ill result in onership or

control of )ore than %/K of the votingstock of a bank b an person hethernatural or Iuridical or hich ill enable suchperson to elect, or be elected as, a directorof such bankF and

!b" An sale or transfer or series of sales ortransfers hich ill effect a change in the)aIorit onership or control of the votingstock of the bank fro) one group ofpersons to another group5 2rovided, That inno case shall such sale or transfer beapproved unless the bank concerned shalli))ediatel co)pl ith the prescribed)ini)u) capital require)ent for ne banks

#ec$ion % Board of -irec$ors and

&fficers

.0". ,&*PITI&' & T1 B&AR- &-IR,T&R# The provisions of the (orporation (ode to

the contrar notithstanding, there shall beat least , and a )a?i)u) of 1 )e)bers

of the board of directors of bank, % of ho)shall be independent directors. An=independent director= shall )ean a personother than an officer or e)ploee of thebank, its subsidiaries or affiliates or relatedinterests. !$ec. 1"

:n the case of a bank )erger or

consolidation, the nu)ber of directors shallnot e?ceed %1. !$ec. 1"

4on-3ilipino citizens )a beco)e )e)bers

of the board of directors of a bank to thee?tent of the foreign participation in theequit of said bank. !$ec. 1 ith $ec. ,A %1"

.02. 67ALII,ATI&'#C-I#67ALII,ATI&'# & -IR,T&R#(B#P ,IR,7LAR 2!9 D 200")

A director shall have the folloing )ini)u)qualifications5

UP LAW BAROPS 2007

ONE UP LAW

6 of 73


7/73


8/73

.0. 67ALII,ATI&'#C-I#67ALII,ATI&'# & &I,R#(B#P ,IR,7LAR 2!9 D 200")An officer shall have the folloing)ini)u) qualifications5

At least %1 ears of ageF

At least a college graduate, or have

at least ears e?perience inbanking or trust operations or

related activities or in a field relatedto his position and responsibilities,or have undergone training inbanking or trust operationsacceptable to the appropriatesupervising and e?a)iningdepart)ent of the B$25 2rovided,hoever, That trust officers shallhave at least % ears of actuale?perience or training in trustoperations or fund )anage)ent orother related fieldsF and

ust be fit and proper for the

position he is beingproposedDappointed to. :ndeter)ining hether a person is fitand proper for a particular position,the folloing )atters )ust beconsidered5- integritDprobitF- co)petenceF- educationF- diligenceF and- e?perienceDtraining.

The disqualifications for directors

)entioned for shall likeise appl toofficers, e?cept that stated in :te)sb.% !persons ho refuse to fulldisclose the e?tent of their businessinterest " and b. !directorsdisqualified for failure toobserveDdischarge their duties andresponsibilities".

J?cept as )a be authorized, the

spouse or a relative ithin the %nddegree of consanguinit or affinit ofan person holding the position of(hair)an, 2resident, J?ecutive Oice2resident or an position ofequivalent rank, General anager,Treasurer, (hief (ashier or (hief

Accountant is disqualified fro)holding or being elected orappointed to an of said positions inthe sa)e bankDquasi-bankF and thespouse or relative ithin the seconddegree of consanguinit or affinit ofan person holding the position of

anager, (ashier, or Accountant of abranch or office of a bankDquasi-bankDtrust entit is disqualified fro)holding or being appointed to an ofsaid positions in the sa)e branch oroffice.

:n the case of #Bs, (Bs, and TBs, an

appointive or elective officials hetherfull ti)e or part ti)e, e?cept in cases

here such service is incident tofinancial assistance provided b thegovern)ent or govern)ent-oned orcontrolled corporations or in casesalloed under e?isting la.

:n the case of (ooperative Banks, an

officer or e)ploee of the (ooperative


9/73


10/73

."0. BA'/I'G -A+# A'- 1&7R# #nless otherise authorized b the B$2 in

the interest of the banking public, allbanks including their branches and officesshall transact business on all orking dasfor at least 0 hours a da. !$ec. %1"

9orking das; shall )ean ondas to

3ridas, e?cept if such das are holidas.

!$ec. %1"

Banks or an of their branches or offices

)a open for business on $aturdas,$undas or holidas for at least & hours ada. Banks hich opt to open on dasother than orking das shall report tothe B$2 the additional das during hichthe or their branches or offices shalltransact business. !$ec. %1"

."". #TRI/# A'- L&,/&7T# The banking industr is hereb declared

as indispensable to the national interest.!$ec. %%"

4otithstanding the provisions of an la

to the contrar, an strike or lockoutinvolving banks, if unsettled after calendar das shall be reported b theB$2 to the $ecretar of Labor ho )aassu)e Iurisdiction over the dispute,decide it, or certif the sa)e to the 4L(for co)pulsor arbitration. oever, the2resident of the 2hilippines )a at anti)e intervene and assu)e Iurisdictionover such labor dispute in order to settle

or ter)inate the sa)e. !$ec.%%"

#ec$ion % -e;osi$s

.0". A,,PTA', & -*A'--PIT#

A bank other than a #B or *B cannot acceptor create de)and deposits e?cept upon priorapproval of, and subIect to such conditionsand rules as )a be prescribed b theonetar Board. !$ec. &&"

.02. T+P# & -PIT#1. Ti)e


11/73


12/73

5.0. P&R & T1 *B I' T1I#RGAR- The B )a

- require that such ratio be deter)inedon the basis of the net orth and riskassets of a bank and its subsidiaries,financial or otheriseF

- prescribe the co)position and the

)anner of deter)ining the net orthand total risk assets of banks andtheir subsidiaries. 2rovided, that- in the e?ercise of this authorit,

the B shall, to the e?tentfeasible, confor) to internationallaccepted standards, includingthose of the Bank for :nternational$ettle)ents !B:$", relating torisk-based capital require)entsF

- the B )a alter or suspendco)pliance ith such ratiohenever necessar for a)a?i)u) period of 1 earF and,

- such ratio shall be appliedunifor)l to banks of the sa)ecategor. !$ec. &&"

:n case of a bank )erger or consolidation,

or hen a bank is under rehabilitationunder a progra) approved b the B$2,the B )a te)poraril relieve thesurviving bank, consolidated bank, orconstituent bank or corporations underrehabilitation fro) full co)pliance iththe required capital ratio under suchconditions as it )a prescribe. !$ec. &&"

5.0. ,T & '&',&*PLIA', The B )a li)it or prohibit the

distribution of net profits b such bankand )a require that part or all of the netprofits be used to increase the capitalaccounts of the bank until the )ini)u)require)ent has been )et.

The B )a, further)ore, restrict or

prohibit the acquisition of )aIor assets

and the )aking of ne invest)ents bthe bank, ith the e?ception of purchasesof readil )arketable evidences of

indebtedness of the 2 and the B$2 andan other evidences of indebtedness orobligations the servicing and repa)ent ofhich are full guaranteed b the 2, untilthe )ini)u) required capital ratio hasbeen restored. !$ec. &&"

5.05. #I'GL B&RR&RF# LI*IT(#BL)

J?cept as the B )a otherise prescribe

for reasons of national interest, the totala)ount of loans, credit acco))odationsand guarantees as )a be defined b theB that )a be e?tended b a bank to anperson, partnership, association,

corporation or other entit shall at no ti)ee?ceed %/K of the net orth of such bank.!$ec. &.1"

The basis for deter)ining co)pliance ith

$BL is the total credit co))it)ent of thebank to the borroer. !$ec. &.1"

#nless the B prescribes otherise, the

total a)ount of loans, creditacco))odations and guarantees prescribedin the preceding paragraph )a beincreased b an additional 1/K of the netorth of such bank provided the additionalliabilities of an borroer are adequatelsecured b trust receipts, shippingdocu)ents, arehouse receipts or othersi)ilar docu)ents transferring or securingtitle covering readil )arketable, non-perishable goods hich )ust be fullcovered b insurance. !$ec. &.%"

:nclusions . The above prescribed ceilings

shall include5a. the direct liabilit of the )aker or

acceptor of paper discounted ith orsold to such bank and the liabilit of ageneral indorser, draer or guarantorho obtains a loan or other creditacco))odation fro) or discounts paperith or sells papers to such bankF

b. in the case of an individual ho onsor controls a )aIorit interest in acorporation, partnership, association oran other entit, the liabilities of saidentities to such bankF

c. in the case of a corporation, all liabilitiesto such bank of all subsidiaries in hichsuch corporation ons or controls a)aIorit interestF and

d. in the case of a partnership, associationor other entit, the liabilities of the)e)bers thereof to such bank. !&.&"

* +ven i# a parent corporation"partnersip" association" entity or anindividual $o o$ns or controls aa&ority interest in suc entities as nolia%ility to te %an" te 4B ayprescri%e te co%ination o# telia%ilities o# su%sidiary corporations or

UP LAW BAROPS 2007

ONE UP LAW

12 of 73


13/73

e%ers o# te partnersip"association" entity or suc individualunder certain circustances" includin.%ut not liited to any o# te #ollo$in.situations=a. the parent corporation,

partnership, association, entit orindividual guarantees therepa)ent of the liabilitiesF

b. the liabilities ere incurred for theacco))odation of the parentcorporation or another subsidiaror of the partnership orassociation or entit or suchindividualF or

c. the subsidiaries though separateentities operate )erel asdepart)ents or divisions of asingle entit. !&.8"

PP (ertain tpes of contingentaccounts of borroers )a beincluded a)ong those subIect to

these prescribed li)its as )a bedeter)ined b the B. !&."

PPP Loans and other creditacco))odations, deposits)aintained ith, and usualguaranteed b a bank to an otherbank or non-bank entit, hetherlocall or abroad, shall be subIectto the li)its as herein prescribed.!&.0"

J?clusions . 3or purposes of this $ection,

loans, other credit acco))odations and

guarantees shall e?clude5

a. loans and other creditacco))odations secured bobligations of the B$2 or of the 2hil.

GovNtFb. loans and other credit

acco))odations full guaranteed bthe govNt as to the pa)ent ofprincipal and interestF

c. loans and other creditacco))odations covered bassign)ent of deposits )aintained inthe lending bank and held in the2hils.F

d. loans, credit acco))odations andacceptances under letters of credit tothe e?tent covered b )argindepositsF and

e. other loans or credit acco))odationshich the B )a fro) ti)e to ti)e,specif as non-risk ite)s. !&."

5.09. R#TRI,TI&' &' BA'/PR T& -RI

$: Q fficers, $tockholders andtheir elated :nterestsF6

GR5 A director or officer of an bankshall neither,1. directl or indirectl, for hi)self or

as the representative or agent ofothers, borro fro) such bankF nor

%. beco)e a guarantor, indorser orsuret for loans fro) such bank to

others, or in an )anner be anobligor or incur an contractualliabilit to the bank.

,. J?cept ith the ritten approvalof the )aIorit of all the directorsof the bank, e?cluding thedirector concerned. The required

approval shall be entered uponthe records of the bank and acop of such entr shall betrans)itted forthith to theappropriate supervising ande?a)ining depart)ent of the B$2.

* Suc $ritten approval sall not%e re/uired #or loans" oter creditaccoodations and advances.ranted to o##icers under a #rin.e%ene#it plan approved %y te BSP'(Sec' 3 par' 1)

** Te liit on loans" creditaccoodations and .uaranteesprescri%ed erein sall not applyto loans" credit accoodationsand .uarantees e-tended %y acooperative %an to itscooperative sareolders' (Sec'3 par' )

2rinciples :nvolved .

-


14/73

- After due notice to the board ofdirectors of the bank, the office of anbank director or officer ho violatesthe provisions of this $ection )a bedeclared vacant and the director orofficer shall be subIect to the penalprovisions of the 4(BA. !$ec. &0 par.&"

- The B )a regulate the a)ount of

loans, credit acco))odations andguarantees that )a be e?tended,directl or indirectl, b a bank to its$:, as ell as invest)ents of suchbank in enterprises oned orcontrolled b said directors, officers,stockholders and their relatedinterests.

* Te outstandin. loans" creditaccoodations and .uarantees$ic a %an ay e-tend to eac o#its


15/73


16/73

5."". PRPA+*'T & L&A'# A'-&T1R ,R-IT A,,&**&-ATI&'# A borroer )a at an ti)e prior to the

agreed )aturit date prepa, in hole orin part, the unpaid balance of an bankloan and other credit acco))odation,subIect to such reasonable ter)s andconditions as )a be agreed uponbeteen the bank and its borroer. !$ec.

8"

5."2. #&* & *BF# P&R# RLAT-T& L&A'# A'- ,R-ITA,,&**&-ATI&'#

The B is hereb authorized to issue such

regulations as it )a dee) necessar ithrespect to unsecured loans or other creditacco))odations that )a be granted bbanks. !$ec. 81"

The B )a, b regulation, prescribe

further securit require)ents to hich thevarious tpes of bank credits shall besubIect, and, in accordance ith theauthorit granted to it in $ec. 1/0 of the4(BA, the Board )a b regulation,reduce the )a?i)u) ratios established in$ecs. &0 and & 6should be $ecs. & and&'7 of this Act, or, in special cases,increase the )a?i)u) ratios establishedtherein. !$ec. 8%"

The B )a, in accordance ith the

authorit granted to it in $ec. 1/0 of the4(BA, and taking into account therequire)ents of the econo) for theeffective utilization of long-ter) funds,prescribe the )aturities, as ell as relatedter)s and conditions for various tpes ofbank loans and other creditacco))odations. An change b the Bin the )a?i)u) )aturities shall applonl to loans and other creditacco))odations )ade after the date ofsuch action. !$ec. 8&"

The onetar Board shall regulate the

interest i)posed on )icrofinance

borroers b lending investors and si)ilarlenders, such as, but not li)ited to, theunconscionable rates of interest collectedon salar loans and si)ilar creditacco))odations. !$ec. 8&"

ffs. TheB )a fi?, b regulation or b order in aspecific case, the a)ount of reserves forbad debts+ or doubtful accounts or othercontingencies. riting off of loans, othercredit acco))odations, advances and other

assets shall be subIect to regulations issuedb the B. !$ec. 8+"

#ec$ion 9 % &$=er &;era$ions

9.0". *A@&R I'E#T*'T#

3or the purpose of enhancing bank supervision,the B shall establish criteria for revieing)aIor acquisitions or invest)ents b a bankincluding corporate affiliations or structures that)a e?pose the bank to undue risks or in ana hinder effective supervision. !$ec. /"

9.02. A,67I#ITI&' & RAL #TAT An bank )a acquire real estate as shall

be necessar for its on use in the conductof its business. !$ec. 1"

The total invest)ent in such real estate and

i)prove)ents thereof, including bankequip)ent, shall not e?ceed /K ofco)bined capital accounts.

-

#nless otherise provided b the B,the equit invest)ent of a bank in

9All debts due to an bank on hich interest is past

due and unpaid for such period as )a be deter)ined bthe B, unless the sa)e are ell-secured and in theprocess of collection shall be considered bad debts. !$ec.

8+"

UP LAW BAROPS 2007

ONE UP LAW

16 of 73


17/73

another corporation engaged pri)arilin real estate shall be considered aspart of the bankEs total invest)ent inreal estate. !$ec. 1"

9.0. B+ A+ & #ATI#A,TI&' &,LAI*#

4otithstanding the li)itations Iust)entioned, a bank )a acquire, hold orconve real propert under the folloingcircu)stances5

1. $uch as shall be )ortgaged to it ingood faith b a of securit for

debtsF%. $uch as shall be conveed to it in

satisfaction of debts previouslcontracted in the course of itsdealingsF or

&. $uch as it shall purchase at salesunder Iudg)ents, decrees,

)ortgages, or trust deeds held b itand such as it shall purchase to securedebts due it. !$ec. %"

An real propert acquired or held under

these circu)stances shall be disposed ofb the bank ithin a period of ears oras )a be prescribed b the B. The bank)a, after said period, continue to holdthe propert for its on use, subIect tothe li)itation that the total invest)ent inreal estate and i)prove)ents thereof,including bank equip)ent, shall note?ceed /K of co)bined capital accounts.!$ec. %"

9.0. &T1R BA'/I'G #REI,#1. eceive in custod funds, docu)ents and

valuable obIectsF%. Act as financial agent and bu and sell, b

order of and for the account of theircusto)ers, shares, evidences ofindebtedness and all tpes of securitiesF

&. ake collections and pa)ents for theaccount of others and perfor) such otherservices for their custo)ers as are notinco)patible ith banking businessF

8. #pon prior approval of B, act as)anaging agent, adviser, consultant orad)inistrator of invest)ent)anage)entDadvisorDconsultancaccountsF and

. ent out safet deposit bo?es. !$ec. &"

The bank shall perfor) the services

per)itted under 1-8 as depositar or as anagent. Accordingl, it shall keep the funds,securities and other effects hich it receivesdul separate fro) the bankEs on assetsand liabilities. !$ec. &"

The B )a regulate all these operations in

order to ensure that such operations do notendanger the interests of the depositorsand other creditors of the bank. !$ec. &"

9.05. PR&1IBITI&'#A. Agains$ Ac$ing as an Ins:rer

A bank shall not directl engage ininsurance business as the insurer. !$ec.

8"B. Pro=ii$ed Transac$ions of

-irec$ors3 &fficers3 m;lovervaluing or aiding theovervaluing of an securit for thepurpose of influencing in an athe actions of the bank or anbankF or

. >utsourcing inherent bankingfunctions. !$ub$ec. .1"

(. B#P ,irc:lar 298 (2000)

UP LAW BAROPS 2007

ONE UP LAW

17 of 73


18/73


19/73

an la, rule or regulation affecting banks,CBs or trust entities, )a be dee)ed asconducting business in an unsafe or unsound)anner, the B shall consider an of thefolloing circu)stances here the act oro)ission has@

1. resulted or )a result in )aterial lossor da)age, or abnor)al risk or

danger to the safet, stabilit, liquiditor solvenc of the institutionF

%. resulted or )a result in )aterial lossor da)age or abnor)al risk to theinstitutionEs depositors, creditors,investors, stockholders or to the B$2or to the public in generalF

&. has caused an undue inIur, or hasgiven an unarranted benefits,advantage or preference to the bankor an part in the discharge b thedirector or officer of his duties andresponsibilities through )anifestpartialit, evident bad faith or gross

ine?cusable negligenceF or suchinvolves entering into an contract ortransaction )anifestl and grossl

disadvantageous to the bank, CB ortrust entit, >4 the director orofficer profited or ill profit thereb.

henever a bank, CB or trust entit persistsin conducting its business in an unsafe orunsound )anner, the B )a, ithoutpreIudice to the ad)inistrative sanctionsprovided in $ec. & of the 4(BA, take actionunder $ec. &/ of the sa)e Act andDori))ediatel e?clude the erring bank fro)

clearing, the provisions of la to the contrarnotithstanding.1/!$ec. 0"

9.08. &' -IEI-'- -,LARATI&'

4o bank or CB shall declare dividends

greater than its accu)ulated net profitsthen on hand, deducting therefro) itslosses and bad debts. !$ec. "

4o bank nor CB shall declare dividends, if

at the ti)e of declaration5

1. :ts clearing account ith the B$2 isoverdranF or

10 2lease see separate revieer on 4(BA as the

provisions referred to are too long to reproduce here.

%. :t is deficient in the required liquiditfloor for govNt deposits for or )oreconsecutive dasF or

&. :t does not co)pl ith the liquiditstandardsDratios prescribed b the B$2for purposes of deter)ining fundsavailable for dividend declarationF or

8. :t has co))itted a )aIor violation as)a be deter)ined b the B$2. !$ec.

"

9.0!. I'-P'-'T A7-IT&R

The B )a require a bank, CB or trust

entit to engage the services of anindependent auditor to be chosen b the

bank, CB or trust entit concerned fro) alist of (2As acceptable to the B.

The ter) of the engage)ent shall be as

prescribed b the B hich )a either beon a continuing basis here the auditorshall act as resident e?a)iner, or on the

basis of special engage)ents, but in ancase, the independent auditor shall beresponsible to the bankEs, CBNs or trustentitEs board of directors.

A cop of the report shall be furnished to

the B.

The B )a also direct the board of

directors of a bank, CB, trust entit andDorthe individual )e)bers thereof, to conduct,either personall or b a co))ittee createdb the board, an annual balance sheet auditof the bank, CB or trust entit to revie theinternal audit and control sste) of thebank, CB or trust entit and to sub)it areport of such audit. !$ec. '"

9."0. I'A',IAL #TAT*'T#

Jver bank, CB or trust entit shall sub)it

to the appropriate supervising ande?a)ining depart)ent of the B$2 financialstate)ents in such for) and frequenc as)a be prescribed b the B$2. !$ec. 0/"

$uch state)ents, hich shall be as of aspecific date designated b the B$2, shallsho the actual financial condition of theinstitution sub)itting the state)ent, and ofits branches, offices, subsidiaries andaffiliates, including the results of itsoperations, and shall contain such

UP LAW BAROPS 2007

ONE UP LAW

19 of 73


20/73

infor)ation as )a be required in B$2regulations. !$ec. 0/"

:n periods of national andDor local

e)ergenc or of i))inent panic hichdirectl threaten )onetar and bankingstabilit, the B, b a vote of at least ofits )e)bers, in special cases and uponapplication of the bank, quasi-bank or

trust entit, )a allo such bank, CB ortrust entit to defer for a stated period ofti)e the publication of the state)ent offinancial condition required herein. !$ec.01"

9."". P7BLI,ATI&'CPTI'G &I'A',IAL #TAT*'T#

Jver bank, CB or trust entit, shall

publish a state)ent of its financialcondition, including those of itssubsidiaries and affiliates, in such ter)s

understandable to the la)an and in suchfrequenc as )a be prescribed b theB$2, in Jnglish or 3ilipino, at least onceever quarter in a nespaper of generalcirculation in the cit or province herethe principal office, in the case of ado)estic institution, or the principalbranch or office in the case of a foreignbank, is located, but if no nespaper ispublished in the sa)e province, then in anespaper published in etro anila or inthe nearest cit or province. The Bangko$entral )a b regulation prescribe thenespaper here the state)entsprescribed herein shall be published. !$ec.01"

The onetar Board )a allo the

posting of the financial state)ents of abank, CB or trust entit in public places it)a deter)ine, in lieu of the publicationrequired in the preceding paragraph, henarranted b the circu)stances. !$ec. 01"

Banks shall also )ake available to the

public in such for) and )anner as theB$2 )a prescribe the co)plete set of its

audited financial state)ents as ell assuch other relevant infor)ation includingthose on enterprises )aIorit-oned orcontrolled b the bank, that ill infor)

the public of the true financial condition ofa bank as of an given ti)e. !$ec. 01"

9."2. P7BLI,ATI&' & ,APITAL #T&,/ A bank, CB or trust entit incorporated

under the las of the 2hils. shall not publishthe a)ount of its authorized or subscribedcapital stock ithout indicating at the sa)eti)e and ith equal pro)inence, thea)ount of its capital actuall paid up. !$ec.0%"

4o branch of an foreign bank doing

business in the 2hils. shall in an aannounce the a)ount of the capital andsurplus of its head office, or of the bank inits entiret ithout indicating at the sa)eti)e and ith equal pro)inence the a)ountof the capital, if an, definitel assigned tosuch branch. :n case no capital has beendefinitel assigned to such branch, such factshall be stated in, and shall for) part of thepublication. !$ec. 0%"

9.". L,TR&'I, TRA'#A,TI&'# The B$2 shall have full authorit to regulate

the use of electronic devices, such asco)puters, and processes for recording,storing and trans)itting infor)ation or datain connection ith the operations of a bank,CB or trust entit, including the deliver ofservices and products to custo)ers b suchentit. !$ec. +"

9.". &T1R RLAT- PR&EI#I&'# &T1 GBL

The Bangko $entral )a charge equitable

rates, co))issions or fees, as )a beprescribed b the onetar Board forsupervision, e?a)ination and other serviceshich it renders under this Act. !$ec. 0"

#nless otherise provided, the violation of

an of the provisions of this Act shall besubIect to $ecs &8, &, &0 and & of the

4(BA. :f the offender is a director or officerof a bank, quasi-bank or trust entit, theB )a also suspend or re)ove suchdirector or officer. :f the violation isco))itted b a corporation, suchcorporation )a be dissolved b quo

arranto proceedings instituted b the$ol.Gen.. !$ec. 00"

The provisions of an la to the contrar

notithstanding, the B$2 shall be consultedb other govern)ent agencies orinstru)entalities in actions or proceedings

UP LAW BAROPS 2007

ONE UP LAW

20 of 73


21/73

initiated b or brought before the)involving controversies in banks, CBs ortrust entities arising out of and involvingrelations beteen and a)ong theirdirectors, officers or stockholders, as ellas disputes beteen an or all of the)and the bank, CBs or trust entit of hichthe are directors, officers orstockholders. !$ec. 0&"

#ni!ersalBanks

$ommercial Banks

Po%ers

the poersauthorized for aco))ercial

bankF

the poers of aninvest)enthouse asprovided ine?isting lasF

andthe poer toinvest in non-allied enterprisesas provided inthe GBL. !$ec.

%&"

the general poersincident to corporations,all such poers as )a be

necessar to carr on thebusiness of co))ercialbanking, such asaccepting drafts andissuing letters of creditFdiscounting andnegotiating pro)issornotes, drafts, bills ofe?change, and otherevidences of debtFaccepting or creatingde)and depositsFreceiving other tpes ofdeposits and deposit

substitutesFbuing and selling foreigne?change and gold orsilver bullionFacquiring )arketablebonds and other debtsecuritiesF ande?tending credit,subIect to such rules asthe B )a pro)ulgate.These rules )a includethe deter)ination ofbonds and other debtsecurities eligible for

invest)ent, the )aturitiesand aggregate a)ount ofsuch invest)ent. !$ec.%+"

BSP Circular 271 (2002)

!1" invest in the equities ofallied enterprisesF

!%"purchase, hold andconve real estateF

!&"receive in custodfunds, docu)ents andvaluable obIectsF

!8"act as financialagentF

!")ake collections andpa)ents for theaccount of othersF

!0"act as )anaging agent,adviser, consultant orad)inistrator ofinvest)ent)anage)entDadvisorD-consultancaccountsF

!"rent out safet depositbo?esF and

!'"engage in quasi-banking functions.

&'uity In!estments

A #B )a investin the equities ofallied !eitherfinancial or non-financial" andnon-alliedenterprises.!$ec. %8"J?cept as the B)a otherise

prescribe5The totalinvest)ent inequities of alliedand non-alliedenterprises shallnot e?ceed /Kof the net orthof the bankF andThe equitinvest)ent inan oneenterprise,hether allied or

non-allied, shallnot e?ceed %Kof the net orthof the bank.!$ec. %8"

A *B )a invest onl inthe equities of alliedenterprises !eitherfinancial or non-financial".!$ec. &/"J?cept as the B )aotherise prescribe5The total invest)ent inequities of alliedenterprises shall not

e?ceed &K of the netorth of the bankF andThe equit invest)ent inan one enterprise shallnot e?ceed %K of the netorth of the bank. !$ec.&/"

=4et orth= shall )ean the total of the

UP LAW BAROPS 2007

ONE UP LAW

21 of 73


22/73

uni)paired paid-in capital including paid-insurplus, retained earnings and undividedprofit, net of valuation reserves and otheradIust)ents as )a be required b the B$2.!$ec. %8"The acquisition of such equit or equities issubIect to the prior approval of the B hichshall pro)ulgate appropriate guidelines togovern such invest)ents. !$ec. %8 R &/"

&'uity In!estments in inancial (llie"&nter)rises

A #B can on upto 1//K of theequit in@a thrift bank,a rural bank ora financial alliedenterprise. !$ec.%"

A *B )a on up to1//K of the equit ofa thrift bank ora rural bank. !$ec. &1"here the equitinvest)ent of a *B is inother financial alliedenterprises, includinganother co))ercial bank,such invest)ent shall

re)ain a )inorit holdingin that enterprise. !$ec.&1"

A publicl-listed #B or *B )a on up to one1//K of the voting stock of onl one other #Bor *B. !$ec. %"

BSP Circular 23 (2000ith prior B$2 approval, banks )ainvest in equities of the folloingfinancial allied undertakings5

a. Leasing co)panies includingleasing of stalls and spaces in a

co))ercial establish)entF2rovided, That bank invest)entinDacquisition of shares of suchleasing co)pan shall beli)itedDapplicable onl in cases ofconversion of outstanding loanobligations into equit.

b. BanksFc. :nvest)ent housesFd. 3inancing co)paniesFe. (redit card co)paniesFf. 3inancial institutions catering to

s)all and )ediu) scale industriesincluding venture capital

corporationsFg. (o)panies engaged in stock

brokerageDsecurities dealershipFand

h. (o)panies engaged in foreigne?change dealershipDbrokerage.

&'uity In!estments in +on,inancial(llie" &nter)rises

A #B or *B )a on up to one hundredpercent !1//K" of the equit in a non-financial allied enterprise. !$ec. %0 and &%"&'uity In!estments in -Bs

To pro)ote co)petitive conditions in financial)arkets, the B )a further li)it to 8/Kequit invest)ents of #Bs and *Bs in CBs.!$ec. %'"

&'uityIn!estments in+on,(llie"&nter)rises

The equitinvest)ent of a#B, or of itsholl or

)aIorit-onedsubsidiaries, in asingle non-allied

enterprise1. shall not

e?ceed&K ofthe totalequit inthatenterprise nor

%. shall ite?ceed

&K ofthevotingstock inthatenterprise. !$ec.%"

#ec$ion % oreign Banks

.0". TRA'#A,TI'G B7#I'## I' T1P1IL#

The entr of foreign banks in the 2hils.

through the establish)ent of branches shall

UP LAW BAROPS 2007

ONE UP LAW

22 of 73


23/73

be governed b the provisions of the3oreign Banks Liberalization Act. !$ec. %"

:n the case of a foreign bank hich has

)ore than 1 branch in the 2hils., all suchbranches shall be treated as 1 unit for thepurpose of the GBL, and all references tothe 2hil. branches of foreign banks shallbe held to refer to such units. !$ec. 8"

:n all )atters not specificall covered b

special provisions applicable onl to aforeign bank or its branches and otheroffices in the 2hils., an foreign banklicensed to do business in the 2hils. shallbe bound b the provisions of the GBL andall other las, rules and regulationsapplicable to banks organized under thelas of the 2hils. of the sa)e class,e?cept those that provide for the creation,for)ation, organization or dissolution ofcorporations or for the fi?ing of therelations, liabilities, responsibilities, or

duties of stockholders, )e)bers, directorsor officers of corporations to each other orto the corporation. !$ec. "

The conduct of offshore banking business

in the 2hilippines shall be governed b>ffshore Banking $ste)


24/73

pon te BSP


25/73

to per)it, for e?a)ple, land or a business leftto a ido or children to be )anaged b astrong third part co))itted to act solel inthe interest of the 9beneficiaries; of the trust.Though beneficiaries have since the 1th

centur had the right to call trustees to thela courts to account for their steardship, infact the guts of the sste) is the pride of thetrustee, for ho) the opportunit to e)plo

his poers unselfishl should be an honor anda privilege. 9>bviousl, the trustee asdescribed in la needs a soul, and co))entscould be )ade about the A)erican innovationof 1'1' hich first chartered a soulless corpto perfor) trust functions. The 9trustco)pan,; so called, perfor)ed a nu)ber offunctions closel analogous to banking5 itsbasic Iob, after all, as to invest and )anagesafel the assets left D it b others. Thequestion of the standard of care to hich sucha co)pan could be held as variouslresolved ???. :n 1'&& the $upre)e Hudicial(ouncil of assachusetts ruled that a trustee

could )anage a trust in an a a 9prudent)an; ould treat his on assetsF but otherstates lagged far behind and ill into the %/th

centur )ost las prescribed a 9legal list; ofinvest)ents approved for trusts ???; !oralesquoting artin aer in Te Baners!1+8""

8.05. PR7-'T *A' A'- #L-ALI'GR7L#

Pr:den$ *an R:le A trust entit shall ad)inister the funds or

propert under its custod ith thediligence that a prudent )an oulde?ercise in the conduct of an enterprise ofa like character and ith si)ilar ai)s.!$ec. '/ par. 1"

The B shall pro)ulgate such rules and

regulations as )a be necessar toprevent circu)vention of the prudent )anrule and the responsibilit therein i)posedon a trust entit. !$ec. '/ par. &"

This rule is part of the code of conduct

required of a trustee and thus set out inthe behavioral guidelines of the anual ofegulation of Banks5 9$ec 8/1$tate)ent of 2rinciples. The cardinalprinciple co))on to all trust and otherfiduciar relationships is fidelit. 2oliciespredicated upon this principle are directed

toards confidentialit, scrupulous care,safet and prudent )anage)ent ofpropert including reasonable probabilit ofinco)e D proper accounting andappropriate reporting thereon. 2racticesare designed to pro)ote efficienc inad)inistration and operationF to adhere andconfor) D the ter)s of the instru)ent orcontractF and to )aintain absolute

separation of propert free fro) anintrusion of conflict of interest.

9A bank authorized to engage in trustand fiduciar business is under noobligation, either legal or )oral, toaccept an such business being offerednor has it the right to accept if thesa)e is contrar to la, rules,regulations public order and publicpolic. :t shall advertise its services ina dignified )anner and enter suchbusiness onl hen de)and for suchservice is evident, hen speciallequipped to render such service and

upon full appreciation of theresponsibilities involved. :t shall beread and illing to give full disclosure

of the services being offered and shallconduct its dealing D transparenc.ar)onious relationship shall likeisebe pursued D other professions toachieve the co))on goal of )utualservice to the public and protection ofits interest.; !orales noting that thereis a si)ilar state)ent of principles in$ec 88/1C of the anual of egulationsfor 4on-3inancial :nstitutions"

#elf-ealing R:le G54o trust entit shall, for the account of

the trustor or the beneficiar of the trust,

1. purchase or acquire propert fro),or

%. sell, transfer, assign or lend )oneor propert to, or

&. purchase debt instru)ents ofa. an of the depart)ents,

directors, officers, stockholders,or e)ploees of the trust entit

b. relatives ithin the 1stdegree ofconsanguinit or affinit, or therelated interests, of suchdirectors, officers andstockholders,

J(.

UP LAW BAROPS 2007

ONE UP LAW

25 of 73


26/73

1. the transaction is specificallauthorized b the trustor and

%. the relationship of the trustee andthe other part involved in thetransaction is full disclosed to thetrustor or beneficiar of the trustprior to the transaction. !$ec. '/par. %"

The B shall pro)ulgate such rules andregulations as )a be necessar toprevent circu)vention of the self-dealingrule or the evasion of the responsibilittherein i)posed on a trust entit. !$ec. '/par. &"

Basicall, a trustee cannot engage in a

self dealing transaction unless5 !1" thetransaction is specificall authorized bthe trustor and !%" the relationship of thetrustee and its counterpart is fulldisclosed to the trustor or beneficiar ofthe trust prior to the transactions !either

in a separate instru)ent of in the trustinstru)ent itself". !orales on the basis of$ubsec. 8/+.& of the anual ofegulations for Banks and $ubsec.88/+C.& of the anual of egulations for4on-Bank 3inancial :nstitutions"

Ra$ionale of $=e R:les

93or the protection of the public ???,

there is need for riting into the laprovisions intended to ensure that trust)anagers shall handle trust accounts

along the 9prudent )an; concept of)anaging funds in trust, since trustorsusuall entrust their funds ??? in fullconfidence, secure in the belief that thetrustee ill )anage his funds as a prudent)an ould.

9There is need therefore to put in

safeguards in the la so as to ensure thatthe e?pected prudence in )anage)entshall indeed be the nor), $uchsafeguards or guidelines )a take the

for) of prohibition for) purchasing oracquiring propert for the trust or foraccount of the trustor or beneficiar of thetrust fro) the bank proper or an of its

depNts or directors, officers or e)ploees,unless specificall authorized b thetrustor.

9:t has been said that the essence of

trusteeship is that the trustee ould not be)otivated b self-interest, that on noaccount shall it receive an personaladvantage fro) the trusteeship, that it shallper)it no dealings of an characterbeteen itself as an individual or corp anditself in its capacit as trustee, and that it

shall receive fro) the trust no profit orfinancial return, directl or indirectl, otherthan its rightful co)pensation for servicesrendered.; !orales citing eco))endation/ of Hoint :3-(B2 Banking $urve(o))ission"

8.09. RGI#TRATI&' R67IR*'T

The $J( shall not register the articles of

incorporation and b-las or ana)end)ent thereto, of an trust entit,unless acco)panied b a certificate of

authorit issued b the B$2. !$ec. '/"

eiterates the require)ents under the(orporation (ode.11!orales"

The certificate of authorit need not be

issued b the B itself under its seal.!orales"

8.0. *I'I*7* ,APITALI?ATI&'

A trust entit, before it can engage in trust

or other fiduciar business, shall co)plith the )ini)u) paid-in capitalrequire)ent hich ill be deter)ined bthe B. !$ec. '%"

11(f. $ec 1 par % of the (orporation (ode5 94o

articles of incorporation or a)end)ent to the articles of

incorporation of banks, banking and Cuasi-bankinginstitutions, building and loan associations, trustco)panies and other financial inter)ediaries, insuranceco)panies, public utilities, educational institutions, andother corps governed b special las shall be accepted orapproved b the $J( unless acco)panied b a favorablereco))endation of the appropriate govern)ent agencto the effect that such articles or a)end)ent is inaccordance ith la.; A4< $ec 80 par 85 9The $J( shallnot accept for filing the b-las or an a)end)entthereto of an bank, banking institution, building andloan association, trust co)pan, insurance co)pan,public utilit, educational institution or other special corpsgoverned b special las, unless acco)panied b acertificate of the appropriate govern)ent agenc to theeffect that such b-las or a)end)ents are in

accordance ith la.

UP LAW BAROPS 2007

ONE UP LAW

26 of 73


27/73

This )eans it )ust have co)bined capitalaccounts of 2%/. 9(o)bined capitalaccounts; refers to the the total capitalstock, retained earnings and profit andloss su))ar, net of !1" such unbookedvaluation reserves and other capitaladIust)ents as )a be required b the

B$2 and !%" total outstanding unsecuredcredit acco))odations, both direct andindirect, to $: hen applicant is ado)estic bank, the co)bined capitalaccounts )ust not be less that the)ini)u) capital prescribed b the B forsuch bank but in no case less than 2%/Fand hen applicant is a branch of aforeign bank, it )ust co)pl ith D thecapital require)ent applicable to suchlocal bank. !orales citing variousprovisions of the anual of egulations for4on-Bank 3inancial :nstitutions and theanual of egulation for Banks"

8.08. P&R# & A TR7#T 'TIT+A trust entit, in addition to the generalpoers incident to corporations, shall have thepoer to5

1. Act as trustee on an)ortgage or bond issued b an)unicipalit, corporation, or an bodpolitic and to accept and e?ecute antrust consistent ith laF

%. Act under the order orappoint)ent of an court as guardian,receiver, trustee, or depositar of the

estate of an )inor or otherinco)petent person, and as receiver

and depositar of an )ones paidinto court b parties to an legalproceedings and of propert of ankind hich )a be brought under theIurisdiction of the courtF

&. Act as the e?ecutor of anill hen it is na)ed the e?ecutorthereofF

8. Act as ad)inistrator of theestate of an deceased person, iththe ill anne?ed, or as ad)inistratorof the estate of an deceased person

hen there is no illF. Accept and e?ecute antrust for the holding, )anage)ent,and ad)inistration of an estate, realor personal, and the rents, issues andprofits thereofF and

0. Jstablish and )anageco))on trust funds, subIect to suchrules and regulations as )a beprescribed b the B. !$ec. '&"

8.0!. G'RAL GR&7PI'G#

1. Tr:s$ B:siness

- an activit resulting fro) a

trustor-trustee relationship!trusteeship" involving theappoint)ent of a trustee b atrustor for the ad)inistration,holding )anage)ent of fundsandDor properties of the trustor bthe trustee for the use benefit oradvantage of the trustor or ofothers called beneficiaries

- Trust entit enters into a propert

relationship, herein legal title tothe propert is transferred to it !astrustee" b a trustor for the benefit

of one or )ore beneficiaries, ho)a or )a not include the trustor.There is thus a division of legal andbeneficial interests in and to thepropert entrusted to the trustentit. The trustor is able to shiftthe burden of )anage)ent of thepropert to the trustee and, at thesa)e ti)e, confer the benefits ofonership on the beneficiar.1%

%. &$=er fid:ciar< :siness

- an activit of a trust licensed bankresulting fro) a contract oragree)ent hereb the bank bindsitself to render services or to act ina representative capacit such as inan agenc, guardianship,Ad)inistratorship of ills,properties and estates,e?ecutorship, receivership, andother si)ilar services hich do notcreate or result in a trusteeship.

- :t shall e?clude collecting or paingagenc arrange)ents and si)ilarfiduciar services hich are

12Art 188/ (ivil (ode. A person ho establishes a

trust is called the trustorF one in ho) confidence isreposed as regards propert for the benefit of anotherperson is knon as the trusteeF and the person for hosebenefit the trust has been created is referred to as the

beneficiar.

UP LAW BAROPS 2007

ONE UP LAW

27 of 73


28/73

inherent in the use of the facilitiesof the other depNts of said bank.:nvest)ent )anage)entactivities, hich are considered asa)ong other fiduciar business,shall be separatel defined in thesucceeding ite) to highlights itsbeing a )aIor source of fiduciarbusiness.

-


29/73

# te trust entity #ails to coply $it any

la$ or re.ulation" te BSP sall retainsuc interest on te securities deposited$it it #or te %ene#it o# ri.t#ul claiants'

All clais arisin. out o# te trust %usiness

o# a trust entity sall ave priority over alloter clais as re.ards te cas orsecurities deposited as a%ove provided'Te 4B ay not perit te cas or

securities deposited to %e reduced %elo$te prescri%ed iniu aount until tedepositin. entity sall discontinue its trust%usiness and sall satis#y te 4B tat itas coplied $it all its o%li.ations inconnection $it suc %usiness' (Sec' )

. Bond

- Before an e?ecutor, ad)inistrator,guardian, trustee, receiver ordepositar appointed b the courtenters upon the e?ecution of his

duties, he shall, upon order of thecourt, file a bond in such su), as thecourt )a direct. !$ec. '"

- #pon the application of an e?ecutor,ad)inistrator, guardian, trustee,receiver, depositar or an otherperson in interest, the court )a,after notice and hearing, order thatthe subIect )atter of the trust or anpart thereof be deposited ith a trustentit. #pon presentation of proof tothe court that the subIect )atter ofthe trust has been deposited ith atrust entit, the court )a order thatthe bond given b such persons forthe faithful perfor)ance of their dutiesbe reduced to such su)s as it )adee) proper5 2rovided, hoever, Thatthe reduced bond shall be sufficient tosecure adequatel the proper

ad)inistration and care of anpropert re)aining under the controlof such persons and the properaccounting for such propert. 2ropertso deposited ith an trust entit shallbe held b such entit under theorders and direction of the court.!$ec.'"

- 4o bond or other securit shall berequired b the court fro) a trust

entit for the faithful perfor)ance ofits duties as court-appointed trustee,

e?ecutor, ad)inistrator, guardian,receiver, or depositar. oever, thecourt )a, upon proper application ithit shoing special cause therefor,require the trust entit to post a bondor other securit for the protection offunds or propert confided to suchentit. !$ec. '0"

- That trust entities need not post abond, unless required b the court, for

the faithful perfor)ance of $ec ' GBLduties is based on the presu)ption thattrust entities alread have a basicsecurit deposit ith the B$2. !orales"

8."". #PARATI&' & TR7#TB7#I'## A'- A##T# R&* T1&T1R B7#I'### A'- A##T# &T1 BA'/

The trust business and all funds, properties

or securities received b an trust entit ase?ecutor, ad)inistrator, guardian, trustee,receiver, or depositar shall be keptseparate and distinct fro) the general

business including all other funds,properties, and assets of such trust entit.The accounts of all such funds, properties,or securities shall likeise be kept separateand distinct fro) the accounts of thegeneral business of the trust entit. !$ec.'"

Trust Business $eparation. 9Trust and other

fiduciar business of a bank shall be carriedout through a trust depNt hich shall beorganizationall, operationall,ad)inistrativel and functionall separateand distinct fro) the other depNts andDorbusiness of the institution.; !orales citing$ubsec 8/0.1.a anual of egulations forBanks"

Trust Assets $eparation. 9All )ones,

properties or securities b a bank in itscapacit as trustee, fiduciar or inves)tnet)anager shall be kept phsicall separate

and distinct fro)t eh other assets of itsother business and shal be under the Iointcustod of at least % persons, one of ho)shall be an officer of the trust or invest)ent)anage)ent depNt, designated for thatpurpose b the board of directors. Theinvest)ent of each trust, other fiduciar orinvest)ent )anage)ent account shall be

UP LAW BAROPS 2007

ONE UP LAW

29 of 73


30/73

kept phsicall separate fro) those ofother trust, other fiduciar or invest)ent)anage)ent accounts, and adequatelidentifies as the assets of propert of therelevant account.; !orales citing $ec8%% :bid."

:nvest)ent of 4on-Trust 3unds. The

invest)ent of funds other than trust funds

of a trust entit hich is a bank, financingco)pan or an invest)ent house shall begoverned b the relevant provisions of theGBL and other applicable las. !$ec. +/"

:f the trust entit is a unit of a bank, afinancing co)pan or an invest)enthouse, then non-trust business activitiesare conducted b other units of such

bank, financing co)pan or invest)enthouse. !orales"18

8."2. I'E#T*'T LI*ITATI&'#

#nless otherise directed b the

instru)ent creating the trust, the lendingand invest)ent of funds and other assetsacquired b a trust entit as e?ecutor,ad)inistrator, guardian, trustee, receiveror depositar of the estate of an )inor orother inco)petent person shall be li)itedto loans or invest)ents as )a beprescribed b la, the B or an court ofco)petent Iurisdiction. !$ec. ''"

istorical 4ote. :t used to be that a trust

co)pan, particularl in the #$ could onanthing. :n fact, )an national banksere then subsidiaries of trust co)panies.hen )onopolies ere being )ade in the1+th and %/th centuries, the devise usedas the trust, as it could hold the stock ofall co)panies Din the group.Accordingl, then the #$ (ongress asbreaking up )onopolies, hat erepassed ere 9anti-trust; las. !orales"

14(lassroo) 4otes ith 2rof. orales. hereas the

egular Banking #nit !B#" officers can supervise3oreign (urrenc


31/73

A trust entit or an of its officers and

directors found to have illfull violatedan pertinent provisions of the GBL, shallbe subIect to the sanctions and penaltiesprovided under $ec. 00 of the GBL and$ecs. &0 and & of the 4(BA.15 !$ec. +1,please see co)panion revieer"

8."9. *PTI&' & TR7#T A##T#

R&* ,LAI*#

4o assets held b a trust entit in its

capacit as trustee shall be subIect to anclai)s other than those of the partiesinterested in the specific trusts. !$ec. +%"

ationale. The creditors of the trustee ill

not be able to attach, garnish or otheriseclai) the trust assets, because the trusteeis not the beneficial oner thereof. >nlthe 5;parties interested in the specifictrust; !nor)all, the beneficiaries of thetrust" can clai) those assets. This isfurther reinforced b the folloing5 9Art%%8/ (ivil (ode. 2ropert held b theinsolvent debtor as a trustee of ane?press or i)plied trust, shall be e?cludedfro) the insolvenc proceedings.;!orales"

#ec$ion ! % ,onserva$ors=i; and,essa$ion of Banking B:siness

!.0". ,&'#REAT&R#1IP

The grounds and procedures for placing a

bank under conservatorship, as ell as,the poers and duties of the conservatorappointed for the bank shall be governedb the provisions of $ec. %+ and the lastto paragraphs of $ec. &/ of the 4(BA52rovided, That this $ection shall alsoappl to conservatorship proceedings of

CBs. !$ec. 0, please refer to co)panionrevieer"

15$ec. 00 GBL. 2enalt for Oiolation of this Act. M

#nless otherise herein provided, the violation of anof the provisions of this Act shall be subIect to $ections&8, &, &0 and & of the 4(BA. :f the offender is adirector or officer of a bank, quasi-bank or trust entit,the onetar Board )a also suspend or re)ove suchdirector or officer. :f the violation is co))itted b acorporation, such corporation )a be dissolved b quoarranto proceedings instituted b the $ol. Gen.

!please see co)panion revieer"

!.02. E&L7'TAR+ LI67I-ATI&'

:n case of the voluntar liquidation of an

bank organized under the las of the 2hils.,or of an branch or office in the 2hils. of aforeign bank, ritten notice of suchliquidation shall be sent to the B before

such liquidation is undertaken, and the Bshall have the right to intervene and takesuch steps as )a be necessar to protectthe interests of creditors. !$ec. 0'"

!.0. R,IER#1IP A'- I'E&L7'TAR+LI67I-ATI&'

The grounds and procedures for placing a

bank under receivership or liquidation, asell as the poers and duties of thereceiver or liquidator appointed for the bankshall be governed b the provisions of $ecs.

&/, &1, &%, and && of the 4(BA5 2rovided,That the petitioner or plaintiff files ith theclerk or Iudge of the court in hich theaction is pending a bond, e?ecuted in favorof the B$2, in an a)ount to be fi?ed b thecourt. This shall also appl to the e?tentpossible to the receivership and liquidationproceedings of CBs. !$ec. 0+"

!.0. P'ALT+ &R TRA'#A,TI&'# ATRA BA'/ B,&*# I'#&LE'T

An director or officer of an bank declared

insolvent or placed under receivership b

the B shall be subIect to the penalprovisions of the 4(BA if he1. refuses to turn over the bankEs records

and assets to the designated receivers,%. ta)pers ith banks records,&. appropriates for hi)self or another

part or destros or causes the)isappropriation and destruction of thebankEs assets,

8. receives or per)its or causes to bereceived in said bank an deposit,collection of loans andDor receivables,

. pas out or per)its or causes to be paidout an funds of said bank, or

0. transfers or per)its or causes to betransferred an securities or propert ofsaid bank !$ec. /"

UP LAW BAROPS 2007

ONE UP LAW

31 of 73


32/73

II.T=e 'ew ,en$ral

Bank Ac$ (RA 95)

A. ,rea$ion3 Res;onsiili$ies and,or;ora$e Powers of $=e B#P

". -,LARATI&' & P&LI,+

1. The $tate shall )aintain a central)onetar authorit that shall function andoperate as an independent andaccountable bod corporate in thedischarge of its )andated responsibilitiesconcerning )one, banking and credit.!$ec. 1"

%. :n line ith this polic, and considering itsunique functions and responsibilities, thecentral )onetar authorit establishedunder the 4(BA, hile being a govNt-oned corporation, shall enIo fiscal andad)inistrative autono). !$ec. 1"

'&TThe 4(BA establishes the independent central)onetar authorit, hich is a bod corporateknon as the B$2. !$ec. %"

2. PRI*AR+ &B@,TIE A'- R&L &

T1 B#P

1. To )aintain price stabilit conducive to abalanced and sustainable groth of theecono). !2ri)ar >bIective"

%. To pro)ote and )aintain )onetarstabilit and the convertibilit of the peso.

&. To provide polic directions in the areas of)one, banking, and credit.

8. To have supervision over the operations ofbanks

. To e?ercise such regulator poers !asprovided under the 4(BA and otherpertinent las" over the operations of

finance co)panies and non-bank financialinstitutions perfor)ing quasi-bankingfunctions and institutions perfor)ingsi)ilar functions. !$ec. &"

'&T

2hase-out of egulator 2oers >ver the>perations of 3inance (orporations and >ther:nstitutions 2erfor)ing $i)ilar 3unctions. TheB$2 shall, ithin a period of ears fro) theeffectivit of this Act, phase out its regulatorpoers over finance co)panies ithout quasi-banking functions and other institutionsperfor)ing si)ilar functions as provided ine?isting las, the sa)e to be assu)ed b the

$J(. !$ec. 1&/"

. ,APITAL & T1 B#P

The capital of the B$2 shall be 2/B, to be fullsubscribed b the GovNt of the 2. !$ec. %"10

. PLA, & B7#I'## & T1 B#P

The B$2 shall have its principal place ofbusiness in etro anila, but )a )aintainbranches, agencies and correspondents in suchother places as the proper conduct of its

business )a require. !$ec. 8"

5. ,&RP&RAT P&R#

1. To adopt, alter, and use a corporate sealhich shall be Iudiciall noticedF

%. To enter into contractsF&. To lease or on real and personal propert,

and to sell or otherise dispose of thesa)eF

8. To sue and be suedF and. To acquire and hold such assets and incur

such liabilities in connection ith its

operations authorized b the provisions ofthe 4(BA, or as are essential to the properconduct of such operationsF

0. To co)pro)ise, condone or release, inhole or in part, an clai) of or settledliabilit to the B$2, regardless of thea)ount involved, under such ter)s andconditions as )a be prescribed b the Bto protect the interests of the B$2F

. To do and perfor) an and all things that)a be necessar or proper to carr out thepurposes of the 4(BA !$ec. "

'&T

16921/B of hich shall be full paid for b the GovNt

upon the effectivit of the Act the balance to be paid forithin a period of % ears fro) the effectivit of the Actin such )anner and for) as the GovNt, through the$ecretar of 3inance and the $ecretar of Budget and

anage)ent, )a thereafter deter)ine.; !$ec. %"

UP LAW BAROPS 2007

ONE UP LAW

32 of 73


33/73

The poers and functions of the B$2 shall bee?ercised b the B$2 B. !$ec. 0"

9. ,RATI&'4 R&* ,B T& B#P

". Transfer of Asse$s and Liaili$ies

#pon the effectivit of this Act, &)e)bers of the B , hich )a includethe Governor, in representation of theB$2, the $ecretar of 3inance and the$ecretar of Budget and anage)ent inrepresentation of the 4ationalGovern)ent, and the (hair)en of the(o))ittees on Banks of the $enate andthe ouse of epresentatives shalldeter)ine the assets and liabilities of the(entral Bank !(B" hich )a betransferred to or assu)ed b the B$2.!$ec. 1&%"1

179The (o))ittee shall co)plete its ork ithin

+/ das fro) the constitution of the B sub)itting aco)prehensive report ith all its findings andIustification. The folloing guidelines shall be strictlobserved in the deter)ination of hich assets andliabilities shall be transferred to the B$25 !a" the Band the $ecretar of 3inance shall have pri)ar

responsibilit for orking out creative )onetar andfinancial solutions to retire the (entral Bank liabilitiesand losses at the least cost to the Govern)entF !b" theB$2 shall re)it K of its net profits to a specialdeposit account !sinking fund" until such ti)e as thenet liabilities of the (entral Bank shall have beenliquidated through generall accepted finance)echanis)s such as, but not li)ited to, rite-offs, set-offs, condonation, collections, reappraisal, revaluation

and bond issuance b the 4ational Govern)ent, or tothe 4ational Govern)ent as dividendsF !c" the assetsand liabilities to be transferred shall be li)ited to ana)ount that ill enable the B$2 to perfor) itsresponsibilities adequatel and operate on a viablebasis5 2rovided, That the assets shall e?ceed theliabilities as certified b the (>A, b an initial a)ountof 21/BF !d" liabilities to be assu)ed b the B$2 shall

include liabilit for notes and coins in circulation as ofthe effective date of this ActF and !e" an asset orliabilit of the (entral Bank not transferred to the B$2shall be retained and ad)inistered, disposed of andliquidated b the (entral Bank itself hich shallcontinue to e?ist as the (B Board of Liquidators onl forthe purposes provided in this paragraph but not laterthan tent-five !%" ears or until such ti)e thatliabilities have been liquidated5 2rovided, That the B$2)a financiall assist the (entral Bank of Liquidators inthe liquidation of (B liabilities5 2rovided, finall, Thatupon disposition of said retained assets and liquidationof said retained liabilities, the (entral Bank shall bedee)ed abolished.

9All actions taken b the B$2 B under this sectionshall be reported to (ongress and the 2resident ithin

&/ das.; !$ec. 1&%"

2. *anda$e $o &rgani>e

The B$2 shall be organized b the B badopting, if it so desires, an entirel nestaffing pattern on organizational structureto suit the operations of the B$2. 4opreferential or priorit right shall be givento or enIoed b an personnel for

appoint)ent to an position in the nestaffing pattern, nor shall an personnel beconsidered as having prior or vested rightsith respect to retention in the B$2 or inan position hich )a be created in thene staffing pattern, even if he should bethe incu)bent of a si)ilar position prior toorganization. The for)ulation of theprogra) of organization shall be co)pletedithin 0 )onths after the effectivit of thisAct, and shall be full i)ple)ented ithin aperiod of 0 )onths thereafter. 2ersonnelho )a not be retained are dee)edseparated fro) the service. !$ec. 1&&"

. #e;ara$ion Benefi$s

2ursuant to $ec. 1 of this Act, the B isauthorized to provide separation incentives,and all those ho shall retire or beseparated fro) the service on account ofreorganization under the preceding sectionshall be entitled to such incentives, hichshall be in addition to all gratuities andbenefits to hich the )a be entitledunder e?isting las. !$ec. 1&8"

. Transfer of Powers

All poers, duties and functions vested bla in the (entral Bank of the 2hilippinesnot inconsistent ith the provisions of thisAct shall be dee)ed transferred to the B$2.All references to the (entral Bank of the2hilippines in an la or special chartersshall be dee)ed to refer to the B$2. !$ec.1&0"

5. Im;lemen$ing -e$ails

The B$2 shall be )ade operational b theperfor)ance of the folloing acts5 !a" the2resident shall constitute the B bappointing the )e)bers thereof ithin 0/das fro) the effectivit of this ActF and !b"

UP LAW BAROPS 2007

ONE UP LAW

33 of 73


34/73

the transfer of such assets and liabilitiesfro) the (entral Bank to the B$2 asprovided in $ec. 1&% shall be co)pletedithin +/ das fro) the constitution of theB.

All incu)bent personnel in the (entralBank as of the date of the approval of thisAct shall continue to e?ercise their duties

and functions as personnel of the B$2subIect to the provisions of $ection 1&&52rovided, That such personnel in the(entral Bank as )a be necessar for thepurpose of i)ple)enting $ection 1&% )abe assigned b the B$2 B to the (entralBank. !$ec. 1&1"

B. T=e *one$ar< Board

". ,&*PITI&'

The B is co)posed of )e)bers appointedb the 2resident for a ter) of 0 ears. 4o)e)ber of the B )a be reappointed )orethan once.

1. B$2 Governor, ho shall be the (hair)anof the B M shall be head of adepart)ent and his appoint)ent shall besubIect to confir)ation b the (>A.henever the Governor is unable toattend a )eeting of the Board, he shalldesignate a fficials andJ)ploees", and

%. A e)ber )a not be a director,officer, e)ploee, consultant, laer,agent or stockholder of an bank, CB oran other institution hich is subIect tosupervision or e?a)ination b the B$2.:n such cases, he shall resign fro), and

divest hi)self of an and all interests insuch institution before assu)ption ofoffice as )e)ber of the B.

&. The )e)bers of the B co)ing fro)the private sector shall not hold another public office or public e)plo)entduring their tenure.

8. 4o person shall be a )e)ber of the Bif he has been connected directl ithan )ultilateral banking or financialinstitution or has a substantial interestin an private bank in the 2hils., ithin1 ear prior to his appoint)entF

. 4o )e)ber of the B shall be

e)ploed in an such institution ithin% ears after the e?piration of his ter)e?cept hen he serves as an officialrepresentative of the 2hilippineGovern)ent to such institution. !$ec. +"

'&T1. :n addition to the require)ents of A

01& !(ode of (onduct and Jthical$tandards for 2ublic >fficials andJ)ploees", an )e)ber of the Bith personal or pecuniar interest inan )atter in the agenda of the Bshall disclose his interest to the B and

shall retire fro) the )eeting hen the)atter is taken up. The decision takenon the )atter shall be )ade public.The )inutes shall reflect the disclosure)ade and the retire)ent of the

UP LAW BAROPS 2007

ONE UP LAW

34 of 73


35/73

)e)ber concerned fro) the )eeting.!$ec. 18"

%. >utside :nterests of the Governor andthe 3ull-ti)e e)bers of the Board.The Governor of the B$2 and the full-ti)e )e)bers of the Board shall li)ittheir professional activities to thosepertaining directl to their positions

ith the B$2. Accordingl, the )anot accept an other e)plo)ent,hether public or private,re)unerated or ad honore), ith thee?ception of positions inelee)osnar, civic, cultural orreligious organizations or henever,b designation of the 2resident, theGovernor or the full-ti)e )e)ber istasked to represent the interest of theGovern)ent or other govern)entagencies in )atters connected ith oraffecting the econo) or the financialsste) of the countr. !$ec. %/"

. Eacancies

An vacanc in the B created b the death,resignation, or re)oval of an )e)ber shallbe filled b the appoint)ent of a ne )e)berto co)plete the une?pired period of the ter)of the )e)ber concerned. !$ec. "

. Removal

The 2resident )a re)ove an )e)ber of theB for an of the folloing reasons5

1. :f he no longer possesses thequalifications specified

%. :f he is subsequentl disqualifiedunder an of the instances providedfor disqualificationF

&. :f he is phsicall or )entallincapacitated that he cannot properldischarge his duties andresponsibilities and such incapacithas lasted for )ore than 0 )onthsF or

8. :f he is guilt of acts or operationshich are of fraudulent or illegalcharacter or hich are )anifestl

opposed to the ai)s and interests ofthe B$2. !$ec. 1/"

5. #alarA shall act as the

e? officio auditor of the B$2 and, as such,he is e)poered and authorized toappoint a representative ho shall be theauditor of the B$2 and, in accordance ithla, fi? his salar, and to appoint and fi?

salaries and nu)ber of personnel to assistsaid representative in his ork. Thesalaries and other e)olu)ents shall bepaid b the (>A. The auditor of the B$2and personnel under hi) )a be re)ovedonl b the (hair)an of the (>A. !$ec.8"

The representative of the (hair)an of the

(>A )ust be a (2A ith at least 1/ earse?perience as such. 4o relative of an)e)ber of the B or the (hair)an of the(>A ithin the 0thdegree of consanguinitor affinit shall be appointed suchrepresentative. !$ec. 8"

. PR&1IBITI&'# &' B#P PR#&''L

:n addition to the prohibitions found in A&/1+ !Anti-Graft and (orrupt 2ractices Act"and 01& !(ode of (onduct and Jthical$tandards for 2ublic >fficials and J)ploees",personnel of the B$2 are hereb prohibitedfro)5

1. being an officer, director, laer or agent,e)ploee, consultant or stockholder,directl or indirectl, of an institutionsubIect to supervision or e?a)ination bthe B$2,

J(5a. non-stock savings and loan

associations and provident fundsorganized e?clusivel fore)ploees of the B$2, and

b. as otherise provided in the 4(BAin this ActF

%. directl or indirectl requesting orreceiving an gift, present or pecuniar or)aterial benefit for hi)self or another,fro) an institution subIect to supervisionor e?a)ination b the B$2F

&. revealing in an )anner, e?cept underorders of the court, the (ongress or an

as a)ended, until otherise provided for in accordance

ith the transitor provisions of this Act.; !$ec. 80"

govern)ent office or agenc authorized bla, or under such conditions as )a beprescribed b the B, infor)ation relatingto the condition or business of aninstitution. This prohibition shall not beheld to appl to the giving of infor)ation tothe B or the Governor of the B$2, or toan person authorized b either of the), inriting, to receive such infor)ationF and

8. borroing fro) an institution subIect tosupervision or e?a)ination b the B$2 shallbe prohibited unless said borroings areadequatel secured, full disclosed to theB, and shall be subIect to such furtherrules and regulations as the B )aprescribe5 2rovided, hoever, Thatpersonnel of the supervising and e?a)iningdepart)ents are prohibited fro) borroingfro) a bank under their supervision ore?a)ination. !$ec. %"

. #A',TI&'#

1. Ref:sal $o *ake Re;or$s or Permi$Hamina$ion

An officer, oner, agent, )anager, director or>:( of an institution subIect to the supervisionor e?a)ination b the B$2 ithin the purvie ofthis Act ho, being required in riting b theB or b the head of the supervising ande?a)ining depart)ent illfull refuses to filethe required report or per)it an lafule?a)ination into the affairs of such institutionshall be punished b a fine of not less than

2/,/// nor )ore than 21//,/// or bi)prison)ent of not less than 1 ear nor )orethan ears, or both, in the discretion of thecourt. !$ec. &8"

%. alse #$a$emen$

The illful )aking of a false or )isleadingstate)ent on a )aterial fact to the B or to thee?a)iners of the B$2 shall be punished b afine of not less than 21//,/// nor )ore than2%//,///, or b i)prison)ent of not )ore ears, or both, at the discretion of the court.!$ec. &"

&. Eiola$ion of T=is Ac$ and &$=er BankingLaws3 R:les3 Reg:la$ions3 &rders orIns$r:c$ions

UP LAW BAROPS 2007

ONE UP LAW

45 of 73


46/73

henever a bank or CB, or henever anperson or entit illfull violates this Act orother pertinent banking las being enforcedor i)ple)ented b the B$2 or an order,instruction, rule or regulation issued b theB, the person or persons responsible forsuch violation shall unless otherise providedin this Act be punished b a fine of not lessthan 2/,/// nor )ore than 2%//,/// or b

i)prison)ent of not less than % ears nor)ore than 1/ ears, or both, at the discretionof the court.

henever a bank or CB persists in carring onits business in an unlaful or unsafe )anner,the Board )a, ithout preIudice to thepenalties provided in the preceding paragraphof this section and the ad)inistrativesanctions provided in $ec. &, take actionunder $ec. &/. !$e

5.c. corporation law-banking laws

Documents