"#$%&$' (#) *+,&+)+- .

/0012 /3+4#$5+- 61
Starr Weigand
8ank|ng Law
I. Genera| Concepts
A. Concept of 8ank|ng
8anks - 8efers Lo enLlLles engaged ln Lhe lendlng of
funds obLalned ln Lhe form of deposlLs
L|ements:
a. Lngaged ln Lhe lendlng of funds (usually cash or
money)
b. CbLalned ln Lhe form of deposlLs (Lhls ls Lhe
lmporLanL elemenL)
c. lrom Lhe publlc
ubllc - means 20 or more persons (buL noL llmlLed Lo a
speclflc group)
A bank ls a moneyed lnsLlLue founded Lo faclllLaLe Lhe
borrowlng, lendlng and safekeeplng of money and Lo
deal ln noLes, bllls of exchange and credlLs. An
lnvesLmenL company, whlch lends ouL money of lLs
cusLomers, collecLs lnLeresL and charges a commlsslon Lo
boLh lender and borrower, ls a bank. kepobllc v. 5ecotlty
cteJlt
1he aw requlrlng compllance wlLh cerLaln requlremenLs
before anyone can engage ln banklng obvlously seeks Lo
proLecL Lhe publlc agalnsL acLual, as well as poLenLlal
ln[ury. ceottol 8ook v. Motfe
An lnvesLmenL company refers Lo any lssuer, whlch ls or
holds lLself ouL as belng engaged/proposes Lo engage
prlmarlly ln Lhe buslness of lnvesLlng, relnvesLlng or
Lradlng ln securlLles. WhaL ls prohlblLed by law ls for
lnvesLmenL companles Lo lend funds obLalned from Lhe
publlc Lhrough recelpLs of deposlL, whlch ls a funcLlon of
banklng lnsLlLuLlon. 8ooos v. Aslo loclflc
8. 8ank|ng d|st|ngu|shed from uas|-bank|ng
L|ements of uas|-bank|ng:
a. 8orrowlng of funds for borrower's own accounL
b. lrom 20 or more lenders aL any one Llme
c. 1hrough lssuance, endorsemenL or asslgnmenL
wlLh recourse or accepLance of deposlL
subsLlLuLes
d. lor purposes of relendlng or purchaslng of
recelvables and oLher obllgaLlons
ueposlL subsLlLuLes - oLher moneLary flnanclal
lnsLrumenLs
kequ|rements of separate ||censes: MusL have auLhorlLy
from CenLral 8ank Lo engage ln quasl-banklng
x: unlversal or commerclal banks auLhorlzed by C8 need
noL obLaln separaLe llcense

C. 8anks d|st|ngu|shed from other f|nanc|a|
|nst|tut|ons
Investment nouses - Lngaged ln underwrlLlng,
guaranLeelng sales/dlsLrlbuLlon of securlLles
I|nanc|ng Corporat|ons - LxLendlng credlL faclllLles Lo
consumers
Investment Compan|es - lnvesLlng, re-lnvesLlng or
Lradlng ln securlLles
Non-Stock Sav|ngs and Loan Assoc|at|ons -
AccumulaLlng savlngs of members and uslng Lhem for
loans Lo such members, long Lerm flnanclng for Lhe
needs of households, home bulldlng and personal
flnance
Cooperat|ves - uuly reglsLered assoclaLlon wlLh
common bond of lnLeresL who volunLarlly [oln LogeLher
Lo achleve a common purpose: equlLable conLrlbuLlon of
caplLal, falr share of rlsks and beneflLs
Insurance Compan|es - dolng an lnsurance buslness":
lncludes
(a) maklng or proposlng Lo make, as lnsurer, any
lnsurance conLracL,
(b) maklng or proposlng Lo make, as sureLy, any conLracL
of sureLyshlp as a vocaLlon and noL as merely lncldenLal
Lo any oLher leglLlmaLe buslness or acLlvlLy of Lhe sureLy,
(c) dolng any klnd of buslness, lncludlng a relnsurance
buslness, speclflcally recognlzed as consLlLuLlng Lhe
dolng of an lnsurance buslness wlLhln Lhe meanlng of
Lhls Code,
(d) dolng or proposlng Lo do any buslness ln subsLance
equlvalenL Lo any of Lhe foregolng ln a manner deslgned
Lo evade Lhe provlslons of Lhls Code.
D. Nature of 8ank|ng 8us|ness

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
V|ta| ro|e |n the economy
As a buslness affecLed wlLh publlc lnLeresL and because
of Lhe naLure of lLs funcLlons, Lhe bank ls under
obllgaLlon Lo LreaL Lhe accounLs of lLs deposlLors wlLh
meLlculous care, always havlng ln mlnd Lhe flduclary
naLure of Lhelr relaLlonshlp. 5lmex v. cA
Make sure LhaL money can be moved Lhrough Lhe
banklng sysLem lnLo Lhe hands of Lhose who need lL.
7 Sub[ecL Lo reasonable regulaLlon by Lhe sLaLe
lL ls Lhe CovernmenL's responslblllLy Lo see Lo lL LhaL Lhe
flnaclal lnLeresL of Lhose who deal wlLh banks and
banklng lnsLlLuLlons, as deposlLors or oLherwlse, are
proLecLed - Lhls Lask ls delegaLed Lo Lhe CenLral 8ank,
whlch ls auLhorlzed Lo admlnlsLer moneLary, banlnklng
and credlL sysLem ln Lhe hlls. ceottol 8ook v. cA
7 SLrlkes and lockouLs: lndusLry lmbued wlLh
publlc lnLeresL, Lhus Sec. of Labor may assume
[urlsdlcLlon (lncludes reLurn Lo work order) 8S
Lo lnform uCLL of such sLrlkes and lockouLs
lnvolvlng banks

D. I|duc|ary Nature of 8ank|ng 8us|ness
a. Degree of d|||gence requ|red
uLmosL fldellLy, dlllgence of a good faLher of a famlly.
As a buslness affecLed wlLh publlc lnLeresL and
because of Lhe naLure of lLs funcLlons, Lhe bank ls
under obllgaLlon Lo LreaL Lhe accounLs of lLs
deposlLors wlLh meLlculous care, always havlng ln
mlnd Lhe flduclary naLure of Lhelr relaLlonshlp.
5lmex v. cA
1here ls no merlL ln Lhe argumenL LhaL a bank
should noL be consldered negllgenL, much less llable
fr damages on accounL of lnadverLence of lLs bank
employees for ArL. 1173 of Lhe Clvll Code only
requlres lL Lo exerclse Lhe dlllgence of a good faLher
of a famlly. Whlle Lhe bank's negllgence may noL
have been aLLended wlLh mallce and bad falLh, lL
caused serlous anxleLy, embarrassmenL and
humlllaLlon Lo deposlLors for whlch Lhey are enLlLled
Lo reasonable moral damages. 8ll v. lAc
b. When utmost d|||gence requ|red
7 In dea||ng w|th accounts of depos|tors, but not
w|th emp|oyees.
llduclary obllgaLlon ls lncluded ln all banklng conLracLs.
Sec. 2 of Lhe C8L expressly lmposes a flduclary duLy on
Lhe banks when lL declares LhaL Lhe SLaLe recognlzes Lhe
flduclary naLure of banklng LhaL requlres hlgh sLandards
of lnLegrlLy and performance". lbll. 8ookloq cotp. v. cA
Slnce Lhe banklng buslness ls lmpressed wlLh publlc
lnLeresL, or paramounL lmporLance LhereLo ls Lhe LrusL
and confldence of Lhe publlc ln general, Lhe hlghesL
degree of dlllgence ls expecLed and hlgh sLandards of
lnLegrlLy and performance are even requlred of lL. 8ll v.
coso Mootessotl
I|duc|ary re|at|onsh|p - 8ank's obllgaLlon Lo observe
hlgh sLandards of lnLegrlLy an performance ls deemed
wrlLLen lnLo every agreemenL beLween a bank and lLs
deposlLor.
7 In se|ect|on and superv|s|on of emp|oyees
8anks are expecLed Lo exerclse Lhe hlghesL degree of
care and dlllgence ln selecLlon and supervlslon of
employees. 8y Lhe very naLure of Lhelr work, Lhe degree
of responslblllLy, care and LrusLworLhlness expecLed of
Lhelr employees and offlclals ls far greaLer Lhan Lhose of
ordlnary clerks and employees. commetclol ooJ lotl
8ook v. cA
negllgence of banklng lnsLlLuLlons should never be
counLenanced. 1hough lLs employees may be Lhe ones
negllgenL, a bank's llablllLy as an obllgor ls noL merely
vlcarlous buL prlmary, as banks are expecLed Lo exerclse
Lhe hlghesL degree of dlllgence ln Lhe selecLlon and
supervlslon of Lhelr employees, and havlng such
obllgaLlon, Lhe 8ank may noL close lLs eyes Lo susplclous
clrcumsLances lnvolvlng LransacLlons, and dlsregard for
sLandard operaLlng procedures by lLs employees. lN8 v.
llke
7 1o be mortgagees |n good fa|th and other
dea||ngs w|th property
MorLgagee-banks, unllke prlvaLe lndlvlduals, are
expecLed Lo exerclse greaLer care and prudence ln Lhelr
deallngs, lncludlng Lhose lnvolvlng reglsLered lands. A
banklng lnsLlLuLlon ls expecLed Lo exerclse due dlllgence
before enLerlng lnLo a morLgage conLracL. 1he
ascerLalnmenL of Lhe sLaLus or condlLlon of Lhe properLy

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
offered Lo lL as securlLy for a loan musL be a sLandard
and lndlspensable parL of lLs operaLlons. ctoz v. 8oocom
A greaLer degree of care and prudence ls requlred. lL
musL ascerLaln Lhe sLaLus and condlLlon of Lhe properLy
(l.e. ocular lnspecLlon).
lf Lhe properLy ls obLalned from real esLaLe developers,
consulL flrsL wlLh Lhe PLu88.
7 |n the custody of documents
1he bank has no rlghL Lo dellver Lo any sLranger Lhe
properLy enLrusLed Lo lL oLher Lhan Lhose conLracLually
and legally enLlLled Lo such. 1he acL of a bank of allowlng
a compleLe sLranger Lo Lake possesslon of Lhe owner's
dupllcaLe cerLlflcaLe even lf Lhe purpose ls merely for
phoLocopylng consLlLuLes manlfesL negllgence whlch
would hold lL llable for damages under ArL. 1170 and
oLher relevanL provlslons of Lhe Clvll Code. Mooopot v.
cA
Lxcept|on: uLmosL dlllgence noL requlred for
LransacLlons ouLslde bank deposlLs
1he same hlgher degree of dlllgence ls nC1 expecLed Lo
be exerLed by banks ln commerclal LransacLlons LhaL do
noL lnvolve Lhelr flduclary relaLlonshlp wlLh deposlLors.
keyes v. cA
1hese LransacLlons have no relaLlon Lo Lhe flduclary
relaLlonshlp of Lhe bank wlLh lLs deposlLors.
c. App||cab|||ty to government f|nanc|a|
|nst|tut|ons (GIIs)
Clls are also expecLed Lo exerclse greaLer degree of care
and prudence ln lLs deallngs, lncludlng Lhose lnvolvlng
land.
1hls requlremenL of due dlllgence exLend even Lo
persons, lnsLlLuLlons enegaged ln Lhe buslness of lendlng
money secured by real esLaLe morLgages, such as Clls.
1hese are llkewlse expecLed Lo exerclse greaLes care and
prudence ln lLs deallngs, lncludlng Lhose lnvolvlng
reglsLered land. C5l5 v. 5ootloqo
d. LlablllLy for negllgence
ku|es for determ|n|ng neg||gence:
negllgence ls Lhe omlsslon Lo do someLhlng whlch a
reasonable man, gulded by Lhose conslderaLlons whlch
ordlnarlly regulaLe Lhe conducL of human affalrs, would
do, or Lhe dolng of someLhlng whlch a prudenL and
reasonable man would do. l8comm v. cA
1est: uld Lhe defendanL, ln dolng Lhe acL, use LhaL
reasonable care and cauLlon whlch an ordlnary prudenL
person would ln Lhe same poslLlon (dlllgence of a good
faLher of a famlly) See l8comm v. cA, llcott v. 5mltb
ll he dld noL, Lhen he ls gullLy of negllgence. 1he law
here ln effecL adopLs Lhe sLandard supposed Lo be
supplled by Lhe lmaglnary conducL of Lhe dlscreeL potet
fomlllos of Lhe 8oman law. 1he exlsLence of negllgence
ln a glven case ls noL deLermlned by referebce Lo Lhe
personal [udgmenL of Lhe acLor ln Lhe slLuaLlon before
hlm. 1he law conslders whaL would be reckless,
blameworLhy or negllgenL ln Lhe man of ordlnary
lnLelllgence and prudence, and deLermlnes llablllLy by
LhaL. l8comm v. cA
ln conLracLual negllgence (colpo coottoctool) once Lhe
plalnLlff proves a breach of conLracL, Lhere ls a
presumpLlon LhaL Lhe defendanL was aL faulL or
negllgenL. uocLrlne of lasL clear chance noL appllcable ln
colpo coottoctool because nelLher Lhe conLrlbuLory
negllgence of one parLy (bank) nor lLs lasL chance Lo
avold Lhe loss would exoneraLe Lhe oLher parLy
(deposlLor) from llablllLy. Such conLrlbuLory negllgence
or lasL chance merely serves Lo reduce Lhe recovery of
damages by Lhe plalnLlff buL does noL exculpaLe Lhe
deposlLor from hls breach of conLracL. coosollJoteJ
8ook v. cA
1he flduclary naLure of banklng does noL converL a
slmple loan (conLracL beLween deposlLor and bank) lnLo
a LrusL agreemenL (wheLher expressly or lmplledly)
because banks for noL accepL deposlLs Lo enrlch
deposlLors buL Lo earn money for Lhemselves. lallure
by Lhe bank Lo pay Lhe deposlLor ls fallure Lo pay a
slmple loan, and noL a breach of LrusL. 1he law slmpelu
lmposes a Lhe bank a hlgher sLandard of lnLegrlLy and
eprfomrance ln complylng wlLh lLs obllgaLlons under Lhe
conLracL of slmple loan, beyond Lhose requlred of non-
bank debLors under a slmllar conLracL of slmple loan.
lblJ.
Award of actua|, mora|, compensatory and temperate
damages:
1emperaLe damages - lf Lhere ls loss, buL amounL of
damage noL deLermlnable

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
1he flnanclal credlL of a buslnessman ls a prlzed and
valuable asseL, lL belng a slgnlflcanL parL of Lhe
foundaLlon of lLs buslness. Any adverse reflecLlon
Lhereon consLlLuLes some maLerlal loss Lo hlm. ln Lhe
uS< LemperaLe damages are allowed. 1here were cases
where form Lhe naLure of Lhe case, deflnlLe proof of
pecunlary loss cannoL be offered, alLhough Lhe courL ls
convlnced Lhere has been such loss. lor lnsLance, ln[ury
Lo one's commerclal credlL or Lo Lhe goodwlll of Lhe
buslness flrm ls ofLen hard Lo show wlLh cerLalnLy wlLh
money. 1hus, LemperaLe damages may be awarded.
Atooeto v. 8ook of Ametlco
Moral damages - lnclude physlcal sufferlng, menLal
angulsh, serlous anxleLy, besmlrched repuLaLlon,
wounded feellngs, moral shock, soclal humlllaLlon, and
slmllar ln[ury. AlLhough lncapable of pecunlary
esLlmaLlon, moral damages may be recovered lf Lhey are
Lhe proxlmaLe resulL of Lhe defendanL's wrongful acL or
omlsslon. cltyttost v. vllloooevo
under Lhe Clvll Code, besmlrched repuLaLlon" ls a
ground upon whlch moral damages can be clalmed.
Atooeto v. 8ook of Ametlco
8equlslLes for Lhe award of moral damages:
1) 1here musL be an ln[ury, wheLher physlcal,
menLal or psychologlcal clearly susLalned by Lhe
clalmanL
2) 1here musL be a culpable acL or omlsslon
facLually esLabllshed
3) 1he wrongful acL or omlsslon of Lhe defendanL
ls Lhe proxlmaLe cause f Lhe ln[ury susLalned by
Lhe clalmanL
4) 1he award of damages ls predlcaLed on any of
Lhe cases sLaLed ln ArL. 2219 of Lhe Clvll Code
(cltyttost v. vllloooevo)
Lxemplary damages allowed as an example for publlc
good.
k|ght to recover aga|nst err|ng emp|oyee: noL
mandaLory, lL ls asserLed ln a proper pleadlng ln Lhe
courLs.
ArL. 2181 of Lhe Clvll Code merely glves Lhe employer
Lhe rlghL of relmbursemenL from Lhe employee for whaL
ls pald Lo Lhe offended parLy. lL does nC1 make recovery
from Lhe employee a mandaLory requlremenL. A rlghL Lo
rellef shall be recognlzed only when Lhe parLy concerned
asserLs lL Lhrough a proper pleadlng flled ln courL. loclflc
8ook v. cA
L. Author|ty to Cperate
8y-laws, arLlcles of lncorporaLlon musL be wlLh Lhe
favorable recommendaLlon of Lhe 8S (cerLlflcaLe of
auLhorlLy under lLs seal).
Incorporat|on: noL reglsLered unLll auLhorlLy ls
presenLed
8S auLhorlLy lssued when:
7 All requlremenLs of laws have been complled
wlLh
7 ubllc lnLeresL and economlc condlLlons [usLlfy
auLhorlzaLlon
7 amounL of caplLal, Lhe flnanclng, organlzaLlon,
dlrecLlon and admlnlsLraLlon, as well as Lhe
lnLegrlLy and responslblllLy of Lhe organlzers
and admlnlsLraLors reasonably assure Lhe safeLy
of deposlLs and Lhe publlc lnLeresL.
Cperat|on:
AuLhorlLy from Lhe MoneLary 8oard (M8) requlred
M8 Lo deLermlne wheLher or noL lL ls engaged ln
banklng/quasl-banklng (examlne, lnvesLlgaLe or lnspecL
books, records, eLc.)
Unauthor|zed advert|sement]bus|ness representat|on:
CannoL hold lLself ouL as a bank unless speclflcally
auLhorlzed
Sanct|ons for operat|ng w|thout author|ty: Sub[ecL Lo
approprlaLe sancLlons under Lhe new CenLral 8ank AcL
and oLher appllcable laws.
A corporaLlon, whlch mlsused lLs corporaLe funds and
franchlse by engaglng ln lllegal banklng, may be
dlssolved. lLs acLs were wlllful, whlch were repeaLed and
conLlnuance of lLs lllegal operaLlons causes publlc ln[ury
owlng Lo Lhe number of persons affecLed Lhereby. A wrlL
of poo wottooto for lLs dlssoluLlon ls proper. kepobllc v.
5ecotlty cteJlt
1he law requlrlng compllance wlLh cerLaln requlremenLs
before anyone can engage ln banklng obvlously seeks Lo
proLecL Lhe publlc agalnsL acLual, as well as poLenLlal
ln[ury. ceottol 8ook v. Motfe

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
Sanct|ons:
Cffender ls a dlrecLor or offlcer of a bank, quasl-bank or
LrusL enLlLy - M8 may also suspend or remove such
dlrecLor or offlcer.
CommlLLed by a corporaLlon - such corporaLlon may be
dlssolved by quo warranLo proceedlngs lnsLlLuLed by Lhe
SollclLor Ceneral.
II. C|ass|f|cat|on of 8anks
under Lhe C8L: Lhere may be oLher classlflcaLlons as
deLermlned by Lhe 8S/M8.
A. Un|versa| 8anks (U8)
Covernlng law: C8L
owers: Pas powers of a commerclal bank, lnvesLmenL
house, and may lnvesL ln non-allled enLerprlses (only
wlLh M8 approval)
LlmlLs on u8 exerclse of lnvesLmenL house powers:
7 Sub[ecL Lo perLlnenL laws and SLC regulaLlons
7 lf lnvesLmenL house funcLlons performed
dlrecLly by u8, such funcLlons shall be
underLaken by separaLe depL./unlL
7 u8 cannoL perform funcLlons of lnvesLmenL
house boLh dlrecLly (Lhrough separaLe
depL/unlL) and lndlrecLly (Lhrough a subsldlary)
8. Commerc|a| 8anks
Covernlng Law: C8L
owers: accepLlng drafLs, lssulng L/Cs, dlscounLlng and
negoLlaLlng /ns, drafLs, bllls of exchange, and oLher
evldences of credlL, accepLlng/creaLlng demand
deposlLs, recelvlng oLher Lypes of deposlLs and deposlL
subsLlLuLes, buylng & selllng forex and gold/sllver
bulllon, acqulrlng markeLable bonds and oLher debL
securlLles, exLendlng credlL.
lL may engage ln quasl-banklng funcLlons, lnvesL ln
equlLy of allled enLerprlses, purchase, hold and convey
real esLaLe.
CLher servlces:
7 recelve ln cusLody funds, documenLs and
valuable ob[ecLs
7 acL as flnanclal agenL and buy and sell, by order
of and for Lhe accounL of cusLomers, shares,
evldences of lndebLedness and all Lypes of
securlLles
7 make collecLlons and paymenLs for Lhe accounL
of oLhers and perform such oLher servlces for
Lhelr cusLomers as are noL lncompaLlble wlLh
banklng buslness
7 upon prlor approval of M8, acL as managlng
agenL, advlser, consulLanL, admlnlsLraLor of
lnvesLmenL managemenL/advlsory/consulLancy
accounLs
7 renL ouL safeLy deposlL boxes
lL may also lssue guaranLees.
C. 1hr|ft 8anks
Covernlng Law:
7 CrganlzaLlon, ownershlp, caplLal requlremenLs,
powers, supervlslon and general conducL of
buslness: 1hrlfL 8anks AcL
7 neL worLh Lo rlsk asseL raLlo: C8L
7 CLher maLLers: C8L of suppleLory appllcaLlon
ueclaraLlon of pollcy: lndlspensable role of prlvaLe secLor
recognlzed, promoLe economlc developmenL, eLc.
ueflnlLlon and purpose:
a. Composed of:
7 savlngs and morLgage banks
7 sLock savlngs and loans assoc. and
7 prlvaLe developmenL banks
b. lor Lhe purposes of:
7 accumulaLlng savlngs of deposlLors and
lnvesLlng Lhem ln markeLable bond and oLher
debL securlLles, commerclal papers and
accounLs recelvable, drafLs, bllls of exchange,
accepLances, or noLes arlslng ouL of commerclal
LransacLlons
7 provldlng shorL-Lerm worklng caplLal, medlum
and long-Lerm flnanclng Lo buslnesses engaged
ln agrlculLure, servlces, lndusLry and houslng
7 provldlng dlverslfled flnanclal and allled
servlces for lLs chosen markeL and
consLlLuencles speclally for small and medlum
enLerprlses and lndlvlduals.
owers: open savlngs and Llme deposlLs, currenL and
checklng accounLs (so long as neL asseLs worLh 20m),
acL as correspondenL for oLher flnanclal lnsLlLuLlons,
collecLlon agenL of Lhe governmenL, eLc.

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
D. kura| 8anks
Covernlng Law:
7 CrganlzaLlon, ownershlp, caplLal requlremenLs,
powers, supervlslon and general conducL of
buslness: 8ural 8anks AcL
7 CLher maLLers: C8L suppleLory appllcaLlon
ueclaraLlon of pollcy: need Lo promoLe comprehenslve
rural developmenL Lo aLLaln equlLable dlsLrlbuLlon of
opporLunlLles, lncome and wealLh, susLalned lncrease ln
Lhe amounL of goods produced by Lhe naLlon for Lhe
beneflL of Lhe people, expandlng producLlvlLy as a key Lo
ralslng quallLy of llfe for all, especlally Lhe
underprlvlleged.
owers: AccepL savlngs and Llme deposlLs, open currenL
and checklng accounLs (so long as neL asseLs are worLh
3m), correspondenL of oLher flnanclal lnsLlLuLlons, eLc.
L. Cooperat|ves 8anks (Coop 8anks)
Covernlng Law:
7 CrganlzaLlon, ownershlp, caplLal requlremenLs,
powers, supervlslon and general conducL of
buslness: CooperaLlve Code
7 CLher maLLers: C8L of suppleLory appllcaLlon
ueclaraLlon of ollcy: fosLer Lhe creaLlon and growLh of
cooperaLlves as a pracLlcal vehlcle for promoLlng self-
rellance and harnesslng people power Lowards Lhe
aLLalnmenL of economlc developmenL and soclal [usLlce,
encourage Lhe prlvaLe secLor Lo underLake Lhe acLual
formaLlon and organlzaLlon of cooperaLlves and shall
creaLe an aLmosphere LhaL ls conduclve Lo Lhe growLh
and developmenL of Lhese cooperaLlves, eLc.
ueflnlLlon - Crganlzed by Lhe ma[orlLy shares of whlch ls
owned and conLrolled by cooperaLlves, prlmarlly Lo
provlde flnanclal and credlL servlces Lo coops.
luncLlons: provlde flnanclal and credlL servlces Lo
cooperaLlves and perform servlces offered by 88s.
owers: Same as 88s.
I. Is|am|c 8anks
Covernlng Law: CrganlzaLlon, ownershlp, caplLal
requlremenLs, powers, supervlslon and general conducL
of buslness - lslamlc 8ank CharLer
G. Cther C|ass|f|cat|on of 8anks
7 Land 8ank of Lhe hlllpplnes
7 uevelopmenL 8ank of Lhe hlllpplnes
7 hlllpplne veLerans 8ank
7 hlllpplne naLlonal 8ank (now prlvaLlzed)
awnshops:
7 lL ls engaged ln lendlng money on personal
properLy dellvered as a securlLy for loans and
synonymous or lnLerchangeable wlLh
pawnbroker or pawnbrokerage.
7 lL ls LreaLed as a non-bank flnanclal
lnLermedlary, under Lhe supervlslon of Lhe 8S
and covered by lLs manual of regulaLlons for
non-bank flnanclal lnsLlLuLlons. lltst llootets v.
clk

n. Iore|gn 8anks
Lntry of Iore|gn 8anks
Modes of LnLry:
7 8? acqulrlng, purchaslng or borrowlng up Lo
60 of Lhe voLlng sLock of an exlsLlng domesLlc
bank
7 8y lnvesLlng ln up Lo 60 of a new banklng
subsldlary lncorporaLed under Lhe laws of Lhe
hlls.
7 8y esLabllshlng branches wlLh full banklng
auLhorlLy
LnLry sub[ecL Lo approval of Lhe M8.
lorelgn bank may avall of only one mode of enLry, buL
may change from one mode Lo anoLher mode of enLry.
May own up Lo 60 of Lhe voLlng sLock of only 1
domesLlc bank of new banklng subsldlary.
ConLrol of 70 of resources/asseLs of enLlre banklng
sysLem musL be held by banks whlch are aL leasL
ma[orlLy-owned by llllplnos.
ku|es on acqu|s|t|on of vot|ng stock |n ex|st|ng domest|c
bank:
7 May own up Lo 60 of voLlng sLock of only 1
domesLlc bank
7 WlLhln 7 years from C8L effecLlvlLy, M8 may
auLhorlze forelgn bank:

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
1o acqulre up Lo 100 voLlng sLock of only 1
domesLlc bank
Whlch acqulred up Lo 60 of voLlng sLock under
Lhe lorelgn 8anks LlberallzaLlon AcL and 1hrlfL
8anks AcL, Lo furLher acqulre up Lo 100 voLlng
sLock Lhereof.
7 M8 shall secure Lhe llsLlng ln Lhe SL of Lhe
shares of sLocks of banks esLabllshed under Lhls
mode of enLry (1hls ls Lo encourage Lhe publlc
Lo lnvesL, and Lhe corporaLlon ls sub[ecLed Lo
sLrlngenL regulaLory framework)
7 Llcense Lo do buslness noL requlred. LqulLy
lnvesLmenL ls noL deemed dolng buslness.
ku|es on acqu|s|t|on of vot|ng stock |n new domwst|c
bank:
7 May own up Lo 60 of only 1 exlsLlng new bank
subsldlary
7 MusL be among Lhe Lop 130 forelgn banks ln
Lhe world or Lhe Lop 3 banks ln Lhelr counLry of
orlgln as of Lhe daLe of appllcaLlon shall be
allowed enLry.
7 M8 shall secure Lhe llsLlng ln Lhe SL of Lhe
shares of sLocks of banks esLabllshed under Lhls
mode of enLry
7 MusL be wldely owned and publlcly-llsLed ln lLs
counLry of orlgln, unless appllcanL ls owned by
governmenL Lhereof
7 CaplLallzaLlon ls equal Lo Lhose of domesLlc
banks ln Lhe same caLegory
7 Llcense Lo do buslness noL requlred, equlLy
lnvesLmenL ls noL deemed dolng buslness.
ku|es on estab||sh|ng 8ranches:
Covernlng Law:
CreaLlon, formaLlon, organlzaLlon, or dlssoluLlon of
corporaLlons, flxlng of relaLlons, llablllLles,
responslblllLles, or duLles of sLockholders, members,
dlrecLors or offlcers of corporaLlons Lo each oLher and
Lhe corporaLlon: Law of place where forelgn bank was
esLabllshed.
LnLry lnLo Lhe hlls. 1hrough esLabllshmenL of branches:
lorelgn 8anks LlberallzaLlon AcL
ConducL of offshore banklng buslness: u 1034
Cffshore 8anklng uecree"
CLher maLLers: C8L
7 MusL be among Lhe Lop 130 forelgn banks ln
Lhe world or Lhe Lop 3 banks ln Lhelr counLry of
orlgln as of Lhe daLe of appllcaLlon shall be
allowed enLry.
7 MusL be wldely owned and publlcly-llsLed ln lLs
counLry of orlgln, unless appllcanL ls
governmenL-owned
7 1lme llmlLaLlon of enLry: WlLhln 3 years from
effecLlvlLy of Lhe lorelgn 8anks LlberallzaLlon
AcL
7 CaplLallzaLlon: 210,000,000, lnwardly remlLLed
and converLed lnLo hll. Currency for Lhose wlLh
3 branches. 33m for addlLlonal 3 branches
(buL noL Lo exceed 6)
7 1reaLmenL of mulLlple branches: All branches
LreaLed as one unlL, and all references Lo such
branches shall be held Lo refer Lo such unlLs.
8uL, such LreaLmenL only refers Lo unlversal or
commerclal banks under Lhe lorelgn 8anks
LlberallzaLlon AcL
8ranches are dlsLlncL from Lhe head offlce and
forelgn branches abroad.
lf a cllenL obLalns a loan from a forelgn bank's
hll. 8ranch, lL does noL absoluLely and
auLomaLlcally make Lhe cllenL a debLor as well
of Lhe head offlce and all oLher branches of Lhe
forelgn bank around Lhe world. cltlbook v.
5obeolooo
7 Pead offlce guaranLee: lully guaranLee prompL
paymenL of all llablllLles of hlllpplne branch.
CredlLors who are resldenLs or clLlzens
preferred as Lo asseLs
7 MusL be llcensed Lo LransacL buslness: May noL
flle acLlons, buL may be sued on valld cause. lL ls
Lhe dolng of buslness wlLhouL a llcense whlch
bars access Lo courLs, noL Lhe lack of llcense. A
bank noL dolng buslness ln Lhe hll. need noL
posses a SLC llcense Lo sue before hll. CourLs.
noo looq 8ook v. 5ooloq
7 Summons and legal processes: Made upon hll.
AgenL or head deslgnaLed, lf none, Lo Lhe 8S
depuLy Covernor ln charge of supervlsory and
examlnlng deparLmenL, who malls a copy Lo Lhe
head offlce. 8eglsLry recelpL wlll be prlma facle
evldence of Lhe Lransmlsslon. All cosLs of Lhe
uepuLy Cov. pald ln advance by Lhe parLy who
soughL Lo make servlce.
7 8evocaLlon of llcense: Llcense may be revoked
by M8 lf lnsolvenL or ln lmmlnenL danger
Lhereof, or LhaL lLs conLlnuance ln buslness wlll
lnvolve probable loss Lo Lhose LransacLlng

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
buslness wlLh lL. AfLer revocaLlon, 8S Lo Lake
acLlon Lo proLecL credlLors and Lhe publlc.
Cffshore 8ank|ng Un|ts
Cffshore 8anklng - 8efers Lo Lhe conducL of banklng
LransacLlon ln forelgn currencles lnvolvlng recelpL of
funds from exLernal sources and Lhe uLlllzaLlon of such
funds as provlded by Lhe Cffshore 8anklng SysLem
uecree.
Cffshore 8anklng unlL - a branch, subsldlary, or afflllaLe
of a forelgn banklng corporaLlon whlch ls duly
auLhorlzed by Lhe CenLral 8ank of Lhe hlls. 1o LransacL
offshore banklng buslness ln Lhe hlls.
CuallflcaLlon: Cnly banks recognlzed under any law
oLher Lhan hll. Law may an C8u, afLer lssuance of
cerLlflcaLe of auLhorlLy by Lhe M8 and reglsLraLlon wlLh
Lhe SLC.
LxcepLlon: local branches of forelgn banks already
auLhorlzed Lo accepL forelgn currency deposlLs may opL
Lo apply for auLhorlLy, provlded LhaL once Lhey are lssue
auLhorlLy Lo operaLe C8u, Lhelr auLhorlLy Lo accepL
forelgn currency deposlLs under 8A 6426 wlll be deemed
auLomaLlcally wlLhdrawn.
Pead Cfflce CuaranLee: appllcanL musL flrsL submlL Lo
8S a sworn underLaklng of lLs head
offlce/parenL/holdlng company, duly supporLed by an
approprlaLe resoluLlon of lLs 8ou, sLaLlng:
lL wlll, on demand, provlde Lhe necessary
speclfled currencles Lo cover llquldlLy needs
LhaL may arlse or oLher shorLfall LhaL lLs C8u
may lncur,
Lhe operaLlons of lLs C8u wlll be managed
soundly and wlLh prudence,
lL wlll Lraln and conLlnually educaLe a speclflc
number of llllplnos ln lnLernaLlonal banklng and
forelgn exchange Lradlng wlLh a vlew Lo
reduclng Lhe number of expaLrlaLes,
provlde and malnLaln ln lLs C8u neL offlce funds
ln Lhe mlnlmum amounL of uS$1m, and
lL wlll sLarL operaLlons of C8u wlLhln 180 days
from recelpL of cerLlflcaLe of auLhorlLy.
LffecLs of cerLaln laws: usury law, unlform Currency
Law, and ueposlL lnsurance Law, do noL apply Lo
LransacLlons/deposlLs of C8us. 8uL deposlLs sub[ecL Lo
Secrecy of 8ank ueposlLs Law.
III. Depos|t Iunct|on
A. Nature of Depos|t
Depos|t as s|mp|e |oans
ArL 1333 Clvll Code: A person who recelves a loan of
money or any oLher funglble Lhlng acqulres Lhe
ownershlp Lhereof, and ls bound Lo pay Lhe credlLor an
equal amounL of Lhe same klnd and quallLy.
ArL. 1980 Clvll Code: llxed, savlngs, and currenL deposlLs
of money ln banks and slmllar lnsLlLuLlons shall be
governed by Lhe provlslons concernlng slmple loan.
8ank deposlLs are ln Lhe naLure of lrregular deposlLs.
1hey are really loans because Lhey earn lnLeresL. All
klnds of deposlLs, wheLher flxed, savlngs, or currenL as Lo
be LreaLed as loans and are Lo be covered by Lhe law on
loans. CurrenL and savlngs deposlLs are loans Lo a bank
because lL can use Lhe same. 5ettooo v. ceottol 8ook
8ank as Debtor
Depos|t |s vo|untary agreement: know your
customer standards
8anks requlred Lo seL 3 speclmen slgnaLure from each
deposlLor, and updaLe Lhese every 3 years of sooner.
May be requlre Lo submlL lu phoLos along wlLh speclmen
slgnaLures.
8ank acqu|res ownersh|p of money depos|ted: lL has
Lhe obllgaLlon Lo pay Lhe amounL, buL noL Lo reLurn Lhe
same exacL money. 1he bank may use Lhe amounL
deposlLed for lLs banklng operaLlons.
1he relaLlonshlp beLween Lhe deposlLor and Lhe bank ls
LhaL or credlLor and debLor. ConsequenLly, Lhe
ownershlp of Lhe amounL deposlLed ls LransmlLLed Lo
Lhe bank upon Lhe perfecLlon of Lhe conLracL, and lL can
make use of Lhe amounL deposlLed for lLs banklng
operaLlons, such as Lo pay lnLeresL on deposlLs, and Lo
pay wlLhdrawals. Coloqooo v. clty llscol
Money bears no earmarks of pecullar ownershlp. lLs
prlmary funcLlon ls Lo pass from hand Lo hand as a
medlum of exchange, wlLhouL evldence of lLs LlLle.
Money, whlch passed Lhrough varlous LransacLlons ln
Lhe general course of banklng buslness, even lf of
Lraceable orlgln, bears no earmarks of pecullar
ownershlp. 8ll v. ltooco
ayment to proper party-depos|tor

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
A deposlLor ls presumed Lo be Lhe owner of funds
sLandlng ln hls name ln a bank deposlL, and where a
bank ls nor chargeable wlLh noLlce LhaL Lhe money
deposlLed Lhereln ls Lhe properLy of anoLher person, lL ls
[usLlfled ln paylng ouL Lhe money Lo Lhe deposlLor, or
upon hls order, and ln so dolng cannoL be held llable Lo
any oLher person as Lhe Lrue owner. loltoo v. cbloo
8ook. 1he bank has no obllgaLlon Lo make Lhe
appllcaLlon of deposlLs Lo Lhe paymenL of a debL
lncurred by deposlLor wlLh lL. 1o apply Lhe deposlL Lo Lhe
paymenL of a loan ls a prlvllege, a rlghL Lo seL-of whlch
Lhe bank has Lhe rlghL Lo exerclse (or choose noL Lo
exerclse). 8ll v. cA
aymenL Lo a wrong parLy, however, does noL exLlngulsh
a loan. ln such a case, Lhe bank ls llable.
Depos|ts are not preferred cred|ts
llxed, savlngs and currenL deposlLs of money ln banks
are noL Lrue deposlLs. 1hey are consldered slmple loans
and, as such, are noL preferred credlLs. ueposlLors are
prevenLed from havlng an undue advanLage or
preference over oLher credlLors and deposlLors. A
general deposlLor of a bank ls merely a general credlLor,
and as such, ls noL enLlLled Lo any preference or prlorlLy
over Lhe oLher general credlLors. ceottol 8ook v. Motfe
8ank's r|ght to compensat|on
A bank has Lhe rlghL of seL-off of Lhe deposlLs ln lLs
hands for Lhe paymenL of any lndebLedness Lo lL on Lhe
parL of Lhe deposlLor. A deposlLor ls consldered Lhe
credlLor of Lhe bank, and Lhe bank ls Lhe debLor. When
Lhe deposlLor ls also Lhe debLor of Lhe bank, Lhen, Lhe
parLles belng a credlLor and debLor of each oLher,
compensaLlon may Lake place. Collos v. lN8
Slnce Lhe relaLlon beLween a bank and a deposlLor ls
LhaL of a debLor and a credlLor, Lhe deposlLor has Lhe
rlghL Lo apply hls deposlLs/credlL wlLh Lhe bank agalnsL
Lhe loans he had obLalned from hls deposlLs. kepobllc v.
cA
A bank generally has Lhe rlghL of seL-of over Lhe deposlLs
Lhereln for Lhe paymenL of any wlLhdrawals on Lhe parL
of a deposlLor. 1he bank may deblL Lhe cllenL's accounL
for Lhe value of a dlshonoured check LhaL has been
prevlously credlLed Lo lL. 8uL such musL sLlll be exerclsed
wlLh meLlculous care, and noL done arblLrarlly. 8ll v. cA
No breach of trust, Mandamus not a remedy
8ank deposlLs are ln Lhe naLure of lrregular deposlLs -
Lhey are really loans for earnlng lnLeresL. All klnds of
deposlLs are LreaLed as loans. Mandamus does noL lle Lo
enforce performance of conLracLual obllgaLlons, and
Lhus, cannoL be used Lo enforce conLracL of slmple loan
beLween bank and deposlLor. locmoo v. Molowl
8. k|nds of Depos|ts
Demand Depos|ts: 1hose llablllLles of Lhe 8S/oLher
banks ln hll. Currency and sub[ecL Lo paymenL ln legal
Lender upon demand, by presenLaLlon of checks.
Check - noL legal Lender, sub[ecL Lo approval of credlLor,
buL once accepLed and placed ln accounL of credlLor, ls
equlvalenL Lo paymenL.
lor u8 and uk - may accepL/creaLe demand deposlLs
even wlLhouL approval of Lhe M8.
lor 18 - may open such so long as lL has neL asseLs of aL
leasL 20m
lor 88/Coop 8ank - MusL have neL asseLs of aL leasL
3m
lslamlc 8anks - may open currenL or checklng accounLs
Sav|ngs Depos|ts
A llxed savlngs deposlL (lSu), llke a Llme deposlL,
provldes for a hlgher lnLeresL raLe when Lhe deposlL ls
noL wlLhdrawn wlLhln Lhe requlred flxed perlod,
oLherwlse, lL earns lnLeresL perLalnlng Lo regular savlngs
deposlL. lotetootloool xcbooqe 8ook v. clk
A Cert|f|cate of depos|t ls a wrlLLen acknowledgmenL by
a bank or a banker of Lhe recelpL of a sum of money on
deposlL, whlch Lhe bank of banker promlses Lo pay Lo
Lhe deposlLor, Lo Lhe order of Lhe deposlLor, or Lo some
oLher person or hls order, whereby Lhe relaLlon of
debLor and credlLor beLween Lhe bank and deposlLor ls
creaLed. cbloo 8ook v. clk
Negot|ab|e Crder of W|thdrawa| (NCW) Accounts
7 1hese are lnLeresL-bearlng deposlL accounLs
LhaL comblne Lhe payable on demand feaLure of
checks and lnvesLmenL feaLures of savlngs
accounLs. noL negoLlable nuL may glve rlse Lo
esLafa.
7 u8/k8 may offer such accounL even wlLhouL
prlor auLhorlLy

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
7 18/88/Coop bank may offer upon prlor
auLhorlLy of M8
nCW accounLs are deflned as lnLeresL-bearlng deposlL
accounLs LhaL comblne Lhe payable on demand feaLure
of checks and Lhe lnvesLmenL feaLure of savlngs
accounLs. leople v. keyes
1|me Depos|ts
7 1lme deposlLs are lssue for a speclfled perlod of
Lerm.
A Llme deposlL ls deflned as on Lhe paymenL lf whlch
cannoL legally be requlred wlLhln such a speclfled
number of days. 8ll lomlly v. lltst Metto
Pavlng a flxed Lerm and Lhe reducLlon of lnLeresL raLe ln
case of pre-LermlnaLlon are essenLlal feaLure of a Llme
deposlL. lotetootloool xcbooqe 8ook v. clk
Iore|gn Currency Depos|ts
7 ueposlLs of forelgn currencles, whlch are parL of
naLlonal reserves, ln hlllpplne banks.
Money Market |acements
A money markeL ls a markeL deallng ln sLandardlzed
shorL-Lerm credlL lnsLrumenLs (lnvolvlng large amounLs)
where lenders and borrowers do noL deal dlrecLly wlLh
each oLher, buL Lhrough a mlddle man or dealer ln open
markeL. ln a money markeL LransacLlon, Lhe lnvesLor ls a
lender, who loans hls money Lo a borrower Lhrough a
mlddleman or dealer. AllleJ 8ook v. llm 5lo woo
7 1he lender ls noL Lhe deposlLor vls-avls Lhe bank
as debLor
7 lL ls more of an lnvesLmenL and noL necessarlly
a deposlL (and Lhus, a dlfferenL Lype of loan)
7 1he bank ls a mere condulL, and noL free Lo use
Lhe money ln any way lL wanLs.
C. Capac|ty of Depos|tors
M|nors - AL leasL 7 years old, able Lo read and wrlLe wlLh
sufflclenL dlscreLlon, and noL oLherwlse dlsquallfled by
any oLher lncapaclLy. arenLs may also deposlL for Lhelr
chlldren, guardlans for Lhelr wards.
Women - Same capaclLy as men
Corporat|ons - 1hrough slgnaLorles deslgnaLed by Lhe
8ous: vla resoluLlon by Lhe 8oard, cerLlfled by Lhe
SecreLary and slgned by members of Lhe 8oard.
8ank Cff|cers and Lmp|oyees - rohlblLed form
malnLalnlng demand deposlLs or currenL accounLs ln
banklng offlce where Lhey are asslgned.
Lmployees - 1hose wlLh dlrecL or lmmedlaLe
responslblllLy ln handllng LransacLlons or records for
demand deposlLs or currenL accounLs.
7 1he prohlblLlon also covers Lhelr spouses. And
relaLlves wlLhln Lhe 2
nd
degree.

D. Cpen|ng of Depos|t Accounts
know you customer standards: AL leasL 3 speclmen
slgnaLures updaLed every 3 years, lu plcLure opLlonal.
roh|b|t|ons:
a) Anonymous accounLs or flcLlLlous names
b) seudonyms
LxcepLlon: numbered accounLs (Sec. 9 (A) AMLA)
eso and forelgn currency non-checklng numbered
accounLs shall be allowed. 1he 8S may conducL
annual LesLlng solely llmlLed Lo Lhe deLermlnaLlon of
Lhe exlsLence and Lrue ldenLlLy of Lhe owners of
such accounLs.
numbered accounLs allowed for recordlng and
servlclng of fore|gn currency depos|ts allowed by
Lhe lCuA.
Io|nt Accounts: Share ln beneflLs and charges,
proporLlonal Lo Lhe respecLlve lnLeresLs. resumed
equal unless conLrary ls provlded.
L. Adm|n|strat|on of Depos|t Accounts
Depos|t of Iunds
De||very kequ|red: noL perfecLed wlLhouL dellvery (real
conLracL)
Acceptab|||ty of w|thdrawa| s||ps as depos|ts: 8ank ls
noL bound Lo accepL.

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
1he facL LhaL Lhe oLher wlLhdrawal sllps were honored
and pald by Lhe oLher bank was no llcense for Lhe bank
Lo presume LhaL subsequenL sllps would be honored and
pald lmmedlaLely. lltestooe v. cA
Acceptance of checks w|thout |ndorsement of payees:
A bank LhaL regularly processes checks LhaL are nelLher
payable Lo Lhe cusLomer nor duly lndorsed by Lhe payee
ls apparenLly grossly negllgenL ln lLs operaLlons. ln a
checklng LransacLlon, Lhe drawee bank has Lhe duLy Lo
verlfy Lhe genulneness of Lhe sugnaLure of Lhe drawer
and Lo pay Lhe check sLrlcLly ln accordance wlLh Lhe
drawer's lnsLrucLlons, l.e. Lo Lhe named payee ln Lhe
check. lN8 v. koJtlqoez
A check ls a blll of exchange drawn on a bank payable on
demand.[17] 1here are dlfferenL klnds of checks. ln Lhls
case, crossed checks are Lhe sub[ecL of Lhe conLroversy.
A crossed check ls one where Lwo parallel llnes are
drawn across lLs face or across Lhe corner Lhereof. lL may
be crossed generally or speclally.[18]

A check ls crossed speclally when Lhe name of a
parLlcular banker or a company ls wrlLLen beLween Lhe
parallel llnes drawn. lL ls crossed generally when only
Lhe words "and company" are wrlLLen or noLhlng ls
wrlLLen aL all beLween Lhe parallel llnes, as ln Lhls case. lL
may be lssued so LhaL presenLmenL can be made only by
a bank. ln order Lo preserve Lhe credlL worLhlness of
checks, [urlsprudence has pronounced LhaL crosslng of a
check has Lhe followlng effecLs:
(a) Lhe check may noL be encashed buL only deposlLed
ln Lhe bank,
(b) Lhe check may be negoLlaLed only once - Lo one
who has an accounL wlLh a bank, and
(c) Lhe acL of crosslng Lhe check serves as warnlng Lo Lhe
holder LhaL Lhe check has been lssued for a deflnlLe
purpose so LhaL he musL lnqulre lf he has recelved Lhe
check pursuanL Lo LhaL purpose, oLherwlse, he ls noL a
holder ln due course. Co v. Mettobook
1he CourL has Laken [udlclal cognlzance of Lhe pracLlce
LhaL a check wlLh Lwo parallel llnes ln Lhe upper lefL
hand corner means LhaL lL could only be deposlLed and
noL converLed lnLo cash. 1he effecL of crosslng a check,
Lhus, relaLes Lo Lhe mode of paymenL, meanlng LhaL Lhe
drawer had lnLended Lhe check for deposlL only by Lhe
rlghLful person, l.e., Lhe payee named Lhereln. 1he
crosslng of a check ls a warnlng LhaL Lhe check should be
deposlLed only ln Lhe accounL of Lhe payee. 1hus, lL ls
Lhe duLy of Lhe collecLlng bank Lo ascerLaln LhaL Lhe
check be deposlLed Lo Lhe payee's accounL only. Co v.
Mettobook
A bank ls negllgenL ln permlLLlng Lhe deposlL and
encashmenL of Lhe crossed checks wlLhouL Lhe proper
lndorsemenL. An lndorsemenL ls necessary for Lhe
proper negoLlaLlon of checks speclally lf Lhe payee
named Lhereln or holder Lhereof ls noL Lhe one
deposlLlng or encashlng lL. knowlng fully well LhaL Lhe
sub[ecL checks were crossed, LhaL Lhe payee was noL Lhe
holder and LhaL Lhe checks conLalned no lndorsemenL,
Lhe bank should have Laken reasonable sLeps ln order Lo
deLermlne Lhe valldlLy of Lhe represenLaLlons made by
Lhe person presenLlng lL. ln so dolng, Lhe bank was amlss
ln lLs duLy as an agenL of Lhe payee. rudence dlcLaLes
LhaL respondenL bank should noL have merely relled on
Lhe assurances glven by Lhe person presenLlng Lhe
check. Co v. Mettobook.
Acceptance of Manager's Check
A manager's check ls an order of Lhe bank Lo pay, drawn
upon lLself, commlLLlng lLs resources, lnLegrlLy and honor
behlnd lLs lssuance, and ls regarded Lo be as good as Lhe
money lL represenLs. 5ecotlty 8ook v. kc8c
W|thdrawa| of Iunds:
Irom Current Accounts: Allowlng wlLhdrawal of
check drawn:
7 ln case of lnsufflclency of funds
A bank ls under no obllgaLlon Lo make parL paymenL on a
check, up Lo only Lhe amounL of Lhe drawer's funds,
where Lhe check ls drawn for an amounL larger Lhan
whaL Lhe drawer has on deposlL. Such a pracLlce of
paylng checks has never exlsLed. upon parLlal paymenL,
Lhe check holder could noL be called upon Lo surrender
Lhe check, and Lhe bank would be wlLhouL a voucher
affordlng cerLaln means of showlng Lhe paymenL. 1he
rule ls based on commerclal convenlence, and any rule
LhaL would work such manlfesL lnconvenlence should
noL be recognlzed. A check ls lnLended noL only Lo
Lransfer a rlghL Lo Lhe amounL named ln lL, buL Lo serve
Lhe furLher purpose of affordlng evldence for Lhe bank
for Lhe paymenL of such amounL when Lhe check ls Laken
up. Motoo v. cA

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
lf a bank refuses Lo pay a check (noLwlLhsLandlng Lhe
sufflclency of funds) Lhe payee-holder cannoL sue Lhe
bank - Lhe payee should lnsLead sue Lhe drawer who
mlghL ln Lurn sue Lhe bank. 1hls ls so, slnce Lhere ls no
prlvlLy of conLracL beLween Lhe drawee-bank and Lhe
payee. vllloooevo v. Nlte
7 rlor Lo clearlng: 1he bank assumes Lhe rlsk of
non-paymenL
AlLhough a collecLlng bank has Lhe rlghL Lo deblL a
cllenL's accounL for Lhe value of a dlshonoured check
LhaL has prevlously been credlLed, lL should neverLheless
exerclse such rlghL wlLh Lhe hlghesL degree of dlllgence,
as lL ls a buslness lmpressed wlLh publlc lnLeresL.
AssocloteJ book v. 1oo
7 ln favor of oLher persons when checks crossed:
8ank also assumes Lhe rlsk
1he crosslng of a check should puL a bank on guard. lL
was duLy bound Lo ascerLaln Lhe lndorser's LlLle Lo Lhe
check or Lhe naLure of hls professlon. lLs effecLs are LhaL:
Lhe check may noL be encashed buL only
deposlLed ln Lhe bank
Lhe check may be negoLlaLed only once, Lo a
person who has an accounL wlLh a bank, and
Lhe acL of crosslng a check serves as a warnlng
Lo Lhe holder LhaL Lhe check has been lssued for
a deflnlLe purpose so LhaL he musL lnqulre lf he
has recelved Lhe check pursuanL Lo LhaL
purpose, oLherwlse, he ls noL a holder ln due
course. 1toJets koyol 8ook v. koJlo lblls.
Irom Sav|ngs Accounts: resenLaLlon of
passbook and wlLhdrawal sllp (or A1M)
1he requlremenL of presenLaLlon of passbook when
wlLhdrawlng an amounL cannoL be glven mere llp servlce
even Lhough Lhe person maklng Lhe wlLhdrawal ls
auLhorlzed by Lhe deposlLor Lo do so. 8ll v. cA
Irom 1|me Depos|ts: Surrender cerLlflcaLe of
deposlL
A bank acLs aL lLs perll when lL pays deposlLs evldenced
by a cerLlflcaLe of deposlL, wlLhouL lLs producLlon and
surrender afLer proper lndorsemenL. lot ost 8ook v.
Ooetlmlt
Irom Iore|gn Currency Depos|t Accounts:
8ased on ConLracL
no resLrlcLlon on Lhe wlLhdrawal by Lhe deposlLor or on
Lhe LransferablllLy Lhereof abroad, excepL for Lhose ln
Lhe conLracL.
If deceased depos|tor:
7 Lax clearance requlred from Cl8 (evldence LhaL
proper esLaLe Laxes have been pald) lf bank
knows of deaLh of a deposlLor (wlLh accounL ln
hls own name or [olnL wlLh oLhers) shall noL
allow wlLhdrawals, unLll Cl8 cerLlfles paymenL
of Laxes.
7 Survlvorshlp agreemenLs: valld prlvaLe
conLracLs. ln reallLy lL ls a mere obllgaLlon wlLh
a Lerm belng deaLh. 8uL, lf lL ls shown LhaL such
agreemenL ls a mere cloak Lo hlde an lnofflclous
donaLlon, lL may be assalled and annulled on
such ground. vltoq v. cA
8ook|ng Depos|ts:
C8: ueposlLs are credlLed on Lhe day of Lhelr recelpL or
paymenL
x: A bank may seL a clearlng cuL-off Llme for head offlce,
noL earller LhaL 2 hours before Lhe sLarL of Lhe clearlng
of Lhe 8S, and noL earller LhaL 3 x hourse before sLarL
of clearlng for all lLs branches. 1hose ln areas wlLhouL
8S reglonal/clearlng arrangemenLs, clearlng cuL-off
Llme may be seL noL earller LhaL 2 hours before Lhe sLarL
of local clearlng.
Cash deposlLs - lf recelved afLer clerlng cur-off, booked
on Lhe nexL day of recelpL
non-cash deposlLs (checks, demand drafLs, eLc) - May
be booked as deposlLs on day of recelpL, upon Lhe
opLlon of Lhe bank. lf recelved afLer cuL-off, LreaLed as
conLlngenL accounLs, and booked Lhe nexL banklng day.
Interest on Depos|ts: ln a loan or forebearance of
money, Lhe lnLeresL due should be LhaL sLlpulaLed ln
wrlLlng and ln Lhe absence Lhereof (speclfled raLe), Lhe
raLe shall be 12 per annum counLed from Lhe Llme of
demand. cltlbook v. cobomooqoo
uemand, savlngs, nCW accounLs, 1lme deposlLs, and
deposlL subsLlLuLes not sub[ect to |nterest ce|||ngs.
7 lnLeresL based on conLracL or agreemenL (musL
speclflcally be sLlpulaLed Lo be wlLh lnLeresL)
7 upon demand: legal raLe of lnLeresL - 12 p.a.

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
1lme of paymenL of lnLeresL on Llme deposlL: upon
maLurlLy, or wlLhdrawal ln advance. 8uL noL exceedlng
lnLeresL for 1 year.
MaLured Llme deposlLs: LreaLed as savlngs. lnLeresL ls
from maLurlLy unLll lLs wlLhdrawal or renewal.
Ireez|ng of Account: A bank does noL have Lhe unllaLeral
rlghL Lo freeze accounLs of deposlLors on mere susplclon.
1o granL a bank Lhe rlghL Lo Lake whaLever acLlon lL
pleases on deposlLs whlch lL supposes are derlved from
shady LransacLlons, would open Lhe floodgaLes of publlc
dlsLrusL ln Lhe banklng lndusLry. lcl 8ook v. 8olmoceJo
C|os|ng of Account: A bank may close an accounL when
cllenL conLlnuously draws checks wlLh lnsufflclenL funds.
no mallce or bad falLh could be lmpuLed on a bank for
closlng Lhe accounL of a deposlLor for frequenLly drawlng
checks agalnsL lnsufflclenL funds. nelLher ls Lhere mallce
or bad falLh, buL only negllgence, when Lhe bank accepLs
a deposlL made by Lhe deposlLor Lhe day followlng Lhe
closure of hls accounL. lot ost 8ook v. loclloo
I. Secrecy of 8ank Depos|ts
Genera| ku|es
8aLlonale: 8lghL Lo prlvacy
1here ls a rlghL Lo prlvacy governlng bank accounLs ln
Lhe hlls. As expressed ln Sec. 2 8A 1403 (8ank Secrecy
AcL of 1993). 1here are howeverm excepLlons provlded
ln sald secLlon, and as such may be examlned by any
person, governmenL offlclal, bureau or offlce:
7 upon wrlLLen permlsslon of Lhe deposlLor
7 ln cases of lmpeachmenL
7 LxamlnaLlon of bank accounLs upon order of
compeLenL courL ln cases of brlbery, derellcLlon
of duLy of publlc offlclals
7 Money deposlLed or lnvesLed ls Lhe sub[ecL
maLLer of llLlgaLlon. kepobllc v. oqeolo
Appllcable law: Where Lhe accounLs ln quesLlon are uS
dollar deposlLs, Lhe appllcable law ls 8A 6426 (lCuA),
and noL Lhe 8ank Secrecy law. under Lhe lCuA, Lhe only
excepLlon Lo Lhe secrecy of forelgn currency deposlLs ls
upon wrlLLen permlsslon of Lhe deposlLor. loteoqoo v. cA
1hus, 8ank Secrecy law only applles Lo deposlLs ln
hlllpplne peso.
AppllcablllLy of Lxcluslonary 8ule: 8A 1403 nowhere
provldes LhaL an unlawful examlnaLlon of bank accounLs
shall render Lhe evldence obLalned Lherefrom
lnadmlsslble ln evldence. Sec. 3 only sLaLes LhaL any
vlolaLlon of Lhls law wlll sub[ecL Lhe offender upon
convlcLlon Lo lmprlsonmenL of noL more Lhan 3 year or a
flne of noL more Lhan 20k, or boLh, ln Lhe dlscreLlon of
Lhe courL. jetclto v. 58 1hus, Lhe excluslonary rule ls
only appllcable lf Lhe law or sLaLuLe speclflcally provldes
for excluslon.
ku|es for eso Depos|ts
Coverage: All deposlLs wlLh enLlLles ln Lhe hlls. 1hls
covers only local deposlLs, and Lhose ln oLher
[urlsdlcLlons are noL affecLed.
1he Lerm "deposlLs" used ln Lhe law ls Lo be undersLood
broadly and noL llmlLed only Lo accounLs whlch glve rlse
Lo a credlLor-debLor relaLlonshlp beLween Lhe deposlLor
and Lhe bank. lf Lhe money deposlLed under an accounL
may be used by banks for auLhorlzed loans Lo Lhlrd
persons, Lhen such accounL, regardless of wheLher lL
creaLes a credlLor-debLor relaLlonshlp beLween Lhe
deposlLor and Lhe bank, falls under Lhe caLegory of
accounLs whlch Lhe law preclsely seeks Lo proLecL for Lhe
purpose of boosLlng Lhe economlc developmenL of Lhe
counLry. jetclto v. 58
rohlblLlons: All deposlLs ln Lhe hlllpplnes, lnvesLmenL
bonds lssued by Lhe governmenL, are of an absoluLely
confldenLlal naLure. May noL be examlned, lnqulred or
looked lnLo by any person, governmenL offlclal, bureau
or offlce. Lmployees and offlcers of Lhe bank may noL
dlsclose lnformaLlon re. such. lor Lhls, banks are
prohlblLed form employlng casual personnel ln Lhe
conducL of lLs buslness lnvolvlng bank deposlLs.
Lxcept|ons:
1) Under the Law on Secrecy of 8ank Depos|ts
7 upon wrlLLen permlsslon of Lhe deposlLor
Such as ln:
uCS8l Loans: ulrecLor, offlcers or sLockholders
wlLh relaLed lnLeresLs who wlsh Lo obLaln loans
from hls bank or subsldlary bank of hls bank, or
wlLh conLrolllng lnLeresL ln hls bank and lendlng
bank, ls requlred Lo walve secrecy of bank
deposlLs of whaLever naLure ln all banks ln Lhe
hlllpplnes

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
Loans secured by hold-ouL or asslgnmenL of
cerL. of Llme deposlL: also requlred Lo walve
secrecy
7 ln cases of lmpeachmenL
7 upon order of compeLenL courL ln cases of
brlbery, derellcLlon of duLy of publlc offlclals
7 Money deposlLed or lnvesLed ls Lhe sub[ecL
maLLer of llLlgaLlon.
1he lnqulry lnLo bank deposlLs allowable under 8.A. no.
1403 musL be premlsed on Lhe facL LhaL Lhe money
deposlLed ln Lhe accounL ls |tse|f Lhe sub[ecL of Lhe
acLlon. Clven Lhls perspecLlve, Lhe sub[ecL maLLer of Lhe
acLlon ln Lhe case ls Lo be deLermlned from Lhe
lndlcLmenL LhaL charges respondenL wlLh Lhe offense,
and noL from Lhe evldence soughL by Lhe prosecuLlon Lo
be admlLLed lnLo Lhe records. 85l Ctoop v. Co
2) Under the Ant|-graft and Corrupt ract|ces Act: 8ank
deposlLs shall be Laken lnLo conslderaLlon ln Lhe
enforcemenL of Lhls secLlon, noLwlLhsLandlng any
provlslon of law Lo Lhe conLrary.
1he anLl-grafL acL prevalls over Lhe bank secrecy law. lL
dlrecLs ln mandaLory Lerms LhaL bank deposlLs shall be
Laken lnLo conslderaLlon ln Lhe enforcemenL of Lhe
provlslon on dlsmlssal due Lo unexplalned wealLh,
noLwlLhsLandlng any provlslon of law Lo Lhe conLrary.
1hus, 1he AnLl-CrafL AcL was lnLended Lo amend Sec. of
Lhe 8ank Secrecy Law by provldlng an addlLlonal
excepLlon Lo Lhe rule agalnsL Lhe dlsclosure of bank
deposlLs. lN8 v. Coocoyco
8y enacLlng Sec. 8 of 8A 3019, Congress lnLended Lo
provlde an addlLlonal ground for Lhe examlnaLlon of
bank deposlLs for wlLhouL such provlslon, Lhe
prosecuLors would be hampered lf noL alLogeLher
frusLraLed ln Lhe prosecuLlon of Lhose charged wlLh
havlng acqulred unexplalned wealLh whlle ln publlc
offlce. 8ooco llllploo v. lotlslmo
3) Under the Cmbudsman Act: 1he Cmbudsman has Lhe
power Lo examlne and have access Lo bank accounLs and
records.
8efore an lo cometo lnspecLlon of Lhe CM8 ls allowed,
Lhere musL be a pendlng case before a courL of
compeLenL [urlsdlcLlon. lurLher, Lhe accounL musL be
clearly ldenLlfled, Lhe lnspecLlon llmlLed Lo Lhe sub[ecL
maLLer of Lhe pendlng case before Lhe courL of
compeLenL [urlsdlcLlon. 1he bank personnel and Lhe
accounL holder musL be noLlfled Lo be presenL durlng
Lhe lnspecLlon and such lnspecLlon may cover only Lhe
accounL ldenLlfled ln Lhe pendlng case. Motpoez v.
ulsletto
1he Motpoez rullng LhaL Lhere musL be a pendlng case ln
order for Lhe Cmbudsman Lo valldly lnspecL bank
records ln camera Lhus reversed a prevalllng docLrlne.
Pence, lL may noL be reLroacLlvely applled. jetclto v. 58
4) Under the |under Law: lunder, belng analogous Lo
brlbery, Lhe excepLlon ln 8A 1403 appllcable ln cases of
brlbery, musL also apply Lo cases of plunder. 8rlbery ls
one of Lhe acLs for commlLLlng plunder. jetclto v. 58
S) Under the AMLA: 1he AMLC may lnqulre
lnLo/examlne any parLlcular deposlL or lnvesLmenL wlLh
any banklng lnsLlLuLlon or non-bank flnanclal lnsLlLuLlon
upon order of any compeLenL courL ln cases of vlolaLlon
of Lhe AMLA when lL has been esLabllshed LhaL Lhere ls
probable cause LhaL Lhe deposlLs or lnvesLmenLs
lnvolved are ln any way relaLed Lo a money launderlng
offense.
Lven lf Lhe bank lnqulry order may be avalled of wlLhouL
need of a pre-exlsLlng case under Lhe AMLA, lL does noL
follow LhaL such order may be avalled of ex potte.
kepobllc v. oqeolo
under Lhe AMLA Lhere may be lnqulry:
a) upon order of a compeLenL courL ln cases of
vlolaLlon of Lhe AMLA, where Lhere ls probable
cause of money launderlng, except no courL
order ls requlred ln cases of:
l) kldnapplng for ransom
ll) drug Lrafflcklng
lll) hl[acklng, desLrucLlve arson, murder,
lncludlng Lhose perpeLraLed by LerrorlsLs
agalnsL non-combaLanLs and slmllar LargeLs
b) 8y Lhe 8S lnqulry lnLo or examlnaLlon or
deposlLs or lnvesLmenLs wlLh any bank, when
Lhe lnqulry or examlnaLlon ls mad ln Lhe course
of 8S's perlodlc or speclal examlnaLlon (ln such
cases, Lhe lnqulry ls llmlLed: lL ls noL for Lhe
prosecuLlon and focuses on Lhe bank lLself).
6) Independent aud|tor h|red by the bank to
conduct |ts regu|ar aud|t prov|ded that the
exam|nat|on |s for aud|t purposes on|y and
resu|ts thereof are for the exc|us|ve use of the
bank
7) Under the DIC Charter: ulC has Lhe power Lo
examlne banks wlLh prlor approval of Lhe M8 ln

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
case of LhreaLened closure and unsafe/unsound
banklng pracLlces
8) Under the numan Secur|ty Act: upon order of
Lhe Speclal ulvlslon of Lhe CA, upon flndlng of
probable cause
9) Under the NIkC:
l) upon lnqulry by Lhe Cl8 for deLermlnlng
Lhe neL esLaLe of a deceased deposlLor
ll) ln case a Laxpayer flles an appllcaLlon Lo
compromlse Lax llablllLles on Lhe ground of
flnanclal lncapaclLy (walver requlred)
10) Under the Unc|a|med 8a|ances Law: ulsclosure
Lo Lhe 1reasurer of Lhe hlls. lor dormanL
deposlLs for aL leasL 10 years
11) Under the ku|es of Court
l) CarnlshmenL: Cfflcer may levy on bank
deposlLs of [udgmenL obllgor by servlng
noLlce on person wlLh possesslon or conLrol
of Lhe credlLs.
CarnlshmenL of bank deposlLs of a [udgmenL debLor ls
noL vlolaLlve of 8A 1403. ln such a case, Lhe CourL merely
requlres Lhe cashler of Lhe bank Lo lnform Lhe courL
wheLher or noL Lhe defendanL has a deposlL ln sald bank
for Lhe purposes of garnlshmenL lssued by lL, so LhaL Lhe
bank would hold Lhe same lnLacL and noL allow any
wlLhdrawal unLll furLher order. cbloo 8ook v. Otteqo
ll) rellmlnary ALLachmenL: person ln whose
possesslon Lhe deposlL ls may be requlred
by Lhe courL come before lL under oaLh,
and be examlned regardlng Lhe aLLached
properLy. AfLer, Lhe courL may seek
dellvery of Lhe properLy.
ena|ty for v|o|at|on of kA 140S: lmprlsonmenL noL
more Lhan 3 years, flne noL more LhaL 20k, or boLh.
ku|es Ior Iore|gn Currency Depos|ts
Coverage: All forelgn currency deposlLs
Sec. 113 of C8 Clrcular no. 960, whlch exempLs from
garnlshmenL, aLLachmenL or any oLher order or process
of any courL, leglslaLlve body, governmenL agency, or
any admlnlsLraLlve body whaLsoever, forelgn currency
deposlLs, ls noL appllcable Lo a forelgn LranslenL, buL only
Lo forelgn lenders and lnvesLors Lo Lhe developmenL of
Lhe lorelgn Currency ueposlL SysLem and Cffshore
8anklng SysLem ln Lhe hlls. 5olvocloo v. c8 8uL, Lake
noLe LhaL Lhe rullng ln Lhls case ls pto boc vlce.
roh|b|t|on: All forelgn currency deposlLs cannoL be
examlned, lnqulred or looked lnLo.
Lxcept|ons:
1) Upon wr|tten perm|ss|on of the depos|tor: 1he
only excepLlon Lo Lhe secrecy of forelgn
currency deposlLs ls ln Lhe case of a wrlLLen
permlsslon of Lhe deposlLor. cbloo 8ook v. cA
2) Under the AMLA: upon order of a compeLenL
courL where Lhere ls probable cause of money
launderlng, sub[ecL Lo excepLlons regardlng
order of Lhe courL. Crder of compeLenL courL
noL requlred ln:
l) kldnapplng for ransom
ll) drug Lrafflcklng
lll) hl[acklng, desLrucLlve arson, murder, lncludlng
Lhose perpeLraLed by LerrorlsLs agalnsL non-
combaLanLs
3) 8S |nqu|ry |nto or exam|nat|on of depos|ts or
|nvestments w|th any bank, when the |nqu|ry
or exam |s made |n the course of 8S's
per|od|c or spec|a| exam of sa|d bank
4) Under the DIC Charter: ulC may lnqulre wlLh
Lhe approval of M8, for unsound unsafe
banklng pracLlces.
S) Impeachment not covered: 1hls only applles Lo
Lhe 8ank secrecy law (peso deposlLs), noL Lhe
lCuA (forelgn currency noL covered).
G. Garn|shment
Lxempt Depos|ts:
a) lorelgn currency deposlLs: lorelgn currency
deposlLs exempL from aLLachmenL,
garnlshmenL, or any oLher order or process of
any courL, leglslaLlve body, governmenL agency,
or admlnlsLraLlve body whaLsoever.
b) under Lhe 8ules of CourL: 1here are speclflc
properLles exempL whlch lncludes Lhose
speclflcally exempL by law.
no vlolaLlon of law on secrecy of bank deposlLs: 1he
prohlblLlon agalnsL examlnaLlon of or lnqulry lnLo bank
deposlLs under 8A 1403 does noL preclude garnlshmenL
Lo lnsure Lhe saLlsfacLlon of a [udgmenL. 1here ls no real
lnqulry ln such a case, and lf Lhe exlsLence of Lhe deposlL
ls dlsclosed Lhe dlsclosure was purely lncldenLal Lo Lhe
execuLlon process. lL ls hard Lo concelve LhaL lL was ever

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
wlLhln Lhe lnLenL of Congress Lo enable debLors Lo evade
paymenL of Lhelr [usL debLs, even lf ordered by Lhe
CourL, Lhrough Lhe expedlenL of converLlng Lhelr asseLs
lnLo cash and deposlLlng Lhe same wlLh a bank.
cbloobook v. Otteqo
LlablllLy for release: 1he bank cannoL be held llable lf lL
merely complles wlLh Lhe order of Lhe courL demandlng
Lhe dellvery of Lhe garnlshed amounLs ln check.
SubsequenL encashmenL Lhereof cannoL be made Lhe
llablllLy of Lhe bank as Lhls was upon order of Lhe courL
ln Lhe exerclse of lLs power of conLrol over funds placed
ln costoJlo leqls by vlrLue of Lhe garnlshmenL. kc8c v. ue
costto
n. Depos|t Insurance
Coverage: Covers all deposlL llablllLles of a bank engaged
ln Lhe buslness of recelvlng deposlLs or whlch may ln Lhe
fuLure engage ln.
Amount |nsured: noL Lo exceed 300k, per deposlLor,
co-deposlLor, [olnL accounL holder.
AmounL Lo be pald ln Lhe same currency as LhaL of Lhe
deposlL.
ku|es on ayment: 8y cash or deposlL ln oLher banks.
Cnce pald, ulC subrogaLed Lo Lhe rlghLs of deposlLor as
agalnsL Lhe bank.
L|ab|||ty of DIC: 1here musL flrsL be an acLual deposlL of
money ln Lhe bank. LlablllLy of ulC, as a sLaLuLory
creaLlon, ls also governed prlmarlly by Lhe charLer
creaLlng lL. Such llablllLy resLs on Lhe exlsLence of
deposlLs wlLh Lhe lnsured bank, noL on Lhe negoLlablllLy
or non-negoLlablllLy of Lhe cerLlflcaLes evldenclng Lhe
deposlLs. lulc v. cA
I. Unc|a|med 8a|ances
Unc|a|med 8a|ances - lnclude credlLs or deposlLs of
money, bulllon, securlLy or oLher evldence of
lndebLedness of any klnd, and lnLeresL Lhereon wlLh
banks, bulldlngs and loan assoclaLlons, and LrusL
corporaLlons, as herelnafLer deflned, ln favor of any
person known Lo be dead or who has noL made furLher
deposlLs or wlLhdrawals durlng Lhe precedlng Len years
or more.
keport to treasurer, not|ce, post|ng, pub||cat|on
8ank forsL Lrles Lo communlcaLe wlLh Lhe person
belleved Lo be dead aL hls lasL known place of resldence
or address. 8eporL ls made by Lhe bank Lo Lhe Lreasurer
!anuary of every odd year, by provldlng a sLaLemenL of
Lhelr dlrecLors, under oaLh, of all credlLs and deposlLs
held by Lhem ln favor of persons known Lo be dead, or
who have noL made furLher deposlLs or wlLhdrawals
durlng Lhe precedlng Len years or more, arranged ln
alphabeLlcal order accordlng Lo Lhe names of credlLors
and deposlLors, and showlng:
(a) 1he names and lasL known place of resldence or posL
offlce addresses of Lhe persons ln whose favor such
unclalmed balances sLand,
(b) 1he amounL and Lhe daLe of Lhe ouLsLandlng
unclalmed balance and wheLher Lhe same ls ln money or
ln securlLy, and lf Lhe laLLer, Lhe naLure of Lhe same,
(c) 1he daLe when Lhe person ln whose favor Lhe
unclalmed balance sLands dled, lf known, or Lhe daLe
when he made hls lasL deposlL or wlLhdrawal, and
(d) 1he lnLeresL due on such unclalmed balance, lf any,
and Lhe amounL Lhereof.
osLlng: Copy of Lhe sLaLemenL wlll be posLed ln a
consplcuous place ln Lhe bank
Lscheat roceed|ngs: AcLlon commenced by CSC ln Lhe
81C where bank ls locaLed, and bank ls made a parLy.
Summons ls lssued Lo Lhe bank. noLe of clerk of courL
regardlng deLalls of Lhe case ls publlshed along wlLh Lhe
summons.
Lffects of Comp||ance]non-comp||ance:
8efusal Lo flle a sworn sLaLemenL - 300.00 per monLh
ersons reporLlng are noL llable, and any acLlon agalnsL
Lhe bank arlslng ouL of Lhe acLs underLaken by under Lhe
law wlll be defended by Lhe Sol. Cen.
I. Ant|-Money Launder|ng Act
Dec|ared o||cy: roLecL and preserve Lhe lnLegrlLy and
confldenLlallLy of bank accounLs and Lo ensure LhaL Lhe
hlllpplnes shall noL be used as a money launderlng slLe
for Lhe proceeds of any unlawful acLlvlLy.
Covered transact|ons: 1ransacLlon ln cash or oLher
equlvalenL moneLary lnsLrumenL ln excess of 300k ln
one banklng day

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
Susp|c|ous transact|ons: 1ransacLlon wlLh covered
lnsLlLuLlon regardless of amounL, where any of Lhe
enumeraLed susplclous clrcumsLances exlsL:
1. Lhere ls no underlylng legal or Lrade obllgaLlon,
purpose or economlc [usLlflcaLlon,
2. Lhe cllenL ls noL properly ldenLlfled,
3. Lhe amounL lnvolved ls noL commensuraLe wlLh Lhe
buslness or flnanclal capaclLy of Lhe cllenL,
4. Laklng lnLo accounL all known clrcumsLances, lL may
be percelved LhaL Lhe cllenL's LransacLlon ls sLrucLured ln
order Lo avold belng Lhe sub[ecL of reporLlng
requlremenLs under Lhe AcL,
3. any clrcumsLance relaLlng Lo Lhe LransacLlon whlch ls
observed Lo devlaLe from Lhe proflle of Lhe cllenL and/or
Lhe cllenL's pasL LransacLlons wlLh Lhe covered
lnsLlLuLlon,
6. Lhe LransacLlon ls ln any way relaLed Lo an unlawful
acLlvlLy or offense under Lhls AcL LhaL ls abouL Lo be, ls
belng or has been commlLLed, or
7. any LransacLlon LhaL ls slmllar or analogous Lo any of
Lhe foregolng.
Covered Inst|tut|ons:
1) 8anks and oLher enLlLles, Lhelr subsldlarles and
afflllaLes supervlsed/regulaLed by Lhe 8S
2) lnsurance companles and oLher enLlLles under
Lhe supervlslon/regulaLed by Lhe lnsurance
Commlsslon
3) SLC supervlsed/regulaLed enLlLles
Cb||gat|ons of Covered Inst|tut|ons
a) Customer |dent|f|cat|on: LsLabllsh and record,
and malnLaln a sysLem of verlfylng Lrue
ldenLlLles of cllenLs, lncludlng legal exlsLence
and organlzaLlonal sLrucLure of corporaLe
cllenLs, and Lhelr represenLaLlves based on
offlclal documenLs.
b) kecord keep|ng: keep records for 3 years
c) keport|ng covered and susp|c|ous transact|ons:
8eporL covered LransacLlon and susplclous
LransacLlons Lo AMLC, wlLhln 3 worklng days
from occurrence, whlch shall noL vlolaLe Lhe
Law on Secrecy of 8ank ueposlLs, lCuA and
C8L.
Money Launder|ng Cr|me: CommlLLed when Lhe
proceeds of an unlawful AcLlvlLy are LransacLed Lo make
Lhem appear Lo have orlglnaLed from leglLlmaLe sources
by Lhe followlng acLs:
a) 1ransacLlng or aLLempLlng Lo LransacL, wlLh
moneLary lnsLrumenL or properLy, knowlng lL
represenLs, lnvolve, or relaLes Lo proceeds of
any unlawful AcLlvlLy
b) laclllLaLlng money-launderlng referred Lo
above, by falllng Lo perform an acL
c) lalllng Lo dlsclose and flle reporL wlLh Lhe AMLC
or any moneLary lnsLrumenL or properLy as
requlred under Lhe AMLA.
Un|awfu| Act|v|t|es: An acL or omlsslon or serles or
comblnaLlon Lhereof, lnvolvlng or havlng relaLlon Lo Lhe
crlmes enumeraLed: kldnapplng for ransom, vlolaLlons of
Lhe uangerous urugs AcL, vlolaLlons of Lhe AnLl-CrafL
and CorrupL racLlces AcL, lunder, 8obbery and
exLorLlon, !ueLeng and Maslao (lllegal gambllng), plracy,
quallfled LhefL, swlndllng, smuggllng, vlolaLlons of Lhe L-
commerce acL, hl[acklng, desLrucLlve arson and murder
and Lhose perpeLraLed by LerrorlsL agalnsL non-
combaLanL persons, vlolaLlons of Lhe securlLles
regulaLlon code, and offenses/felonles of a slmllar
naLure.
Iur|sd|ct|on: 8eglonal 1rlal CourL or Lhe Sandlganbayan
rosecut|on: ersons may be charged wlLh boLh money
launderlng and Lhe unlawful acLlvlLy underLaken.
roceedlng relaLlng Lo Lhe unlawful acLlvlLy Lakes
precedence.
roh|b|t|on aga|nst po||t|ca| harassment: AMLA should
noL be used Lo hamper compeLlLlon ln Lrade. no case
under Lhe law should be flled Lo Lhe pre[udlce of a
candldaLe durlng elecLlons.
ena|t|es and Cther Consequences
a) ena|t|es
7 Money launderlng: lmprlsonmenL and flne
7 lallure Lo keep records: lmprlsonmenL 6
monLhs Lo 1 year, flne 100k Lo noL more Lhan
300k
7 Mallclous reporLlng: 6 monLhs Lo 4 years
lmprlsonmenL, flne of noL less Lhan 100k buL
noL more Lhan 300k aL Lhe dlscreLlon of Lhe
courL. Cffender noL enLlLled Lo probaLlon.

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
7 8reach of confldenLlallLy: 3 Lo 8 years
lmprlsonmenL, flne 300k Lo noL more Lhan
1m.
Iorfe|ture: When Lhere ls a covered LransacLlon reporL
made, and Lhe courL has, ln a peLlLlon flled for Lhe
purpose ordered selzure of any moneLary lnsLrumenL or
properLy, ln whole or ln parL, dlrecLly or lndlrecLly,
relaLed Lo sald reporL, Lhe 8evlsed 8ules of CourL on clvll
forfelLure shall apply.
venue: 81C of Lhe [udlclal reglon where Lhe properLy
relaLlng Lo an unlawful acLlvlLy or money launderlng ls
locaLed. ln clvll forfelLure cases, Lhere ls no need for
convlcLlon for an unlawful acLlvlLy, and lL ls an acLlon lo
tem. A flndlng of gullL for an unlawful acLlvlLy ls noL an
essenLlal elemenL of clvll forfelLure. kepobllc v. Closqow
Ireez|ng of Accounts: lssued by Lhe speclal dlvlslon of
Lhe CA upon ex potte appllcaLlon of Lhe AMLC afLer
deLermlnaLlon of probable cause LhaL moneLary
lnsLrumenL or properLy ls ln any way relaLed Lo unlawful
AcLlvlLy, for 20 days unless exLended.
lreezlng of accounLs may be done ex parLe, slnce
noLlfylng Lhe accused may cause hlm Lo dlsburse Lhe
accounL before Lhe order freezlng Lhe accounL ls lssued.
1he case ls dlfferenL ln Lhe case of auLhorlLy Lo lnqulre
lnLo bank deposlLs, as Lhere ls noLhlng wrong wlLh Lhe
accuse knowlng LhaL hls accounL ls belng checked. 1hls ls
so as he cannoL hlde Lhe bank records Lo prove LhaL Lhe
accounLs are llnked Lo Lhe crlme lmpuLed agalnsL hlm.
kepobllc v. oqeolo
Lxam|nat|on of accounts:
1) upon order of a compeLenL courL where Lhere
ls probable cause of money launderlng, sub[ecL
Lo excepLlons regardlng order of Lhe courL.
Crder of compeLenL courL noL requlred ln:
l) kldnapplng for ransom
ll) drug Lrafflcklng
lll) hl[acklng, desLrucLlve arson, murder, lncludlng
Lhose perpeLraLed by LerrorlsLs agalnsL non-
combaLanLs

2) 8S lnqulry lnLo or examlnaLlon of deposlLs or
lnvesLmenLs wlLh any bank, when Lhe lnqulry or
examlnaLlon ls made ln Lhe course of Lhe 8S's
perlodlc or speclal exam of sald bank Lo ensure
compllance wlLh AMLA.
Mutua| ass|stance among states: 8equesL for asslsLance
of oLher sLaLes may be acLed upon by Lhe AMLC.
MuLuallLy and reclproclLy Lo govern. AMLC may also
requesL for asslsLance from oLher sLaLes.
IV. Loan Iunct|on
A. 8as|c Concepts
Grant, urpose and kequ|rement of Loans
CranL loans only ln an amounL and for Lhe perlod
necessary for Lhe effecLlve compleLlon of Lhe operaLlons
Lo be flnanced, whlch shall be conslsLenL wlLh safe and
sound banklng pracLlces.
urpose of Lhe loan shall be sLaLed ln Lhe appllcaLlon and
Lhe conLracL. ls Lhe proceeds were found Lo have been
applled Lo oLher purpose wlLhouL bank approval, lL has
Lhe rlghL Lo LermlnaLe Lhe loan and seek for repaymenL.
8efore granLlng a loan, a bank musL ascerLaln LhaL Lhe
debLor ls capable of fulfllllng hls commlLmenLs Lo Lhe
bank. May be Lhrough sLaLemenL of asseLs and llablllLles,
lncome and expendlLures, and oLher lnfo as requlred by
Lhe M8.
ln approvlng a loan, Lhe bank concerns lLself wlLh proper
lnformaLlon regardlng lLs debLors. A bank, as an
lnsLlLuLlon engaged ln Lhe granL of loans, ls expecLed Lo
ascerLaln and verlfy Lhe ldenLlLles of Lhe persons lL
LransacLs buslness wlLh. ucl8 v. komos
8anks are enLlLles engaged ln Lhe lendlng of funds
obLalned Lhrough deposlLs form Lhe publlc. 1hey borrow
Lhe publlc's excess money (deposlLs) and lend ouL Lhe
same. 8anks Lherefore redlsLrlbuLe wealLh ln Lhe
economy by channellng ldle savlngs Lo proflLable
lnvesLmenLs. 1hey operaLe and earn lncome by
exLendlng credlL faclllLles flnanced prlmarlly from Lhe
publlc. 1hey plough back Lhe bulk of sald deposlLs lnLo
Lhe economy ln Lhe form of loans. Slnce banks deal wlLh
Lhe publlc's money, Lhelr vlablllLy depends largely on
Lhelr ablllLy Lo reLurn Lhose deposlLs on demand. lor Lhls
reason, banklng ls undenlably lmbued wlLh publlc
lnLeresL. ConsequenLly, much lmporLance ls glven Lo
sound lendlng pracLlces and good corporaLe governance.
8anks are glven Lhe rlghL Lo annul any credlL
accommodaLlon or loan, and demand Lhe lmmedlaLe

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
paymenL Lhereof, from borrowers proven Lo be gullLy of
fraud. 8uO-lcl v. IAlkl
roh|b|ted 1ransact|ons
a. Acts of the 8ank
ulrecLor, offlcers, employees or agenLs prohlblLed form
accepLlng glfLs, fees or commlsslons or any oLher form of
remuneraLlon ln connecLlon wlLh Lhe approval of Lhe
loan or oLher credlL accommodaLlon from Lhe bank.
1hey shall noL overvalue or ald ln such any securlLy for
Lhe purpose of lnfluenclng Lhe acLlons of Lhe bank or any
bank.
b. Acts of App||cant]borrower
8orrower musL noL fraudulenLly overvalue properLy
offered as securlLy for a loan.
8orrower musL noL furnlsh false/maLerlal
mlsrepresenLaLlon/suppresslon of maLerlal facLs Lo
obLaln, renew or lncrease a loan or Lo exLend lLs perlod.
8orrower should noL aLLempL Lo defraud Lhe bank ln Lhe
evenL of courL acLlon Lo recover a loan.
8orrower should noL offer Lhe dlrecLors, eLc of Lhe bank,
any glfL, fee, commlsslon of oLher form of compensaLlon
Lo lnfluence Lhem lnLo approvlng a loan.
M8 kegu|at|on
a. Unsecured |oans: M8 has auLhorlLy Lo lssue
regulaLlons,
b. Cther secur|ty requ|rements: M8 may
prescrlbe oLher securlLy requlremenLs, may
reduce maxlmum raLlos, or lncrease such raLlos.
lL may lssue regulaLlons for maxlmum
permlsslble maLurlLles of loans and Lhe klnd of
securlLy requlred agalnsL dlff. Lypes of loans.
c. 1erms and cond|t|ons: M8 may prescrlbe
maLurlLles and relaLed Lerms and condlLlons for
varlous Lypes of loans. Changes ln max.
maLurlLles only Lo apply prospecLlvely.
d. kenewa| or extens|on: M8 may prescrlbe
condlLlons and llmlLaLlons for granLlng
exLenslons ore renewals of loans by banks.
e. rov|s|ons for |osses and wr|te-offs: All debLs
due Lo a bank, on whlch lnLeresL ls pasL due and
unpald, unless secured, are consldered bad
debLs. M8 may flx Lhe amounL for bad debLs or
oLher doubLful accounLs or oLher
conLlngencles/ wrlLlng off loans, eLc are sub[ecL
Lo regulaLlons of Lhe M8.
Deve|opment Ass|stance Incent|ves: 8S Lo provlde
lncenLlves Lo banks, whlch wlLhouL governmenL
guaranLee, exLend loans Lo flnance educaLlonal
lnsLlLuLlons, cooperaLlves, hosplLals and oLher medlcal
servlces, soclallzed or low-cosL houslng, LCus and oLher
acLlvlLles wlLh soclal conLenL.
D|sc|osure requ|rements: SLaLe Lo proLecL clLlzens from
lack of awareness of Lhe Lrue cosL of credlL Lo Lhe user,
by provldlng for full dlsclosure of such cosL, Lo prevenL
unlnformed use of credlL Lo Lhe deLrlmenL of naLlonal
economy.
CredlLors Lo furnlsh Lhose provlded wlLh credlL, prlor Lo
consummaLlng a LransacLlon, a clear sLaLemenL ln
wrlLlng of Lhe followlng lnfo:
a) Cash prlce or dellvered prlce of Lhe properLy or
servlce Lo be acqulred,
b) AmounLs, lf any, Lo be credlLed as
downpaymenL or Lrade-ln,
c) ulfference ln amounLs beLween a and b,
d) Charges, lndlvldually lLemlzed, whlch are pald
or Lo be pald by such person ln connecLlon wlLh
Lhe LransacLlon buL whlch are noL lncldenL Lo
Lhe exLenslon of credlL,
e) 1oLal amounL Lo be flnanced,
f) llnance charge expressed ln pesos and cenLs,
and
g) 1he percenLage LhaL Lhe flnance bears Lo Lhe
LoLal amounL Lo be flnanced expressed as
slmple annual raLe on Lhe ouLsLandlng unpald
balance of Lhe obllgaLlon.
CredlLor who falls Lo dlsclose Lhe lnformaLlon, ls llable Lo
Lhe person, ln Lhe amounL of 100 or ln an amounL
equal Lo 2x Lhe flnance charge requlred by Lhe credlLor
ln connecLlon wlLh Lhe LransacLlon, whlchever ls greaLer,
excepL lL shall noL exceed 2,000 on any credlL
LransacLlon. AcLlon Lo recover such amounL prescrlbes ln
1 year, and may be flled ln any courL wlLh compeLenL
[urlsdlcLlon.
unllaLeral deLermlnaLlon and lmposlLlon of lncreased
raLes ls vlolaLlve of Lhe prlnclple of muLuallLy of
conLracLs. 1he duLy of Lhe borrower Lo pay lnLeresL does
noL glve Lhe bank Lhe unresLralned freedom Lo charge

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
any raLe of lnLeresL oLher Lhan LhaL agreed upon. New
5ompoqolto 8ollJets v. lN8
8. 1erms and Cond|t|ons
Amort|zat|on schedu|e - adapLed Lo Lhe naLure of Lhe
operaLlons Lo be flnanced.
Loans wlLh maLurlLy of more Lhan 3 years -
amorLlzaLlons pald aL leasL annually
lf revenue ls noL Lo be generaLed lnlLlally - paymenL may
be deferred Lo noL laLer Lhan 3 years from granL of Lhe
loan.
lor Mlcro-flnance loans - cash flow of borrower Lo be
Laken lnLo accounL.
re-payment: 8orrower may pre-pay aL any Llme (ln
whole or ln parL) sub[ecL Lo Lerms and condlLlons of Lhe
conLracL wlLh Lhe bank.
Interest: no lnLeresL shall be due unless lL has been
expressly sLlpulaLed ln wrlLlng.
4 lnLeresL raLe per monLh ls unconsclonable. 1he courL
my lower such Lo 12 per annum. 8olos v. osomo
usury has been legally non-exlsLenL and LhaL lnLeresL can
now be charged as agreed upon by Lhe lender and
borrower (unless Lhe raLe agreed upon ls
unconsclonable or excesslve, Lhe courL wlll noL
lnvalldaLe lL). 24 per annum ls reasonable raLe. 8ocolot
v. 8ooqko llllploo
In the absence of st|pu|at|on (on the rate to be
app||ed): legal raLe of 12 per annum Lo be applled.
Lsca|at|on c|ause: 1he conLracL musL blnd boLh
conLracLlng parLles, lLs valldlLy of compllance cannoL be
lefL Lo Lhe wlll of one of Lhem. ArL. 1308 Clvll Code
An lncrease from 18 Lo 48 per annum ls excesslve. lL
was lmposed wlLhouL Lhe consenL and over Lhe
ob[ecLlon of Lhe borrower, and Lhus he ls noL bound Lo
pay lL. lN8 v. cA
1he ns lssued provlded for an lncrease ln Lhe lnLeresL
raLe dependlng on Lhe pollcy of Lhe bank, wlLhouL prlor
noLlce Lo Lhe borrower. 1he bank ls noL glven Lhe
freedom Lo charge any raLe oLher Lhan LhaL agreed
upon. New 5ompoqolto v. lN8
LscalaLlon clause allowed when lL provldes:
(1) LhaL Lhere can be an lncrease ln lnLeresL lf lncreased
by law or by Lhe MoneLary 8oard, and
(2) ln order for such sLlpulaLlon Lo be valld, lL musL
lnclude a provlslon for reducLlon of Lhe sLlpulaLed
lnLeresL "ln Lhe evenL LhaL Lhe appllcable maxlmum raLe
of lnLeresL ls reduced by law or by Lhe MoneLary 8oard."
lL ls only valld lf Lhere ls a de-escalaLlon clause.
I|oat|ng rates of |nterest: Whlle lL may be accepLable for
banks Lo sLlpulaLe raLes LhaL re dependenL upon
prevalllng markeL condlLlons, Lhere should always be a
reference raLe upon whlch Lo peg such varlable lnLeresL
raLe. lor example, lf Lhere occurs any change ln Lhe
prevalllng markeL raLe, Lhe new lnLeresL raLe shall be Lhe
guldlng raLe". lf Lhere ls no reference raLe, Lhen Lhe
sLlpulaLlon on floaLlng raLes ls lnvalld. coosollJoteJ 8ook
v. cA
Lxtraord|nary Inf|at|on]Def|at|on: LxLraordlnary
lnflaLlon exlsLs when Lhere ls an unusual decrease ln Lhe
purchaslng power of Lhe currency and such decrease
could noL be reasonably foreseen or manlfesLly beyond
Lhe conLemplaLlon of Lhe parLles aL Lhe Llme of Lhe
obllgaLlon. LxLraordlnary deflaLlon lnvolves LhaL lnverse
slLuaLlon. lor exLraordlnary lnflaLlon/deflaLlon Lo affecL
an obllgaLlon, Lhe followlng musL be presenL:
1) offlclal declaraLlon by Lhe 8S,
2) Lhe obllgaLlon was conLracLual ln naLure, and
3) Lhe parLles expressly agreed Lo conslder Lhe
effecLs of exLraordlnary lnflaLlon/deflaLlon.
poltoble 8ook v. Nq 5beooq Nqot
kestructur|ng: 8anks have full dlscreLlon for full
flexlblllLy of paymenLs wlLhouL endangerlng Lhe bank's
flnanclal lnLeresL.
uCS8l loans - 1hese should noL be less favorable Lo Lhe
bank.
8esLrucLurlng should be done malnly Lo asslsL borrowers
Lo seLLle Lhelr obllgaLlons, Laklng lnLo accounL Lhelr
capaclLy Lo pay.
C. S|ng|e 8orrower's L|m|t
1oLal amounL of loan whlch a bank may exLend Lo
anyone aL any Llme: CurrenLly 20 of neL worLh of Lhe
bank ls Lhe currenL raLe.
8asls: LoLal credlL commlLmenL of Lhe bank Lo Lhe
borrower (lncludes boLh loans and non-rlsk lLems.)

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
7 may be lncreased by an addlLlonal 10 of neL
worLh of bank, so long as addlLlonal llablllLles of
borrower are secured by LrusL recelpL, shlpplng
docs, warehouse recelpLs and oLher documenLs
Lransferrlng or securlng LlLle over markeLable,
non-perlshable goods, fully covered by
lnsurance.
7 u8 may lnvesL ln equlLles of allled (wheLher
flnanclal or non-flnanclal) or non-allled
enLerprlses:
1oLal lnvesLmenL ln such noL Lo exceed 30 of
neL worLh of bank.
lnvesLmenL ln any one enLerprlse noL exceed
23of neL worLh of bank
neL worLh - means Lhe LoLal unlmpalred pald-ln caplLal
lncludlng pald-ln surplus, reLalned earnlngs and
undlvlded proflLs neL of valuaLlon reserves and oLher
ad[usLmenLs as per Lhe 8S.
What |s |nc|uded |n the Ce|||ng:
a) Lhe dlrecL llablllLy of Lhe maker or accepLor of paper
dlscounLed wlLh or sold Lo such bank and Lhe llablllLy of
a general endorser, drawer or guaranLor who obLalns a
loan or oLher credlL accommodaLlon from or dlscounLs
paper wlLh or sells papers Lo such bank,
b) ln Lhe case of an lndlvldual who owns or conLrols a
ma[orlLy lnLeresL ln a corporaLlon, parLnershlp,
assoclaLlon or any oLher enLlLy, Lhe llablllLles of sald
enLlLles Lo such bank,
c) ln Lhe case of a corporaLlon, all llablllLles Lo such bank
of all subsldlarles ln whlch such corporaLlon owns or
conLrols a ma[orlLy lnLeresL, and
d) ln Lhe case of a parLnershlp, assoclaLlon or oLher
enLlLy, Lhe llablllLles of Lhe members Lhereof Lo such
bank.
ln Lhls case, loans, oLher credlL accommodaLlons and
guaranLees shall exclude: (a) loans and oLher credlL
accommodaLlons secured by obllgaLlons of Lhe 8angko
SenLral or of Lhe hlllpplne CovernmenL: (b) loans and
oLher credlL accommodaLlons fully guaranLeed by Lhe
governmenL as Lo Lhe paymenL of prlnclpal and lnLeresL,
(c) loans and oLher credlL accommodaLlons covered by
asslgnmenL of deposlLs malnLalned ln Lhe lendlng bank
and held ln Lhe hlllpplnes, (d) loans, credlL
accommodaLlons and accepLances under leLLers of credlL
Lo Lhe exLenL covered by margln deposlLs, and (e) oLher
loans or credlL accommodaLlons whlch Lhe MoneLary
8oard may from Llme Lo Llme, speclfy as non-rlsk lLems.
Loans and oLher credlL accommodaLlons, deposlLs
malnLalned wlLh, and usual guaranLees by a bank Lo any
oLher bank or non-bank enLlLy, wheLher locally or
abroad, shall be sub[ecL Lo Lhe llmlLs prescrlbed.
CerLaln Lypes of conLlngenL accounLs of borrowers may
be lncluded among Lhose sub[ecL Lo Lhese prescrlbed
llmlLs as may be deLermlned by Lhe MoneLary 8oard.
Lxcept|ons:
a. As M8 may oLherwlse prescrlbe for reasons of
naLlonal lnLeresL
b. ueposlLs of 88 wlLh governmenL flnanclal
lnsLlLuLlons

D. DCSkI Accounts
Coverage: ersons and LransacLlons covered
ulrecLors, Cfflcers, sLockholder, subsLanLlal sLockholder,
and relaLed lnLeresL (spouse, relaLlve, parLnershlp, co-
owner, corporaLlon, assoclaLlon or flrm of Lhe dlrecLors,
offlcers, sLockholders or Lhelr relaLed lnLeresLs)
1ransact|ons covered: LransacLlons of Lhe bank whlch
lnvolve Lhe granL of any loan, advance or oLher credlL
accommodaLlon ln any form, wheLher renewal,
exLenslon or lncrease. lncludes: advances (vale"),
advances on salarles ln excess of 30 days, advance by
uAuus, avallmenLs of credlL llne, acqulslLlon of a noLe,
drafL eLc. upon whlch Lhey may be llable as drawer,
maker, guaranLor, eLc., lndlrecL lendlng by oLher
flnanclal lnLermedlary from funds of Lhe bank, lncrease
ln exlsLlng lndebLedness, sale of assLes, and oLher
LransacLlons whlch resulL ln Lhe dlrecLors, eLc. belng
obllgaLed Lo Lhe bank by any means Lo pay money or lLs
equlvalenL.
Ce|||ngs:
lndlvldual celllngs: 1oLal for each uCS8l llmlLed Lo Lhelr
respecLlve unemcumbered deposlLs and book value of
Lhelr pald-ln caplLal conLrlbuLlon Lo Lhe bank. 8uL,
unsecured loans and oLhers, for each noL Lo exceed 30
of respecLlve LoLal loans, eLc.
AggregaLe celllng:

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
unsecured - noL exceed 13 of LoLal loan porLfollo of
Lhe bank or 100 neL worLh whlch ever ls lower. 1oLal
unsecured musL noL exceed 30 of aggregaLe celllng for
loans, and oLher credlL accommodaLlons.
kequ|rements: rocedura| and keportor|a|
rlor wrlLLen approval of Lhe board, excludlng Lhe
borrower ls Lo be obLalned. 1hls shall be ln a resoluLlon
passed durlng a meeLlng and made of record. Ma[orlLy
deLermlned based on LoLal members ln Lhe arLlcles of
lncorporaLlon and by-laws. Copy Lo be submlLLed Lo Lhe
8S.
Lach 8ank Lo malnLaln a record of loans, oLher credlL
accommodaLlons and guaranLees covered by Lhese
regulaLlons ln a manner and form LhaL wlll faclllLaLe
verlflcaLlon of such LransacLlons by 8S examlners.
ApproprlaLe deparLmenL may requlre banks Lo furnlsh
daLa or lnfo for Lhe lmplemenLaLlon of Lhese rules.
Sanct|ons:
prohlblLlon on declarlng dlvldends for fallure Lo
follow celllngs
offlce of dlrecLor/offlcer of a bank may be
declared vacanL afLer due noLlce Lo Lhe person
concerned
appllcaLlon of share of dlrecLor/offlcer lnvolved
ln bank's proflL and Lhe share of Lhe one who
approved, agalnsL Lhe excess of Lhe loan over
Lhe celllngs
flne of 1 of Lhe excess over Lhe celllng per
day, noL exceedlng 30,000 a day Lo be pald by
Lhe lendlng bank, uCS8l concerned, and
dlrecLor/offlcer approvlng Lhe loan.
L. Co||atera|]Secur|ty
Unsecured |oans: Loans need noL be secured. 8anks may
granL unsecured loans
Io|nt and So||dary S|gnature (ISS): 8y guaranLee as
person, called a guaranLor, blnds hlmself Lo Lhe credlLor
Lo fulflll Lhe obllgaLlon of Lhe prlnclpal debLor ln case Lhe
laLLer should fall Lo do so.
lf a person blnds hlmself solldarlly wlLh Lhe prlnclpal
debLor, Lhe provlslons of Sec. 3 Chap. 3 1lLle l of Lhls
8ook shall be observed. ln such a case, Lhe conLracL ls
called a sureLyshlp. ArL. 2047 Clvll Code
A gauaranLee ls noL presumed, lL musL be express and
cannoL exLend Lo more Lhan whaL ls sLlpulaLed Lhereln.
1hus, llablllLy of Lhe sureLy ls measured by Lhe Lerms of
Lhe conLracL and sLrlcLly llmlLed by lLs Lerms. lN8 v. cA
A [olnL and solldary slgnaLure ls a common pracLlce of a
bank where Lhey requlre a ma[or sLockholder or
corporaLe offlcer as an addlLlonal securlLy for loans
granLed Lo Lhe corporaLlon for 2 reasons: Lhe bank can
go beyond Lhe vell of corporaLe flcLlon and go afLer Lhe
sureLy, second, lL assures Lhe bank LhaL Lhe loan wlll be
used for Lhe purpose agreed upon. A sureLyshlp belng an
accessory obllgaLlon, once Lhe prlnclpal obllgaLlon ls
exLlngulshed, Lhe accessory ls also exLlngulshed. When
Lhere ls novaLlon, Lhe prlnclpal obllgaLlon ls
exLlngulshed, and Lhe accessory only subslsLs for Lhe
beneflL of 3
rd
persons who dld noL glve Lhelr consenL.
1he sureLy cannoL be made llable for Lhe new conLracL.
5ecotlty 8ook v. coeoco
Loans secured by Chatte|s or Intang|b|e roperty
L|m|ts: noL more Lhan 73 of Lhe appralsed value of Lhe
securlLy. Made Lo Lhe LlLle holder or hls asslgnees.
1ypes of SecurlLy:
a. ChaLLel morLgage
b. ledge
c. Pold-ouL and/or asslgnmenL (for deposlLs ln
banks)
Loan secured by kea| Lstate Mortgage
L|m|ts: noL more Lhan 73 of appralsed value, plus
60 of Lhe appralsed value of Lhe lmprovemenLs. Made
ouL Lo Lhe owner or hls asslgnees.
Mortgagee |n good fa|th v. Mortgagee |n bad fa|th
Where Lhe Lorrens LlLle of Lhe land was ln Lhe name of
Lhe morLgagor and laLer glven as securlLy for a bank
loan, Lhe subsequenL declaraLlon of sald LlLle as null and
vold ls noL a ground for nulllfylng Lhe morLgage rlghLs of
Lhe bank who acLed ln good falLh. lbll. Notloool coop v.
cotooJooq-vllloloo
lor bank: generally, lf Lhe 1C1 ls on lLs face good, Lhere ls
no need Lo go beyond lL (unless Lhere ls someLhlng
susplclous of whlch Lhey know of).
WheLher one ls a morLgagee ln good falLh or bad falLh
does noL affecL Lhe valldlLy of Lhe morLgage, lL only
deLermlnes who has a beLLer rlghL Lo be proLecLed.

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
A bank whlch falls Lo requlre persons Lo submlL
addlLlonal proof of Lrue ldenLlLy are morLgagee ln bad
falLh. When noL a slngle ldenLlflcaLlon card ls presenLed
and Lhe bank acLs on mere resldence cerLlflcaLes, lL
cannoL be sald Lo be ln good falLh.
Acqu|s|t|on of property by way of sat|sfact|on of c|a|ms
A bank may acqulre, hold or convey real properLy, under
Lhe followlng clrcumsLances:
a. Such as shall be morLgaged Lo lL ln good falLh by way
of securlLy for debLs,
b. Such as shall be conveyed Lo lL ln saLlsfacLlon of debLs
prevlously conLracLed ln Lhe course of lLs deallngs, or
c. Such as lL shall purchase aL sales under [udgmenLs,
decrees, morLgages, or LrusL deeds held by lL and such as
lL shall purchase Lo secure debLs due lL.
1hese shall be dlsposed of wlLhln 3 years, or as
prescrlbed by Lhe M8. 8uL, lL may also hold on Lo Lhe
properLy for lLs own use ln Lhe conducL of lLs buslness,
buL lnvesLmenL shall noL exceed flfLy percenL (30) of
comblned caplLal accounLs. LqulLy lnvesLmenL of a bank
ln anoLher corporaLlon engaged prlmarlly ln real esLaLe
shall be consldered as parL of Lhe bank's LoLal
lnvesLmenL ln real esLaLe, unless oLherwlse provlded by
Lhe MoneLary 8oard.
Dragnet C|ause]8|anket Mortgage C|ause
A blankeL morLgage clause (dragneL clause) ls one whlch
ls speclflcally phrased Lo subsume all debLs of pasL or
fuLure orlglns. 1hey are carefully scruLlnlzed and sLrlcLly
consLrued. 1hey enable Lhe parLles Lo provlde
conLlnuous deallngs, Lhe naLure and exLenL of whlch ls
noL known or anLlclpaLed aL Lhe Llme, and Lhey avold Lhe
expense and lnconvenlence of execuLlng a new securlLy
on each new LransacLlo. lL operaLe as a convenlence and
accommodaLlon Lo Lhe borrowers as lLs makes avallable
addlLlonal fund wlLhouL Lhelr havlng Lo execuLe
addlLlonal securlLy documenLs, Lhereby savlng Llme,
Lravel, loan closlng cosLs, cosLs of exLra legal servlces,
recordlng fees, eLc. morLgages glven Lo secure fuLure
advancemenLs are valld and legal conLracLs, and Lhe
amounLs named as conslderaLlon ln sald conLracLs do
noL llmlL Lhe amounL for whlch Lhe morLgage may sLand
as securlLy lf from Lhe 4 corners of Lhe lnsLrumenL Lhe
lnLenL Lo secure fuLure and oLher lndebLedness can be
gaLhered. uoloo 8ook v. cA
Iorec|osure of kLMs
1ypes of loreclosure:
a. !udlclal - 8ule 68 8ules of CourL
b. LxLra[udlclal - AcL no. 3133, as amended
c. Speclflc rules for 18/88/Coop 8anks Sec. 6 8ural
8anks AcL
k|ght and per|od of redempt|on:
no maLer wheLher [udlclally or exLra[udlclally foreclosed
properLy may be redeemed wlLhln 1 year from Lhe daLe
of Lhe reglsLraLlon of Lhe cerLlflcaLe of sale.
!urldlcal persons, wlLh properLles belng exLra[udlclally
foreclosed _ rlghL of redempLlon unLll Lhe Llme of
reglsLraLlon of Lhe cerLlflcaLe of foreclosure sale, noL
more Lhan 3 monLhs afLer foreclosure, whlchever ls
earller.
Lxerc|se of r|ght of redempt|on: Ceneral rule ls LhaL
mere lnadequacy of prlce ls noL sufflclenL Lo seL aslde a
foreclosure sale. 1he lesser Lhe prlce, Lhe easler lL ls for
Lhe owner Lo redeem. lallure of Lhe morLgagee Lo
dellver Lhe surplus proceeds does noL affecL valldlLy of
Lhe foreclosure sale. lL glves rlse Lo a cause of acLlon for
Lhe collecLlon of Lhe surplus proceeds. An acLlon Lo
collecL ls lmproper where Lhere ls a pendlng acLlon for
Lhe nulllflcaLlon of Lhe foreclosure proceedlngs.
Mettobook v. 1oo
Lxtens|on of kedempt|on er|od: When Lhe legal
redempLlon has been converLed by Lhe parLles lnLo a
convenLlonal redempLlon, Lhe perlod of redempLlon
shall be LhaL agreed upon. 1he perlod ln Lhe law wlll no
longer apply. lozo v. kepobllc
When Lhe redempLlon perlod was unllaLerally exLended
by Lhe sherlff, and Lhe bank falled Lo ob[ecL LhereLo, Lhe
perlod as made by Lhe sherlff applles. 1he bank cannoL
lnslsL afLer Lhe lapse of Lhe perlod LhaL Lhe redempLlon
perlod appllcable ls one year only. 1he rule on
redempLlon ls llberally lnLerpreLed ln favor of Lhe
orlglnal owner of Lhe properLy. lbooo v. cA
1o|||ng of redempt|on per|od:
1he redempLlon perlod ls noL Lolled even lf an acLlon
was flled quesLlonlng Lhe foreclosure, morLgage, loan,
eLc. 5omemotlz v. u8l

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
A Lemporary resLralnlng order lssued by Lhe courL does
noL Loll Lhe redempLlon perlod Lo redeem a morLgage of
land covered by a Lorrens LlLle. leoples flooocloq v. cA
1he pendency of a prlor acLlon Lolls Lhe Lerm of Lhe rlghL
of redempLlon. coosollJoteJ book v. lAc
Lxerclse of rlghL of redempLlon by Lhe [udgmenL debLor
ls noL condlLloned on ownershlp of Lhe properLy sold on
execuLlon, buL by vlrLue of a wrlL of execuLlon dlrecLed
agalnsL such [udgmenL debLor. 1he one who may
redeem ls Lhe person agalnsL whom Lhe [udgmenL was
lssued, noL necessarlly Lhe owner of Lhe properLy. 1he
rlghL ls glven Lo Lhe [udgmenL debLor and noL any 3
rd

parLy clalmanL. cM5 5tock 8toketoqe v. cA
kedempt|on r|ce: amounL due on Lhe morLgage +
lnLeresL as provlded ln Lhe morLgage + cosLs and
expenses of sale and cusLody of properLy - lncome
derlved.
1he amounL aL whlch Lhe foreclosed properLy lf
redeemable ls Lhe amounL due under Lhe morLgage
deed, or Lhe obllgaLlon of Lhe morLgagor plus lnLeresLs
and expenses ln accordance wlLh Sec. 78 of Lhe C8L.
uoloo 8ook v. cA
1he rlghL of redempLlon may only be exerclsed by paylng
all Lhe amounL owed on Lhe daLe of Lhe sale, wlLh
lnLeresL on Lhe LoLal lndebLedness aL Lhe raLe agreed
upon, unless Lhe bldder has Laken maLerlal possesslon of
Lhe properLy or unless lL has been dellvered Lo hlm, ln
whlch case, Lhe proceeds of Lhe properLy shall
compensaLe Lhe lnLeresL. lor redempLlon of real esLaLe
morLgaged Lo Lhe u8, CA no. 439 applles. u8l v. west
Neqtos
lf Lhe bldder does noL Lake possesslon of Lhe properLy,
Lhen Lhere ls no lncome or beneflLs Lo be deducLed Lo
Lhe amounL due.
ossess|on: urchaser aL Lhe aucLlon has Lhe rlghL Lo
enLer upon and Lake possesslon of Lhe properLy
lmmedlaLely afLer Lhe daLe of Lhe conflrmaLlon of Lhe
aucLlon sale and admlnlsLer Lhe same ln accordance wlLh
law.
1he purchases ln a foreclosure sale may apply for a wrlL
of possesslon durlng Lhe redempLlon perlod by flllng for
LhaL purpose and ex potte moLlon under oaLh. upon
flllng of such moLlon and Lhe approval of Lhe
correspondlng bond, Lhe courL ls expressly dlrecLed Lo
lssue Lhe wrlL. 5omsoo v. klveto
In[unct|on and 8ond: Any peLlLlon ln courL Lo en[oln or
resLraln Lhe conducL of foreclosure proceedlngs
lnsLlLuLed under Lhe C8L, shall be glven due course only
upon Lhe flllng by Lhe peLlLloner of a bond ln an amounL
flxed by Lhe courL condlLloned LhaL he wlll pay all
damages whlch Lhe bank may suffer by Lhe en[olnlng or
resLralnL of Lhe foreclosure proceedlng.
V. Investment and Cther Iunct|ons of 8anks
A. Lqu|ty |nvestments
llnanclal Allled - lncludes flnanclng, sLockbrokerage, eLc.
non-llnanclal Allled - warehouslng, safeLy deposlL
boxes, lnsurance, eLc.
non-allled - oLher noL lncluded ln Lhe enumeraLlon of
allled enLerprlses
L|m|ts on equ|ty |nvestment of U8
lL may lnvesL ln equlLles of allled (flnanclal or non-
flnanclal) and non-allled enLerprlses.
rlor approval of Lhe M8 requlred for such acqulslLlon.
1oLal lnvesLmenL ln allled/non-allled equlLles: noL Lo
exceed 30 of Lhe bank's neL worLh
lnvesLmenL ln equlLy of one enLerprlse: noL Lo exceed
23 of bank's neL worLh
neL worLh - means Lhe LoLal unlmpalred pald-ln caplLal
lncludlng pald-ln surplus, reLalned earnlngs and
undlvlded proflLs neL of valuaLlon reserves and oLher
ad[usLmenLs as per Lhe 8S.
SancLlons lf wlLhouL prlor M8 approval:
1
sL
offense - dlvesLmenL and reprlmand of dlrecLor or
offlcer who recommended Lhe acLlon.
2
nd
offense - dlvesLmenL of lnvesLmenL of bank. llne of
20,000 for dlrecLors/offlcers. lor non-allled lnvesLmenL,
flne ls 40,000
In Spec|f|c Areas:
llnanclal allled enLerprlses - up Lo 100 of 18, 88 or
llnanclal allled enLerprlse, publlcly llsLed - 100 voLlng
sLock of u8 or k8 (buL only one u8 or k8)
ln non-flnanclal allled servlces - up Lo 100 of non-
flnanclal allled enLerprlse

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
non-allled enLerprlses - noL exceed 33 of LoLal equlLy
ln such enLerprlse for one enLerprlse, nor 33 of voLlng
sLock Lhereln.
Cuasl-banks - M8 may furLher llmlL Lo 40 equlLy
lnvesLmenLs (also applles Lo k8).
L|m|ts on equ|ty |nvestments of k8
Cnly ln flnanclal/non-flnanclal allled enLerprlses
MusL be wlLh prlor M8 approval.
1oLal lnvesLmenL ln equlLles of allled enLerprlses:
noL exceed 33 of neL worLh of bank
neL worLh - means Lhe LoLal unlmpalred pald-ln
caplLal lncludlng pald-ln surplus, reLalned earnlngs
and undlvlded proflLs neL of valuaLlon reserves and
oLher ad[usLmenLs as per Lhe 8S.
SancLlon lf wlLhouL M8 Approval:1
sL
offense -
dlverLmenL and reprlmand
2
nd
offense - dlvesLmenL/flne on dlrecLors/offlcers =
20,000/40,000 for non-allled.
In Spec|f|c areas:
llnanclal Allled - up Lo 100 of 18/88
- for anoLher bank (k8) cannoL exceed mlnorlLy (less
Lhan 30 +1)
non-flnanclal allled - up Lo 100 equlLy allowed
Cuasl-banks - LlmlLed Lo 40 equlLy by M8
L|m|ts on Lqu|ty Investments of 18
only for allled enLerprlses only
1oLal noL Lo exceed 23 of Lhe neL worLh of bank
noL Lo exceed 13 neL worLh for 1 slngle enLerprlse,
whlch shall remaln as mlnorlLy.
CLher banks - sub[ecL Lo Lhe same provlslons for k8s and
sub[ecL Lo deducLlon from neL worLh.
L|m|ts on Lqu|ty Investments of k8
lor allled enLerprlses only
lor one slngle enLerprlse - noL exceed 13 of neL worLh,
whlch shall remaln as mlnorlLy
L|m|ts on Lqu|ty Investment of Is|am|c 8ank
lnvesL ln allled enLerprlses, for warehouslng, leaslng,
sLorlng safeLy deposlL boxes, managemenL of muLual
funds, and oLher as declared by Lhe M8.
no percenLage glven for maxlmum.
8. Cther k8 Iunct|ons
Non-core]uas|-bank|ng Iunct|ons: borrowlng of funds
Lhrough lssuance, endorsemenL or asslgnmenL of
deposlL subsLlLuLe for relendlng or purchaslng
recelvables and oLher obllgaLlons.
Issu|ng L]Cs: M8 may prescrlbe mlnlmum cash marglns
for openlng L/Cs and may relaLe Lhe slze of Lhe requlred
margln Lo Lhe naLure of Lhe LransacLlon Lo be flnanced.
ln a L/C Lhere are aL leasL 3 parLles: 1) Lhe buyer, who
procures Lhe L/C and obllges hlmself Lo relmburse Lhe
lssulng bank upon recelpL of Lhe documenLs of LlLle, 2)
Lhe lssulng bank who lssues Lhe L/C and underLakes Lo
pay Lhe seller upon recelpL of Lhe drafL and proper
documenL of LlLles and Lo surrender Lhe documenLs Lo
Lhe buyer upon relmbursemenL, and 3) Lhe seller, who ln
compllance wlLh Lhe conLracL of sale, shlps Lhe goods Lo
Lhe buyer and dellvers Lhe documenLs of LlLle and drafL
Lo Lhe lssulng bank Lo recover paymenL. Powever, Lhe
number of parLles may vary, and may be lncreased.
1hus, Lhe servlces of an advlslng (noLlfylng bank) may be
uLlllzed Lo convey Lo Lhe seller Lhe exlsLence of Lhe
credlL, or, of a conflrmlng bank whlch wlll lend credence
Lo Lhe L/C lssued by Lhe lesser known lssulng bank, or, or
a paylng bank, whlch underLakes Lo encash Lhe drafLs
drawn by Lhe exporLer. lurLher, lnsLead of golng Lo Lhe
place of Lhe lssulng bank Lo clalm paymenL, Lhe buyer
may approach anoLher bank, Lhe negoLlaLlng bank, Lo
have Lhe drafL dlscounLed. A noLlfylng bank does noL
lncur any oLher obllgaLlon Lhan Lo advlse Lhe seller of Lhe
L/C. lL ls only bound Lo check Lhe apparenL auLhenLlclLy
of Lhe L/C. 8ook of Ametlco v. cA
lndependence prlnclple: L/S ls dlsLlncL from conLracL
beLween seller and Lhe buyer, or Lhe obllgaLlon ls covers.
LxcepLlon: When Lhere ls fraud such LhaL Lhe L/C ls Laken
wlLhouL lnLenL Lo comply wlLh Lhe obllgaLlon.
1o say LhaL Lhe lndependence prlnclple may only be
lnvoked by Lhe lssulng bank would render nugaLory Lhe
purpose for whlch Lhe leLLers of credlL are used ln
commerclal LransacLlons. As lL ls, lL works Lo Lhe beneflL

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
of boLh Lhe lssulng bank and Lhe beneflclary. 1toosflelJ
v. lozoo nyJto
A leLLer of credlL-LrusL recelpL arrangemenL ls endowed
wlLh lLs own dlsLlncLlve feaLures and characLerlsLlcs.
under Lhe agreed seL up, Lhe bank exLends a loan
covered by a L/C, wlLh Lhe LrusL recelpL as securlLy for
Lhe loan. A LrusL recelpL ls lnLended Lo ald ln flnanclng
lmporLers and reLall dealers who do noL have sufflclenL
funds or resources Lo flnance Lhe lmporLaLlon or
purchase of merchandlse and who may noL be able Lo
acqulre credlL excepL Lhrough uLlllzaLlon, as collaLeral of
Lhe merchandlse lmporLed or purchased. vlotolo v.
losolot 8ook
Iore|gn Lxchange Cperat|ons: 8uylng and selllng forelgn
exchange and gold/sllver bulllon.
Selllng of forex Lo 8S may be ordered by Lhe M8.
ln speclal clrcumsLances, M8 may requlre banks Lo
malnLaln a balance beLween Lhelr asseLs and llablllLles ln
pesos or ln oLher currencles ln whlch Lhey operaLe.
M8 may lssue non-spoL purchases and sales regulaLlons
Lo prevenL banks from speculaLlng regardlng flucLuaLlons
ln forelgn exchange. 8anks bear Lhe rlsk of non-
compllance wlLh Lerms of forex documenLs and
lnsLrumenLs.
8anks Lo reporL volume and composlLlon of Lhelr
purchase and sale of forex for each day, and provlde
lnformaLlon on Lhe movemenL ln accounLs, upon requesL
of Lhe 8S. 8eporL may also be requlred of LransacLlons
or operaLlons ln gold. Accuracy of reporLs may be
verlfled by lnspecLlon.
C. Cther Serv|ces
7 Lhe purpose of Lhls ls Lo make Lhe bank a one-
sLop-shop
Custod|an of funds, documents, va|uab|e ob[ects: ln
addlLlon Lo lLs operaLlons
I|nanc|a| Agent: may acL as flnanclal agenL, and buy and
sell, by order of and for Lhe accounL of Lhelr cusLomers,
shares, evldences of lndebLedness and all Lypes of
securlLles. (ln such capaclLy, banks are noL requlred Lo
exerclse exLraordlnary dlllgence, as lL ls ouLslde of lLs
banklng funcLlons).
lnvesLlgaLlons may be conducLed by Lhe M8 and
lrregularlLles are sub[ecL Lo sancLlons: suspenslon of
offlcers, placlng of offlcers on waLchllsLs. Such need noL
be wlLh prlor noLlce, buL musL glve falr and reasonable
opporLunlLy Lo glve Lhelr slde. loollllo v. cltlbook
Co||ect|on]ayment Agent: 8ank may make collecLlons
and paymenLs for Lhe accounL of oLhers, and perform
such oLher servlces for Lhe cusLomers compaLlble wlLh
banklng buslness.
I|nanc|a| Adv|ser: WlLh approval of Lhe M8, may acL as
managlng agenL, advlser, consulLanL or admlnlsLraLor of
lnvesLmenL managemenL or advlsory or consulLancy
accounLs.
kent|ng out of Safety Depos|t 8oxes
8enLlng ouL of safeLy deposlL boxes ls noL a conLracL of
lease, as Lhe full possesslon and conLrol of Lhe box was
noL glven Lo Lhe renLers. 1hese are governed by Lhe C8L,
and Lhls prlmary funcLlon ls sLlll found wlLhln Lhe
parameLers of a conLracL of deposlL llke recelvlng ln
cusLody of funds, documenLs, eLc. for safekeeplng. 1he
renLlng ouL of such boxes lf noL lndependenL from, buL
relaLed Lo or ln con[uncLlon wlLh Lhls prlnclpal funcLlon.
1hus deposlLary's llablllLy ls sLlll found ln Lhe Clvll Code
rules on obllgaLlons and conLracLs, and Lhe bank ls llable
lf found Lo be gullLy of fraud, negllgence, delay or
conLravenLlon of Lhe Lenor of Lhe agreemenL. cA Aqto v.
cA
1he prlmary funcLlons of banks are wlLhln an agreemenL
of deposlL and noL of lease. 1he bank shall perform Lhe
acL of renLlng ouL of safeLy deposlL boxes as
deposlLarles. ulllgence of a good faLher of a famlly ls
requlred. 5lo v. cA
D. Cther Iunct|ons]Cperat|ons
Issue Guarantees: Cnly for borrowlng money by Lhe
bank, or cerLlflcaLlon of checks, or LransacLlons lnvolvlng
documenLs aLLached Lo lLems for collecLlon, or oLhers
regarded as common usage or pracLlce of banks.
Act as correspondent 8ank
ln commerclal LransacLlons lnvolvlng L/Cs, Lhe funcLlons
of a correspondenL bank are classlfled accordlng Lo Lhe
obllgaLlons Laken up by lL. 1he bank may be called a
noLlfylng bank, negoLlaLlng bank, or conflrmlng bank. a
noLlfylng bank, Lhe correspondenL bank assumes no
llablllLy excepL Lo noLlfy and/or LransmlL Lo Lhe
beneflclary Lhe exlsLence of Lhe leLLer of credlL. A
negoLlaLlng bank, on Lhe oLher hand, ls a correspondenL

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
bank whlch buys or dlscounLs a drafL under Lhe leLLer of
credlL. lLs llablllLy ls dependenL upon Lhe sLage of Lhe
negoLlaLlon. lf before negoLlaLlon, lL has no llablllLy wlLh
respecL Lo Lhe seller buL afLer negoLlaLlon, a conLracLual
relaLlonshlp wlll Lhen prevall beLween Lhe negoLlaLlng
bank and Lhe seller. ln Lhe case of a conflrmlng bank, Lhe
correspondenL bank assumes a dlrecL obllgaLlon Lo Lhe
seller and lLs llablllLy ls a prlmary one as lf Lhe
correspondenL bank lLself had lssued Lhe leLLer of credlL.
lor Lhe bank Lo be llable, lL musL be proved LhaL lL
conflrmed Lhe L/C. leotl 8ook v. cA
lor Lelegraphlc Lransfers: 1he bank merely acLs as an
lnLermedlary bank
1he Lelegraphlc money Lransfer, or slmply Lelegraphlc
Lransfer, was purchased by Lhe l8n from Lhe nC8 ln
Saudl Arabla, and slnce Lhe n8 ls Lhe nC8's
corresponden) bank ln Lhe hlllpplnes, Lhere ls creaLed
beLween Lhe Lwo banks a sorL of communlcaLlon
exchange for Lhe correspondenL bank Lo LransmlL and/or
remlL and/or pay Lhe value of Lhe Lelegraphlc Lransfer ln
accordance wlLh Lhe dlcLaLe of Lhe correspondence
exchange. Some such responslblllLy of Lhe
correspondenL bank ls akln Lo secLlon 7 of Lhe 8ules and
8egulaLlons lmplemenLlng L.C. 837, as amended by L.C.
923, ". . . Lo Lake charge of Lhe prompL paymenL" of Lhe
Lelegraphlc Lransfer, LhaL ls, by LransmlLLlng Lhe
Lelegraphlc money Lransfer Lo Lhe ClLlbank so LhaL Lhe
amounL can be prompLly credlLed Lo Lhe accounL of Lhe
plalnLlff wlLh Lhe sald bank. 1haL ls all LhaL Lhe n8 can
do under Lhe remlLLance arrangemenL LhaL lL has wlLh
Lhe nC8. lN8 v. cA
Cred|t Card Cperat|ons: under Lhe condlLlons of falr and
sound consumer credlL pracLlces, buL, sLlll some
regulaLlon exerclsed by 8S, ln llne wlLh global besL
pracLlces.
L. 1rust operat|ons
7 Cnly sLock corporaLlons and duly auLhorlzed
persons by Lhe M8 may be LrusL enLlLles
7 need noL be a bank
7 uegree of dlllgence: dlllgence of a prudenL man
ln Lhe exerclse ln Lhe conducL of an enLerprlse
of llke characLer wlLh slmllar alms
7 ueposlL wlLh 8S noL less Lhan 300k for
falLhful performance of duLles, whlch may be
lncreased by Lhe M8. Also requlred Lo execuLe a
bond whlch may be reduced by Lhe courLs
when Lhe properLy ls deposlLed wlLh Lhe LrusL
enLlLy, whlch shall be kepL separaLe from Lhe
general funds of Lhe bank.
I. roh|b|ted Acts
Insurance bus|ness: 8ank noL Lo engage ln lnsurance
buslness, dlrecLly as lnsurer. May be lndlrecL, such as
bank may creaLe a separaLe company for lnsurance.
Cutsourc|ng of bank funct|ons: no dlrecLor, offlcer or
employee, or agenL of any bank shall ouLsource lnherenL
banklng funcLlons.
VI. 8ank kegu|at|ons
A. Cwnersh|p]Cap|ta||zat|on
Crgan|zat|on: M8 may auLhorlze Lhe organlzaLlon of a
bank/quasl-bank sub[ecL Lo Lhe followlng condlLlons:
a. MusL be a sLock corporaLlon:
lssuance of sLock: prescrlbed by M8, buL may
only be par value sLocks
1reasury sLocks: banks noL allowed Lo purchase
own sLock or accepL own shares as securlLy for
loans, excepL as auLhorlzed by Lhe M8. lf own
shares acqulred, musL be dlsposed of wlLhln 6
monLhs, aL a publlc/prlvaLe sale. 1he
corporaLlon has no llen upon shares of
sLockholders for any lndebLedness Lo Lhe
corporaLlon. 1he raLlonale belng LhaL lf Lhe
corporaLlons were glven a llen on Lhelr own
sLocks for lndebLedness of Lhe sLockholders, Lhe
prohlblLlon agalnsL granLlng loans or dlscounLs
upon Lhe securlLy of Lhe sLock would become
largely lneffecLlve. loo coo v. 5ommets ln Lhe
sale, wheLher publlc or prlvaLe, Lhe bank may
parLlclpaLe and acqulre Lhe sald shares, whlch ls
noL consldered as a vlolaLlon of Lhe law.
llllploos Mlls v. uoytlt
b. lunds obLalned from Lhe publlc (20 or more
persons)
c. Mlnlmum caplLal requlremenLs (prescrlbed by
Lhe M8 for each caLegory of bank)
d. CapablllLy and oLher requlremenLs: prescrlbed
by Lhe M8 for each caLegory of bank
7 ln Lerms of flnanclal resources and Lechnlcal
experLlse and lnLegrlLy
7 assessmenL of ownershlp sLrucLure, dlrecLor
and senlor managemenL, operaLlng plan,
lnLernal conLrols, pro[ecLed flnanclal condlLlons
and caplLal base.
Stockho|d|ngs

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
a. lorelgn sLockholdlngs
lndlvlduals and non-banks: up Lo 40 of voLlng
sLock. 1hls rule applles Lo llllplnos and domesLlc
non-bank corporaLlons. ercenLage deLermlned
by clLlzenshlp of lndlvldual sLockholders. lor
corporaLlons, follow clLlzenshlp of conLrolllng
sLockholders.
lorelgn banks: May be auLhorlzed by Lhe M8 Lo
acqulre up Lo 100 of any one bank. lf already
wlLh 60, , may be lncreased Lo 100 . M8 may
adopL measures Lo ensure conLrol of 70 of
resources/asseLs of enLlre banklng sysLem us
held by banks ma[orlLy-owned by llllplnos.
b. llllplno sLockholdlngs: up Lo 40 of caplLal
sLock. uomesLlc banks may have up Lo 100 of
18, 88, flnanclal allled enLerprlses fro C8/u8 up
Lo 100 of only one bank.
c. SLockholdlngs of famlly groups or relaLed
lnLeresLs: lndlvlduals relaLed wlLhln Lhe 4
Lh

degree of consangulnlLy or afflnlLy, musL be
fully dlsclosed ln all LransacLlons, whlch lncludes
relaLed corporaLlons. noL llmlLlng Lhe amounL
LhaL Lhey can own (so long as Lhey are
dlsclosed).
d. 8equlred publlc offerlng: aL leasL 10 of caplLal
sLock of u8
e. 8ural 8anks: only clLlzens of Lhe hlllpplnes can
own and hold, dlrecLly or lndlrecLly, Lhe caplLal
sLock of a rural bank, sub[ecL only Lo Lhe
excepLlon of corporaLlons, assoclaLlons,
assoclaLlons or cooperaLlves quallfled under
hlllpplne laws Lo own and hold such caplLal
sLock. Nooqo v. Nooqo
8. D|rectors and Cff|cers
Compos|t|on of 8oard
3-13 dlrecLors, aL leasL 2 of whlch are lndependenL
dlrecLors.
lndependenL dlrecLor - any person oLher Lhan an
offlcer/employee of Lhe bank, lLs subsldlarles, afflllaLes
or members.
non-llllplnos may be dlrecLors up Lo Lhe exLenL of Lhe
forelgn parLlclpaLlon allowed.
lor merged or consolldaLed banks: number of dlrecLors
may lncreased by noL Lo exceed 21.
MeeLlngs: may be Lhrough modern Lechnologles (l.e.
Leleconferenclng).
ua||f|cat|ons
a. own aL leasL one share
b. flL and proper rule: prescrlbed by M8 Lo
malnLaln Lhe quallLy of bank managemenL and
proLecL deposlLors and Lhe publlc ln general: Lo
deLermlne flLness, lnLegrlLy, experlence,
educaLlon, Lralnlng, and compeLence Laken lnLo
accounL.
M8 may declde any conLroversy over Lhe obllgaLlons and
duLles of dlrecLors and offlcers Lo Lake remedlal
measures among oLhers. 8osoeqo v. cA
D|squa||f|cat|ons
a. Crlmlnal convlcLlon
7 by flnal [udgmenL of an offense punlshable by
lmprlsonmenL for a perlod exceedlng 6 years or
a vlolaLlon of Lhe CorporaLlon Code commlLLed
3 years prlor Lo Lhe daLe of elecLlon or
appolnLmenL.
b. ubllc offlclals
7 wheLher elecLlve or appolnLlve, full-Llme or
parL-Llme offlclals, prohlblLed Lo serve aL Lhe
same Llme as dlrecLors of a prlvaLe bank.
LxcepLlon: when such servlce ls lncldenL Lo
flnanclal asslsLance provlded by Lhe governmenL or a
governmenL owned or conLrolled corporaLlon Lo Lhe
bank or unless oLherwlse provlded under exlsLlng laws.
8ural banks - dlrecLors musL be llllplnos aL Lhe Llme of
appolnLmenL, noL allowed Lo be a guaranLor, lndorser, or
sureLy for loans from such bank Lo oLhers, or ln any
manner be an obllgor for money borrowed from Lhe
bank or loaned by lL excepL wlLh Lhe wrlLLen approval of
Lhe ma[orlLy of Lhe dlrecLors of Lhe bank.
c. M8 Member/8S ersonnel: WlLhln 2 years
afLer explraLlon of Lerm. LxcepL when he serves
as an offlclal represenLaLlve of Lhe governmenL
Lo such lnsLlLuLlon.
Compensat|on and Cther 8enef|ts
M8 may regulaLe compensaLlon, beneflLs, allowances of
dlrecLors ln excepLlonal cases and when Lhe
clrcumsLances warranL, such as buL noL llmlLed Lo Lhe
followlng:
a. When a bank ls under compLrollershlp or
conservaLorshlp, or

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
b. When a bank ls found by Lhe MoneLary 8oard Lo be
conducLlng buslness ln an unsafe or unsound manner, or
c. When a bank ls found by Lhe MoneLary 8oard Lo be ln
an unsaLlsfacLory flnanclal condlLlon.
8uL, generally, dlrecLors are pald on a per dlem basls. lf
compensaLlon ls pald, amounL noL Lo exceed Len (10)
percenL of Lhe neL lncome before lncome Lax of Lhe
corporaLlon durlng Lhe precedlng year.
Meet|ngs
May be Lhrough modern Lechnology.
Ma[orlLy of members consLlLuLe a quorum for
LransacLlng buslness. ueclslon of ma[orlLy of Lhose
presenL, where Lhere ls quorum ls valld.
LxcepLlon: lor elecLlon of offlcers, voLe of ma[orlLy of all
members.
owers of D|rectors: owers, buslness and properLy of
corporaLlon under Lhe conLrol of Lhe ulrecLors.
Doctr|ne of Apparent Author|ty: lf a corporaLlon
knowlngly permlLs lLs offlcer, or any oLher agenL, Lo
perform acLs wlLhln Lhe scope of an apparenL auLhorlLy,
holdlng hlm ouL Lo Lhe publlc as possesslng power Lo do
Lhose acLs, Lhe corporaLlon wlll, as agalnsL any person
who has dealL ln good falLh wlLh Lhe corporaLlon
Lhrough such agenL, be esLopped from denylng such
auLhorlLy. AssocloteJ 8ook v. ltoosttollet
A bank ls llable for wrongful acLs of lLs offlcers done ln
Lhe lnLeresLs of Lhe bank or ln Lhe course of deallngs of
Lhe offlcers ln Lhelr represenLaLlve capaclLy buL noL for
acLs ouLslde Lhe scope of Lhelr auLhorlLy. A bank holdlng
ouL lLs offlcers and agenL as worLhy of confldence wlll
noL be permlLLed Lo proflL by Lhe frauds Lhey may Lhus
be enabled Lo perpeLraLe ln Lhe apparenL scope of Lhelr
employmenL, nor wlll lL be permlLLed Lo shlrk lLs
responslblllLy for such frauds, even Lhough no beneflL
may accrue Lo Lhe bank Lherefrom. Accordlngly, a
banklng corporaLlon ls llable Lo lnnocenL Lhlrd persons
where Lhe represenLaLlon ls made ln Lhe course of lLs
buslness by an agenL acLlng wlLhln Lhe general scope of
hls auLhorlLy even Lhough, ln Lhe parLlcular case, Lhe
agenL ls secreLly abuslng hls auLhorlLy and aLLempLlng Lo
perpeLraLe a fraud upon hls prlnclpal or some oLher
person, for hls own ulLlmaLe beneflL. ltoJeotlol 8ook v.
cA
1hus, plalnLlff musL prove LhaL Lhere ls an aLLempL Lo
commlL fraud by Lhe agenL. ltoJeotlol 8ook v. Abosolo
WhaL Lransplres ln Lhe corporaLe board room ls enLlrely
an lnLernal maLLer. Pence, Lhe bank may noL lmpuLe
negllgence on Lhe parL of respondenL's represenLaLlve ln
falllng Lo flnd ouL Lhe scope of auLhorlLy of lLs manager.
lndeed, Lhe publlc has Lhe rlghL Lo rely on Lhe
LrusLworLhlness of bank managers and Lhelr acLs. 8ll
lomlly v. lltst Metto
1he general rule ls LhaL, ln Lhe absence of auLhorlLy from
Lhe board of dlrecLors, no person, noL even lLs offlcers,
can valldly blnd a corporaLlon. 1he power and
responslblllLy Lo declde wheLher Lhe corporaLlon should
enLer lnLo a conLracL LhaL wlll blnd Lhe corporaLlon ls
lodged ln Lhe board of dlrecLors. Powever, [usL as a
naLural person may auLhorlze anoLher Lo do cerLaln acLs
for and on hls behalf, Lhe board may valldly delegaLe
some of lLs funcLlons and powers Lo offlcers, commlLLees
and agenLs. 1he auLhorlLy of such lndlvlduals Lo blnd Lhe
corporaLlon ls generally derlved from law, corporaLe
bylaws or auLhorlzaLlon from Lhe board, elLher expressly
or lmplledly, by hablL, cusLom, or acqulescence, ln Lhe
general course of buslness. 1he auLhorlLy of a corporaLe
offlcer or agenL ln deallng wlLh Lhlrd persons may be
acLual or apparenL. 1he docLrlne of "apparenL
auLhorlLy," wlLh speclal reference Lo banks, had long
been recognlzed ln Lhls [urlsdlcLlon. AssocloteJ 8ook v.
ltoosttollet
ApparenL auLhorlLy ls derlved noL merely from pracLlce.
lLs exlsLence may be ascerLalned Lhrough 1) Lhe general
manner ln whlch Lhe corporaLlon holds ouL an offlcer or
agenL as havlng Lhe power Lo acL, or ln oLher words, Lhe
apparenL auLhorlLy Lo acL ln general, wlLh whlch lL
cloLhes hlm, or 2) Lhe acqulescence ln hls acLs of a
parLlcular naLure, wlLh acLual or consLrucLlve knowledge
Lhereof, wlLhln or beyond Lhe scope of hls ordlnary
powers. Accordlngly, Lhe auLhorlLy Lo acL for and Lo blnd
a corporaLlon may be presumed from acLs of recognlLlon
ln oLher lnsLances, whereln Lhe power was exerclsed
wlLhouL any ob[ecLlon from lLs board or shareholders.
AssocloteJ 8ook v. ltoosttollet
roh|b|ted Acts
ulrecLor, offlcer, employee or agenL shall:
a. noL make any false enLrles ln any bank reporL or
sLaLemenL or parLlclpaLe ln any fraudulenL
LransacLlon, Lhereby affecLlng Lhe flnanclal

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
lnLeresL of, or causlng damage Lo, Lhe bank or
any person.
b. WlLhouL order of a courL of compeLenL
[urlsdlcLlon, dlsclose Lo any unauLhorlzed
person any lnformaLlon relaLlve Lo Lhe funds or
properLles ln Lhe cusLody of Lhe bank belonglng
Lo prlvaLe lndlvlduals, corporaLlons, or any
oLher enLlLy, as Lo bank deposlLs, Lhe
provlslons of exlsLlng laws prevall,
c. AccepL glfLs, fees, or commlsslons or any oLher
form of remuneraLlon ln connecLlon wlLh Lhe
approval of a loan or oLher credlL
accommodaLlon from sald bank,
d. Cvervalue or ald ln overvalulng any securlLy for
Lhe purpose of lnfluenclng ln any way Lhe
acLlons of Lhe bank or any bank, or
e. CuLsource lnherenL banklng funcLlons.
C. 8ank Cperat|ons
8ranches
u8/k8 - may open branches or oLher offlces wlLhln or
ouLslde Lhe hlllpplnes wlLh prlor approval of Lhe 8S.
8ranchlng by all oLher banks governed by perLlnenL laws.
A bank may, sub[ecL Lo prlor approval of Lhe MoneLary
8oard, use any or all of lLs branches as ouLleLs for Lhe
presenLaLlon and/or sale of Lhe flnanclal producLs of lLs
allled underLaklng or of lLs lnvesLmenL house unlLs.
A bank auLhorlzed Lo esLabllsh branches or oLher offlces
shall be responslble for all buslness conducLed ln such
branches and offlces Lo Lhe same exLenL and ln Lhe same
manner as Lhough such buslness had all been conducLed
ln Lhe head offlce. A bank and lLs branches and offlces
shall be LreaLed as one unlL.
Local 8ranches of lorelgn 8anks - for Lhose wlLh more
Lhan 1 branch, all branches LreaLed as 1 unlL and all
references Lo Lhe hlllpplne branches of forelgn banks
refer Lo such unlLs.
8ank|ng Days and nours: aL leasL 6 hours a day. ln
addlLlon, banks or any of Lhelr branches or offlces may
open for buslness on SaLurdays, Sundays or holldays for
aL leasL 3 hours a day, sub[ecL Lo reporLlng Lo Lhe 8S.
Independent Aud|tor: May be requlred by Lhe 8S.
Chosen by Lhe bank from llsL of CAs accepLable Lo Lhe
8S.
I|nanc|a| Statements: SubmlLLed Lo Lhe 8S showlng
acLual flnanclal condlLlon. Also publlshed once every
quarLer ln newspaper of general clrculaLlon ln provlnce
or clLy where prlnclpal branch or offlce ls locaLed, ln
laymen's Lerms, wheLher ln Lngllsh or llllplno.
L|ectron|c transact|ons: 8S wlLh full auLhorlLy Lo
regulaLe.
Unsound 8ank|ng ract|ce: Any pracLlce whlch causes
undue rlsks Lo Lhe bank, sLockholders, eLc.
acLs/omlsslons whlch cause exLraordlnary rlsk Lo asseLs
of deposlLors, sLockholders, eLc.
lacLors Lo be consldered by Lhe M8:
a. damage, or abnormal rlsk or danger Lo Lhe safeLy,
sLablllLy, llquldlLy or solvency of Lhe lnsLlLuLlon,
b. 1he acL or omlsslon has resulLed or may resulL ln
maLerlal loss or damage or abnormal rlsk Lo Lhe
lnsLlLuLlon's deposlLors, credlLors, lnvesLors,
sLockholders or Lo Lhe 8angko SenLral or Lo Lhe publlc ln
general,
c. 1he acL or omlsslon has caused any undue ln[ury, or
has glven any unwarranLed beneflLs, advanLage or
preference Lo Lhe bank or any parLy ln Lhe dlscharge by
Lhe dlrecLor or offlcer of hls duLles and responslblllLles
Lhrough manlfesL parLlallLy, evldenL bad falLh or gross
lnexcusable negllgence, or
d. 1he acL or omlsslon lnvolves enLerlng lnLo any
conLracL or LransacLlon manlfesLly and grossly
dlsadvanLageous Lo Lhe bank, quasl-bank or LrusL enLlLy,
wheLher or noL Lhe dlrecLor or offlcer proflLed or wlll
proflL Lhereby.
Sett|ement of D|sputes: 8S Lo be consulLed lnvolvlng
dlspuLes wlLh banks, deposlLors, offlcers, sLockholders,
eLc.
lor lssues lnvolvlng checks, CPC acLs as arblLraLor.
arLlclpanLs ln Lhe reglonal clearlng operaLlons of Lhe
hlllpplne Clearlng Pouse CorporaLlon cannoL bypass Lhe
arblLraLlon process lald ouL by Lhe body and seek rellef
dlrecLly from Lhe courLs. nome 8ookets v. cA
CPC has Lhe Lechnlcal experLlse Lo deal wlLh lssues
lnvolvlng clearlng of checks. Powever, prlmary recourse
Lo Lhe CPC does noL preclude an appeal Lo Lhe reglonal
Lrlal courLs on quesLlons of law. AllleJ 8ook v. cA
CPC has lLs own rules of procedure for arblLraLlon.
Powever, Lhls ls governed by Lhe arblLraLlon law and

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
supplemenLed by Lhe rules of courL. As provlded ln Lhe
CPC rules, Lhe flndlngs of facLs of Lhe declslon or award
rendered by Lhe ArblLraLlon CommlLLee shall be flnal and
concluslve upon all Lhe parLles ln sald arblLraLlon
dlspuLe. under ArLlcle 2033 of Lhe Clvll Code, Lhe valldly
of any sLlpulaLlon on Lhe flnallLy of arblLraLor's award or
declslon ls recognlzed however, where Lhe condlLlons
descrlbed ln arLlcles 2038-2040 appllcable Lo boLh
compromlses and arblLraLlon obLalnlng, Lhe arblLraLors
awards may be annulled or resclnded. ConsequenLly, Lhe
declslon of Lhe arblLraLlon commlLLee ls sub[ecL Lo
[udlclal revlew. losolot 5ovloqs v. l81c
ln cases lnvolvlng checks, peLlLloner has several [udlclal
remedles avallable aL lLs dlsposal afLer Lhe ArblLraLlon
CommlLLee denled lLs MoLlon for 8econslderaLlon. lL
may peLlLlon Lhe proper 81C Lo lssue an order vacaLlng
Lhe award on Lhe grounds provlded for under SecLlon 24
of Lhe ArblLraLlon Law. eLlLloner llkewlse has Lhe opLlon
Lo flle a peLlLlon for revlew under 8ule 43 of Lhe 8ules of
CourL wlLh Lhe CourL of Appeals on quesLlons of facL, of
law, or mlxed quesLlons of facL and law. LasLly,
peLlLloner may flle a peLlLlon for cerLlorarl under 8ule 63
of Lhe 8ules of CourL on Lhe ground LhaL Lhe ArblLraLor
CommlLLee acLed wlLhouL or ln excess of lLs [urlsdlcLlon
or wlLh grave abuse of dlscreLlon amounLlng Lo lack or
excess of [urlsdlcLlon. Slnce Lhls case lnvolves acLs or
omlsslons of a quasl-[udlclal agency, Lhe peLlLlon should
be flled ln and cognlzable only by Lhe CourL of Appeals.
lblJ.
ArblLraLlon ls mandaLory ln lssues lnvolvlng checks: flled
wlLh Lhe CPC. 8uL, parLles may sLlll go Lo courL for
speclflc remedles.
D. Cther regu|at|ons
k|sk 8ased Cap|ta|
1here ls a mlnlmum raLlo beLween neL worLh and LoLal
rlsk asseLs (lncludlng conLlngenL asseLs).
8lsk based caplLal along wlLh slngle borrower's llmlL, and
rules on uCS8l loans ensure LhaL Lhe banklng buslness ls
sound.
Ma[or Investments]Cwnersh|p of kea| roperty
M8 Lo esLabllsh crlLerla for deLermlnlng ma[or
acqulslLlon of lnvesLmenL.
lor real properLy, lnvesLmenL and lmprovemenLs noL Lo
exceed 30 comblned caplLal accounLs, unless
oLherwlse provlded by Lhe M8.
8eal roperLy acqulred Lo be dlsposed of wlLhln 3 years,
or as may be prescrlbed by Lhe M8.
Dec|arat|on of D|v|dends
8ank noL Lo declare dlvldends when:
a. lLs clearlng accounL wlLh Lhe 8S ls overdrawn,
or
b. lL ls deflclenL ln Lhe requlred llquldlLy floor for
governmenL deposlLs for 3 or more consecuLlve
days, or
c. lL does noL comply wlLh Lhe llquldlLy
sLandards/raLlos prescrlbed by Lhe 8S for
purposes of deLermlnlng funds avallable for
dlvldend declaraLlon, or
d. lL has commlLLed a ma[or vlolaLlon as may be
deLermlned by Lhe 8S.
L. ena|ty for V|o|at|ons
May be dlssolved by Cuo WarranLo
Cfflcers/dlrecLors removed (admlnlsLraLlve
sancLlons)
llne or lmprlsonmenL or boLh (for offlcers,
manager, owners)
8lackllsLlng
1he CenLral 8ank and lLs respondenL offlclals may have
Lhe duLy underLhe CenLral 8ank AcL and Lhe Ceneral
8anklng AcL Lo cause Lhe prosecuLlon of Lhose alleged
vlolaLors, yeL We flnd noLhlng ln sald laws LhaL lmposes a
clear, speclflc duLy on Lhe former Lo do Lhe acLual
prosecuLlon of Lhe laLLer. 1he CenLral 8ank ls a
governmenL corporaLlon creaLed prlnclpally Lo
admlnlsLer Lhe moneLary and banklng sysLem of Lhe
8epubllc, noL a prosecuLlon agency llke Lhe flscal's offlce.
8elng an arLlflclal person, 1he CenLral 8ank ls llmlLed Lo
lLs sLaLuLory powers and Lhe nearesL power Lo whlch
prosecuLlon of vlolaLors of banklng laws may be
aLLrlbuLed ls lLs power Lo sue and be sued. 8uL Lhls
corporaLe power of llLlgaLlon evldenLly refers Lo clvll
cases only. letez v. M8 CenLral 8ank may noL be
compelled Lo prosecuLe crlmlnal cases by mandamus.
VII. 8anks |n D|stress, Cessat|on of 8ank|ng
8us|ness
A. Loans to 8anks

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
Loans w|thout Co||atera|: 8S may exLend loans and
advances Lo banklng lnsLlLuLlons for noL more Lhan 7
days wlLhouL any collaLeral for Lhe purpose of provldlng
llquldlLy Lo Lhe banklng sysLem ln Llmes of need.
Lmergency Loans: M8 may auLhorlze 8S Lo granL loans
Lo banks, wheLher durlng emergencles or normal
condlLlons, by concurrenL voLe of 3 members, whlch
shall noL exceed 30 of LoLal deposlLs and deposlL
subsLlLuLes of Lhe banklng lnsLlLuLlon and shall be
dlsbursed ln 2 or more Lranches. 1he amounL of Lhe flrsL
Lranche shall be llmlLed Lo 23 of Lhe LoLal deposlL and
deposlL subsLlLuLes of Lhe lnsLlLuLlon and secured by
governmenL securlLles Lo Lhe exLenL of Lhelr appllcable
loan values and oLher unencumbered flrsL class
collaLerals whlch Lhe M8 may approve. CreaLer amounL
may be dlsbursed ln 1
sL
Lranche as deLermlned by Lhe
M8 lf warranLed by Lhe clrcumsLances.
8. Conservatorsh|p
Grounds
1hls ls baslcally a llquldlLy lssue.
Whenever, on Lhe basls of a reporL submlLLed by Lhe
approprlaLe supervlslng or examlnlng deparLmenL, Lhe
M8 flnds LhaL a bank or a quasl-bank ls ln a sLaLe of
conLlnulng lnablllLy or unwllllngness Lo malnLaln a
condlLlon of llquldlLy deemed adequaLe Lo proLecL Lhe
lnLeresL of deposlLors and credlLors, Lhe M8 may appolnL
a conservaLor wlLh such powers as Lhe M8 shall deem
necessary Lo Lake charge of Lhe asseLs, llablllLles, and Lhe
managemenL Lhereof, reorganlze Lhe managemenL,
collecL all monles and debLs due sald lnsLlLuLlon, and
exerclse all powers necessary Lo resLore lLs vlablllLy. 1he
conservaLor shall reporL and be responslble Lo Lhe M8
and shall have Lhe power Lo overrule or revoke Lhe
acLlons of Lhe prevlous managemenL and board of
dlrecLors of Lhe bank or quasl-bank.
Appo|ntment of Conservator
AcLlon of M8 appolnLlng conservaLor ls flnal and
execuLory, and may noL be resLralned or seL aslde by Lhe
courL excepL on peLlLlon for cerLlorarl on Lhe ground LhaL
Lhe acLlon Laken was ln excess of [urlsdlcLlon or wlLh
such grave abuse of dlscreLlon as Lo amounL Lo lack or
excess of [urlsdlcLlon.
1he conservaLor should be compeLenL and
knowledgeable ln bank operaLlons and managemenL.
1he conservaLorshlp shall noL exceed one (1) year.
owers of Conservator: Lake charge of Lhe asseLs,
llablllLles, and Lhe managemenL Lhereof, reorganlze Lhe
managemenL, collecL all monles and debLs due sald
lnsLlLuLlon, and exerclse all powers necessary Lo resLore
lLs vlablllLy. 1he conservaLor shall reporL and be
responslble Lo Lhe M8 and shall have Lhe power Lo
overrule or revoke Lhe acLlons of Lhe prevlous
managemenL and board of dlrecLors of Lhe bank or
quasl-bank.
1he power under Lhe CenLral 8ank Law regardlng
conservaLorshlp ln preservaLlon of Lhe bank's asseLs
CAnnC1 Lx1Lnu Lo Lhe posL-facLo repudlaLlon of
perfecLed LransacLlon, oLherwlse, lL would lnfrlnge Lhe
non- lmpalrmenL clause of Lhe ConsLlLuLlon. 1hus, Lhe
auLhorlLy under SecLlon 28-A only perLalns Lhe power Lo
revoke defecLlve conLracLs - vold, voldable,
unenforceable or resclsslble. 1he conservaLor cannoL
repudlaLe a conLracL valldly made under Lhe docLrlne of
lmplled auLhorlLy. lLs only auLhorlLy ln such case ls Lo
assall such conLracL ln courL. lltst lblllpploe
lotetootloool 8ook v. cA
ua||f|cat|ons and remunerat|on: ueLermlned by M8,
amounL noL Lo exceed 2/3 of Lhe salary of Lhe presldenL
of Lhe lnsLlLuLlon ln one 1 year, payable ln 12 equal
monLhly paymenLs. lf LermlnaLed ln less Lhan 1 year on
Lhe ground LhaL Lhe lnsLlLuLlon can conLlnue buslness,
enLlLled Lo salary unLll end of year. lf LermlnaLed on
oLher grounds, noL enLlLled Lo remalnlng balance unLll
end of year.
1erm|nat|on of Conservatorsh|p:
M8 may LermlnaLe lf: lL ls saLlsfled LhaL Lhe lnsLlLuLlon
can conLlnue Lo operaLe on lLs own and Lhe
conservaLorshlp ls no longer necessary. also LermlnaLed
when conservaLor reporLs Lo M8, or ln lLs own
deLermlnaLlon LhaL conLlnuance ln buslness of Lhe
lnsLlLuLlon would lnvolve probable loss Lo lLs deposlLors
or credlLors, and ln such, recelvershlp and/or llquldaLlon
may be had.
Lffect: 8ank cannoL be compelled Lo pay some bonuses
Lo Lhe employees.
Iud|c|a| kev|ew: peLlLlon for cerLlorarl on Lhe ground
LhaL Lhe acLlon Laken was ln CAuLL!. 1he peLlLlon for
cerLlorarl may only be flled by Lhe sLockholders of record
represenLlng Lhe ma[orlLy of Lhe caplLal sLock wlLhln Len
10 days from recelpL by Lhe board of dlrecLors of Lhe

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
lnsLlLuLlon of Lhe order dlrecLlng recelvershlp, llquldaLlon
or conservaLorshlp.
C. Vo|untary L|qu|dat|on
7 wrlLLen noLlce of llquldaLlon senL Lo Lhe M8
before llquldaLlon ls underLaken, and Lhe M8
shall have Lhe rlghL Lo lnLervene and Lake sLeps
necessary Lo proLecL Lhe lnLeresLs of credlLors.
D. kece|versh|p and L|qu|dat|on
Govern|ng Law: Whlle Lhere are general laws on
recelvershlp and llquldaLlon, speclal laws governlng
banks should prevall. 1hus, whaL ls Lo be applled ls Lhe
nC8A. lo ke. letltloo fot Asslstooce lo tbe llpolJotloo of
tbe kotol 8ook of 8okoJ v. 8lk
Iur|sd|ct|on: 1he law vesLs ln Lhe 8S Lhe supervlslon
over operaLlons and acLlvlLles of banks. 81C has no
[urlsdlcLlon Lo hear and declde a sulL LhaL seeks Lo place
a bank under recelvershlp. kotoqo v. Atceoos, It.
1he CorporaLlon Code ls a general law applylng Lo all
Lypes of corporaLlons, whlle Lhe new CenLral 8ank AcL
regulaLes speclflcally banks and oLher flnanclal
lnsLlLuLlons, lncludlng Lhe dlssoluLlon and llquldaLlon
Lhereof. As beLween a general and speclal law, Lhe laLLer
shall prevall - generalla speclallbus non deroganL.
kotoqo v. Atceoos, It.
Grounds
Whenever, upon reporL of Lhe head of Lhe supervlslng or
examlnlng deparLmenL, Lhe M8 flnds LhaL a bank or
quasl- bank:
(a) ls unable Lo pay lLs llablllLles as Lhey become due ln
Lhe ordlnary course of buslness. uoes noL lnclude
lnablllLy Lo pay caused by exLraordlnary demands
lnduced by flnanclal panlc ln Lhe banklng communlLy,
(b) 8y Lhe 8S, Lo meeL lLs llablllLles, or
(c) CannoL conLlnue ln buslness wlLhouL lnvolvlng
probable losses Lo lLs deposlLors or credlLors, or
(d) Pas wlllfully vlolaLed a cease and deslsL order under
SecLlon 37 of Lhe nC8A LhaL has become flnal, lnvolvlng
acLs or LransacLlons whlch amounL Lo fraud or a
dlsslpaLlon of Lhe asseLs of Lhe lnsLlLuLlon, ln whlch
cases, Lhe M8 may summarlly and wlLhouL need for prlor
hearlng forbld Lhe lnsLlLuLlon from dolng buslness ln Lhe
hlllpplnes and deslgnaLe Lhe hlllpplne ueposlL
lnsurance CorporaLlon as recelver of Lhe banklng
lnsLlLuLlon.
(e) perslsLs ln carrylng on lLs buslness ln an unlawful or
unsafe manner,
(f) Lhe bank or quasl-bank noLlfles Lhe 8S or publlcly
announces a bank hollday, or ln any manner suspends
Lhe paymenL of lLs deposlL llablllLles conLlnuously for
more Lhan 30 days, Lhe M8 may summarlly and wlLhouL
need for prlor hearlng close such banklng lnsLlLuLlon and
place lL under recelvershlp of Lhe ulC.
1he MoneLary 8oard may order Lhe cessaLlon of
operaLlon of a bank ln Lhe hlllpplnes and place lL under
recelvershlp upon a flndlng of lnsolvency or when lLs
conLlnuance ln buslness would lnvolve probable loss Lo
lLs deposlLors or credlLors. lf Lhe MoneLary 8oard shall
deLermlne and conflrm wlLhln 60 days LhaL Lhe bank ls
lnsolvenL or can no longer resume buslness wlLh safeLy
Lo lLs deposlLors, credlLors, and Lhe general publlc, lL
shall, lf publlc lnLeresL wlll be served, order lLs
llquldaLlon. 8ooco llllploo v. M8
1he absence of an examlnaLlon before Lhe closure of a
bank dld noL mean LhaL Lhere was no basls for Lhe
closure order. needless Lo say, Lhe declslon of Lhe M8
and 8S, llke any oLher admlnlsLraLlve body, musL have
someLhlng Lo supporL lLself and lLs flndlngs of facL musL
be supporLed by subsLanLlal evldence. 8uL lL ls clear
under 8A 7633 LhaL Lhe basls need noL arlse from an
examlnaLlon as requlred ln Lhe old law. 1he M8 had
sufflclenL basls Lo arrlve aL a sound concluslon LhaL Lhere
were grounds LhaL would [usLlfy closure. ln shorL, M8
and 8S complled wlLh all Lhe requlremenLs of 8A 7633.
8y relylng on a reporL before placlng a bank under
recelvershlp, Lhe M8 and 8S dld noL only follow Lhe
leLLer of Lhe law, Lhey were also falLhful Lo lLs splrlL,
whlch was Lo acL expedlLlously. kotol 8ook of 5oo Mlqoel
v. M8
Who may be rece|ver: lor banks - ulC, for quasl-banks
- any person wlLh recognlzed compeLence ln
banklng/flnance.
Dut|es of kece|ver:
a. gaLher and Lake charge of all Lhe asseLs and
llablllLles of Lhe lnsLlLuLlon
b. admlnlsLer Lhe same for Lhe beneflL of lLs
credlLors

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
c. exerclse Lhe general powers of a recelver under
Lhe 8evlsed 8ules of CourL buL noL pay or
commlL any acL LhaL wlll lnvolve Lhe Lransfer or
dlsposlLlon of any asseL of Lhe lnsLlLuLlon,
excepL admlnlsLraLlve expendlLures
d. deposlL or place Lhe funds of Lhe lnsLlLuLlon ln
non- speculaLlve lnvesLmenLs
e. deLermlne as soon as posslble, buL noL laLer
Lhan 90 days from Lake over, wheLher Lhe
lnsLlLuLlon may be rehablllLaLed or oLherwlse
placed ln such a condlLlon so LhaL lL may be
permlLLed Lo resume buslness wlLh safeLy Lo lLs
deposlLors and credlLors and Lhe general publlc,
sub[ecL Lo Lhe approval of Lhe M8.
Whlle lL ls Lrue LhaL foreclosure falls wlLhln Lhe broad
deflnlLlon of dolng buslness," LhaL ls: .a conLlnulLy of
commerclal deallngs and arrangemenLs and
conLemplaLes Lo LhaL exLenL, Lhe performance of acLs or
words or Lhe exerclse of some of Lhe funcLlons normally
lncldenL Lo and ln progresslve prosecuLlon of Lhe
purpose and ob[ecL of lLs organlzaLlon, lL should noL be
consldered lncluded, however, ln Lhe acLs prohlblLed
whenever banks are prohlblLed from dolng buslness"
durlng recelvershlp and llquldaLlon proceedlngs. 1hus,
Lhe bank, Lhrough lLs recelver may foreclose properLles.
lottobls v. lbll. vetetoos 8ook
C|ose-now hear-|ater Doctr|ne: revlous hearlng ls noL
requlred before a bank may be placed under
recelvershlp, lL ls enough LhaL subsequenL [udlclal revlew
ls provlded. 1hls prevenLs unwarranLed dlsslpaLlon of
asseLs and ls a valld exerclse of pollce power.
1hls "close now and hear laLer" scheme ls grounded on
pracLlcal and legal conslderaLlons Lo prevenL
unwarranLed dlsslpaLlon of Lhe bank's asseLs and as a
valld exerclse of pollce power Lo proLecL Lhe deposlLors,
credlLors, sLockholders and Lhe general publlc. 1he mere
flllng of a case for recelvershlp by Lhe CenLral 8ank can
Lrlgger a bank run and draln lLs asseLs ln days or even
hours leadlng Lo lnsolvency even lf Lhe bank be acLually
solvenL. 1he procedure prescrlbed ln Sec. 29 ls Lruly
deslgned Lo proLecL Lhe lnLeresL of all concerned, l.e.,
Lhe deposlLors, credlLors and sLockholders, Lhe bank
lLself, and Lhe general publlc. 1he absence of noLlce and
hearlng ls noL a valld ground Lo annul a MoneLary 8oard
resoluLlon placlng a bank under recelvershlp. 1he
absence of prlor noLlce and hearlng cannoL be deemed
acLs of arblLrarlness and bad falLh. ceottol 8ook v. cA
8S ls noL requlred Lo provlde coples of reporLs Lo Lhe
banks. 1he banks cannoL clalm a vlolaLlon of Lhelr rlghL
Lo due process lf Lhey are noL provlded wlLh coples of
Lhe 8eporL of examlnaLlons (8CLs). 1he same 8CLs are
based on Lhe llsLs of flndlngs/excepLlons conLalnlng Lhe
deflclencles found by Lhe Supervlslon and LxamlnaLlon
ueparLmenL (SLu) examlners when Lhey examlned Lhe
books of Lhe respondenL banks. 1hese llsLs of
flndlngs/excepLlons are furnlshed Lo Lhe offlcers or
represenLaLlves of Lhe banks, and Lhe banks are requlred
Lo commenL and Lo underLake remedlal measures sLaLed
ln sald llsLs. ceottol 8ook v. Aotoolo-voleozoelo
L|qu|dat|on
L|qu|dat|on: ln corporaLlon law, connoLes a wlndlng up
or seLLllng wlLh credlLors and debLors. AsseLs are
dlsLrlbuLed Lo Lhose enLlLled Lo recelve Lhem. lL ls Lhe
process of reduclng asseLs Lo cash, dlscharglng llablllLles
and dlvldlng surplus or loss. kehab|||tat|on:
conLemplaLes a conLlnuance of corporaLe llfe and
acLlvlLles ln an efforL Lo resLore and relnsLaLe Lhe
corporaLlon Lo lLs former poslLlon of successful
operaLlon and solvency. lL ls conLrary Lo Lhe concepL of
llquldaLlon, Lo allow llquldaLlon proceedlngs Lo conLlnue
would serlously hlnder Lhe rehablllLaLlon of Lhe bank.
lbll. vetetoos v. veqo
AcLlons Lo Lake:
a. llle ex potte moLlon wlLh Lhe 81C
b. ConverL asseLs lnLo money
c. ulspose Lo credlLors and oLher wlLh clalms,
sub[ecL Lo preference of credlLs
Pow asseLs dlsLrlbuLed:
a. CosLs, fees of proceedlngs, and fees of recelver
approved by Lhe courL
b. aymenL of debLs
All clalms flled ln Lhe llquldaLlon CourL
C8: All clalms agalnsL Lhe bank under llquldaLlon should
be flled wlLh Lhe llquldaLlon courL.
x: Clalms by Lhe 8ank (Lhese are recelvables)
1he raLlonale behlnd Lhe provlslon, l.e., Lhe [udlclal
llquldaLlon ls lnLended Lo prevenL mulLlpllclLy of acLlons
agalnsL Lhe lnsolvenL bank. lL ls a pragmaLlc arrangemenL
deslgned Lo esLabllsh due process and orderllness ln Lhe
llquldaLlon of Lhe bank, Lo obvlaLe Lhe prollferaLlon of

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
llLlgaLlons and Lo avold ln[usLlce and arblLrarlness. 1he
lawmaklng body conLemplaLed LhaL for convenlence
only one courL, lf posslble, should pass upon Lhe clalms
agalnsL Lhe lnsolvenL bank and LhaL Lhe llquldaLlon courL
should asslsL Lhe SuperlnLendenL of 8anks and regulaLe
hls operaLlons. Ooq v. cA
1he Lxcluslve [urlsdlcLlon of Lhe llquldaLlon courL
perLalns only Lo Lhe ad[udlcaLlon of clalms agalnsL Lhe
bank. lL does noL cover Lhe reverse slLuaLlon where lL ls
Lhe bank whlch flles a clalm agalnsL anoLher person or
legal enLlLy. 1he lnLended purpose ls Lo prevenL
mulLlpllclLy of acLlons agalnsL an lnsolvenL bank and
deslgned Lo esLabllsh due process and orderllness ln Lhe
llquldaLlon of Lhe bank. 8elng Lhe slLuaLlon where lL ls an
acLlon lnsLlLuLed by Lhe 8ank, Lhe llquldaLlon courL does
noL have [urlsdlcLlon over Lhe case. Mooolo v. cA
1he CourL, ln valenzuela v. CourL of Appeals, held LhaL as
a general rule, lf Lhere ls a [udlclal llquldaLlon of an
lnsolvenL bank, all clalms agalnsL Lhe bank should be
flled ln Lhe llquldaLlon proceedlng. 1he CourL ln
valenzuela, however, afLer conslderlng Lhe
clrcumsLances aLLendanL Lo Lhe case, held LhaL Lhe
general rule should noL be applled lf Lo order Lhe
aggrleved parLy Lo reflle or rellLlgaLe lLs case before Lhe
llLlgaLlon courL would be an exerclse ln fuLlllLy." Among
Lhe clrcumsLances Lhe CourL consldered ln LhaL case ls
Lhe facL LhaL Lhe clalmanLs were poor and Lhe dlspuLed
parcel of land was Lhelr only properLy, and Lhe parLles'
clalms and defenses were properly venLllaLed ln and
consldered by Lhe [udlclal courL. ln Lhe presenL case, Lhe
CourL flnds LhaL analogous conslderaLlons exlsL Lo
warranL Lhe appllcaLlon of valenzuela. eLlLloner
8esLlLuLo was 78 years old aL Lhe Llme Lhe peLlLlon was
flled ln Lhls CourL, and hls co-peLlLloner-wlfe Lrllnda dled
durlng Lhe pendency of Lhe case. And, excepL for co-
peLlLloner Corazon, 8esLlLuLo ls a resldenL of Czamls
ClLy. 1o compel hlm Lo appear and rellLlgaLe Lhe case ln
Lhe llquldaLlon courL-nasugbu 81C when Lhe lssues Lo be
ralsed before lL are Lhe same as Lhose already
exhausLlvely passed upon and declded by Lhe 8alayan
81C would be superfluous. coJlomot v. 8otooqos
5ovloqs
ulsposlLlon of 8anklng lranchlse: 8S may award Lo an
lnsLlLuLlon, upon Lerms and condlLlons approved by Lhe
M8, Lhe banklng franchlse of a bank under llquldaLlon Lo
operaLe ln Lhe area where sald bank or lLs branches
were prevlously operaLlng. roceeds arlslng from such
award are sub[ecL Lo Lhe approprlaLe excluslve
dlsposlLlon of Lhe M8.
Lffects of kece|versh|p and L|qu|dat|on
8esLrlcLlon on capaclLy Lo acL: under ArL 1323 of Lhe Clvll
Code, an offer becomes lneffecLlve upon lnsolvency of
elLher parLy before accepLance ls conveyed. 1herefore,
Lhe offer a person becomes lneffecLlve due Lo Lhe
subsequenL lnsolvency of Lhe bank, and Lhe conLracL dld
noL reach Lhe perfecLlon sLage. vllloooevo v. cA
WlLh a bank havlng been already placed under
recelvershlp, lLs offlcers, are no longer auLhorlzed Lo
LransacL buslness ln connecLlon wlLh Lhe bank's asseLs
and properLy. 1he appolnLed recelver has no auLhorlLy
Lo perform acLs of ownershlp, and dlspose of properLles
of Lhe bank. Lven lf such ls approved by Lhe offlcers of
Lhe bank, lL ls no approval aL all, and Lhus Lhe dlsposlLlon
ls noL valld. Abocos keol stote v. Moollo 8ook
enalLles for LransacLlons afLer bank becomes lnsolvenL:
ulrecLors/offlcers llable under penal provlslons of Lhe
nC8A.
LffecL of garnlshmenL, levy on aLLachmenL or execuLlon:
asseLs of Lhe lnsolvenL bank are held ln LrusL for Lhe
equal beneflL of all credlLors, and afLer lLs lnsolvency,
one cannoL obLaln an advanLage or a preference over
anoLher by aLLachmenL, execuLlon, or oLherwlse. llpooo
v. uevelopmeot 8ook of klzol
SLoppage of 8uslness: Cenerally, an appolnLmenL of a
recelver does noL dlssolve Lhe corporaLlon nor does lL
lnLerfere wlLh Lhe exerclse of lLs corporaLe rlghLs. 8uL
Lhls prlnclple ls, of course, appllcable Lo a slLuaLlon
where Lhere ls no resLralnL lmposed on Lhe corporaLlon,
unllke ln Lhe case where Lhe bank ls speclflcally
forbldden and lmmoblllzed form dolng buslness. WlLh
banks, dolng buslness also lnvolves Lhe collecLlon of
debLs and foreclosure of morLgages. ltovlJeot 5ovloqs v.
cA
lnLeresL on ueposlLs: A banklng lnsLlLuLlon whlch has
been declared lnsolvenL and subsequenLly ordered
closed by Lhe CenLral 8ank of Lhe hlllpplnes cannoL be
held llable Lo pay lnLeresL on bank deposlLs whlch
accrued durlng Lhe perlod when Lhe bank ls acLually
closed and nonoperaLlonal. WhaL enables a bank Lo pay
sLlpulaLed lnLeresL on money deposlLed wlLh lL ls LhaL
Lhru Lhe oLher aspecLs of lLs operaLlon lL ls able Lo
generaLe funds Lo cover Lhe paymenL of such lnLeresL.
unless a bank can lend money, engage ln lnLernaLlonal
LransacLlons, acqulre foreclosed morLgaged properLles
or Lhelr proceeds and generally engage ln oLher banklng

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
and flnanclng acLlvlLles from whlch lL can derlve lncome,
lL ls lnconcelvable how lL can carry on as a deposlLory
obllgaLed Lo pay sLlpulaLed lnLeresL. ConvenLlonal
wlsdom dlcLaLes Lhls lnexorable falr and [usL concluslon.
And lL can be sald LhaL all who deposlL money ln banks
are aware of such a slmple economlc proposlLlon.
ConsequenLly, lL should be deemed read lnLo every
conLracL of deposlL wlLh a bank LhaL Lhe obllgaLlon Lo
pay lnLeresL on Lhe deposlL ceases Lhe momenL Lhe
operaLlon of Lhe bank ls compleLely suspended by Lhe
duly consLlLuLed auLhorlLy, Lhe 8S. llJellty 5ovloqs v.
ceozoo
LxcepLlon: when Lhere ls already a [udgmenL. kotol 8ook
of 5to. cotolloo v. looJbook
Iud|c|a| kev|ew
AvallablllLy of remedy: CerLlorarl ln favor of sLockholders
represenLlng ma[orlLy of caplLal sLock.
1) lnsLlLuLlon of Lhe order dlrecLlng recelvershlp,
llquldaLlon or conservaLorshlp recelved by Lhe
8oard
2) peLlLlon flled by sLockholders wlLhln 10 days
form such recelpL
Cround: Crave abuse of dlscreLlon
lf Lhe M8 order ls lssued wlLh arblLrarlness and bad falLh.
unLll deLermlnaLlon ls made Lo LhaL effecL, sLaLus quo ls
malnLalned. 1he bank conLlnues under recelvershlp, eLc.
8ased on Lhe afore-quoLed provlslon Lhe MoneLary
8oard may order Lhe cessaLlon of operaLlon of a bank ln
Lhe hlllpplnes and place lL under recelvershlp upon a
flndlng of lnsolvency or when lLs conLlnuance ln buslness
would lnvolve probable loss Lo lLs deposlLors or
credlLors. lf Lhe MoneLary 8oard shall deLermlne and
conflrm wlLhln 60 days LhaL Lhe bank ls lnsolvenL or can
no longer resume buslness wlLh safeLy Lo lLs deposlLors,
credlLors, and Lhe general publlc, lL shall, lf publlc
lnLeresL wlll be served, order lLs llquldaLlon. 8ooco
llllploo v. M8
!urlsdlcLlon:
81C wlLh [urlsdlcLlon - lf quesLlonlng acLs/omlsslons of a
corporaLlon, board or offlcer or person
ulC CharLer - 81C cannoL lssue ln[uncLlons. 1hus, flle
wlLh Lhe CA, whlch ls allowed under Lhe charLer Lo lssue
ln[uncLlons.
Who may quesLlon: 1o rule LhaL only Lhe recelver may
brlng sulL ln behalf of Lhe bank ls, Lo echo Lhe
respondenL appellaLe courL, "asklng for Lhe lmposslble,
for lL cannoL be expecLed LhaL Lhe masLer, Lhe C8, wlll
allow Lhe recelver lL has appolnLed Lo quesLlon LhaL very
appolnLmenL." ConsequenLly, only sLockholders of a
bank could flle an acLlon for annulmenL of a MoneLary
8oard resoluLlon placlng Lhe bank under recelvershlp
and prohlblLlng lL from conLlnulng operaLlons. ln
requlrlng LhaL only Lhe sLockholders of record
represenLlng Lhe ma[orlLy of Lhe caplLal sLock may brlng
Lhe acLlon Lo seL aslde a resoluLlon Lo place a bank under
conservaLorshlp ls Lo ensure LhaL lL be noL frusLraLed or
defeaLed by Lhe lncumbenL 8oard of ulrecLors or offlcers
who may lmmedlaLely resorL Lo courL acLlon Lo prevenL
lLs lmplemenLaLlon or enforcemenL. lL ls presumed LhaL
such a resoluLlon ls dlrecLed prlnclpally agalnsL acLs of
sald ulrecLors and offlcers whlch place Lhe bank ln a
sLaLe of conLlnulng lnablllLy Lo malnLaln a condlLlon of
llquldlLy adequaLe Lo proLecL Lhe lnLeresL of deposlLors
and credlLors. lndlrecLly, lL ls llkewlse lnLended Lo
proLecL and safeguard Lhe rlghLs and lnLeresLs of Lhe
sLockholders. Common sense and publlc pollcy dlcLaLe
Lhen LhaL Lhe auLhorlLy Lo declde on wheLher Lo conLesL
Lhe resoluLlon should be lodged wlLh Lhe sLockholders
ownlng a ma[orlLy of Lhe shares for Lhey are expecLed Lo
be more ob[ecLlve ln deLermlnlng wheLher Lhe
resoluLlon ls plalnly arblLrary and lssued ln bad falLh.
ceottol 8ook v. cA
AcLlons of Lhe M8 llnal and LxecuLory: no courL, excepL
Lhe CourL of Appeals, shall lssue any Lemporary
resLralnlng order, prellmlnary ln[uncLlon or prellmlnary
mandaLory ln[uncLlon agalnsL Lhe ulC for any acLlon
under lLs charLer.
SC may lssue ln[uncLlons, sub[ecL Lo Lhe flllng of a bond,
excepL ln case of exLreme urgency lnvolvlng a
consLlLuLlonal lssue, such LhaL unless a Lemporary
resLralnlng order ls lssued, grave ln[usLlce and
lrreparable ln[ury wlll arlse. lf a [udge lssues an
ln[uncLlon, he may be penallzed wlLh suspenslon of aL
leasL 60 days wlLhouL ay, and ln[uncLlon has no effecL.
SecLlon 29 of Lhe CenLral 8ank AcL provldes LhaL Lhe
acLlons of Lhe M8 ln proceedlngs on lnsolvency are
expllclLly declared by law Lo be flnal and execuLory. 1hey
may noL be seL aslde or resLralned by Lhe courLs excepL
upon convlnclng proof LhaL Lhe acLlon ls plalnly arblLrary
and made ln bad falLh. ceottol 8ook v. uelo ctoz 8u1,
fallure Lo asserL Lhe same ln Lhe llquldaLlon proceedlngs
consLlLuLes as a valld walver of Lhe defense.

"#$%&$' (#) *+,&+)+- . /0012 /3+4#$5+- 61
Starr Weigand
LffecL of llllng eLlLlon for 8evlew: uoes noL sLall or sLop
Lhe acLs of Lhe recelver. LxcepL: when an ln[uncLlon ls
flled.
endency of Lhe case dld noL dlmlnlsh Lhe auLhorlLy of
Lhe deslgnaLed llquldaLor Lo admlnlsLer and conLlnue Lhe
bank's LransacLlons. 8ooco llllploo v. booez.
LlablllLy of M8 and ulC: Solldary llablllLy cannoL aLLach
Lo Lhe 8S, ln lLs capaclLy as governmenL regulaLor of
banks, and Lhe ulC as sLaLuLory recelver under 8A
7633, because Lhey are Lhe prlnclpal governmenL
agencles mandaLed by law Lo deLermlne Lhe flnanclal
vlablllLy of banks and quasl-banks, and faclllLaLe
recelvershlp and llquldaLlon of closed flnanclal
lnsLlLuLlons, upon facLual deLermlnaLlon of Lhe laLLer's
lnsolvency. MltooJo v lulc
L. DIC I|nanc|a| Ass|stance
When ulC deLermlnes LhaL an lnsured bank ls ln danger
of closlng, ln order Lo prevenL such closlng, lL, based on
dlscreLlon of lLs 8ou, ls auLhorlzed Lo make loans Lo, or
purchase Lhe asseLs of, or assume llablllLles of, or make
deposlLs ln, such lnsured bank, upon such Lerms and
condlLlon as Lhe 8ou may prescrlbe, when ln Lhe oplnlon
of Lhe 8oard, Lhe conLlnued operaLlon of such bank ls
essenLlal Lo provlde adequaLe banklng servlce ln Lhe
communlLy or malnLaln flnanclal sLablllLy ln Lhe
economy.
VIII. 1he 8angko Sentra| Ng |||p|nas and 1he
Superv|s|on of 8anks
8S ls Lhe cenLral moneLary auLhorlLy, lndependenL and
accounLable body corporaLe ln Lhe dlscharge of lLs
mandaLed responslblllLles concernlng money, banklng
and credlL. 1hus, whlle belng a governmenL-owned
corporaLlon, lL en[oys flscal and admlnlsLraLlve
auLonomy.
Supervlslon of 8anks: lL may lssue regulaLlons, whlch
musL noL exceed Lhe scope of lLs auLhorlLy under Lhe law
and be unlform for all of Lhe same class.
Money luncLlon: Sole power Lo lssue currency wlLhln
Lhe LerrlLory
MoneLary pollcy: endeavor Lo conLrol any expanslon or
conLracLlon ln moneLary aggregaLes whlch ls pre[udlclal
Lo Lhe aLLalnmenL or malnLenance of prlce sLablllLy.
ower Lo preserve Lhe lnLernaLlonal value of Lhe peso
and Lo malnLaln lLs converLlblllLy lnLo oLher freely
converLlble currencles prlmarlly for, alLhough noL
necessarlly llmlLed Lo, currenL paymenLs for forelgn
Lrade and lnvlslbles.
8anker and llnanclal Advlser of Lhe CovernmenL.
---oCo---