UW 19) Banking and Financial Law Rafael A. Morales L The Philippine Financial System A. Certain Constituents 1, Bangko Sentral ng Pilipinas Section 4 et seq., General Banking Law of 2000 , Forex Companies, etc.. 2. Investment Houses, Financing Compari 3. Universal and Commercial Banks (including Philippine branches of foreign banks) (@) Functions Sections 29 & 53, General Banking Law of 2000 (b) Certain Basic Units (i Regular Banking Unit (RBU) Fidelity Savings and Mortgage Bank vs. Cenzon, 184SCRA 141 (1990) (ii) Foreign Currency Deposit Unit (FCDU) Cancio vs. Court of Appeals, 154 SCRA 731 (1987) Salvacion vs. Central Bank, 278 SCRA 27 (1997) GSIS vs. Court of Appeals, 651 SCRA 661 (2011) ii) Trust Department Section 79 er seq., General Banking Law of 2000 Gv) Investment House Unit (©) Degree of Diligence ‘Simex International (Manila), Inc. vs. Court of Appeals, 183 SCRA 360 (1990) Bank of the Philippine Islands vs. Intermediate Appellate Court, 206 SCRA 408 (1992) Bank of the Philippine Islands vs. Court of Appeals, 326 SCRA 641 (2000) Consolidated Bank and Trust Corporation vs. Court of Appeals, 410 SCRA 562 (2003) Philippine Banking Corporation vs. Court of Appeals, 419 SCRA __ 4872004) ‘Samsung Construction Company Philippines, Inc. vs. Far East Bank, 436 SCRA 402 (2004) Heirs of Eduardo Manlapat vs. Court of Appeals, 459 SCRA 412 (2005) Philippine National Bank vs. Pike, 470 SCRA 328 (2005) Cadiz vs. Court of Appeals, 474 SCRA 232 (2008) Far East Bank and Trust Company vs. Pacilan, Jr., 465 SCRA 372 (2005) Citibank, N.A. vs. Cabamongan, 488 SCRA 517 (2006) Citibank, N.A. vs. Sabeniano, 504 SCRA 378 (2006) @ Systemic Risk: Certain Prudential Measures (Reserves (i) SBL Section 35, General Banking Law of 2000(iii) DOSRI Section 36, General Banking Law of 2000 Civ) Loan-loss provision Section 49, General Banking law of 2000 ‘The Special Purpose Vehicle (SPV) Act of 2002 (Republic Act No, 9182, as amended) (¥) PDIC insurance (moral hazard) (vi) Capital adequacy (Basel IM) Section 34, General Banking Law of 2000 (vii) Equity investment limits (allied vs. non-allied enterprises) Section 24 et seq., General Banking Law of 2000 Demosthenes P. Agan, Jr. ef al. vs. PIATCO, et al., 402 SCRA 612 (2003) B. Foreign Exchange Liberalization 1. Manual of Regulations on Foreign Exchange Transactions 2. Republic Act No. 8183 3. Section 72, New Central Bank Act IL, Certain Financial Transactions and Documents A. Loan Transactions 1. Analysis of Parts of a Loan Agreement (a) Preamble (b) Terms of Loan Dio vs. Japor, 463 SCRA 170 (2005) Consolidated Bank and Trust Corporation vs. Court of Appeals, 365 SCRA 671 (2001) Macalinao vs. Bank of the Philippine Islands, 600 SCRA 67 (2009) (© Yield Protection (disaster clause, tax gross-up clause) (d) Representations and Warranties (pari passu representation) (c) Negative and Affirmative Covenants (negative pledge) (B) Conditions Precedent (g) Events of Default (MAC clause cross-default/cross-acceleration clause) China Banking Corporation vs. Court of Appeals, 461 SCRA 162 (2005) ‘Mondragon Leisure and Resorts Corporation vs. Courtof Appeals, 460 SCRA 279 (2005) (h) Miscellaneous (judgment currency clause, sharing clause) 2. Closing opinion 3. Loan Transfers and Participations (@) Section X238, Manual of Regulations for Banks (b) Participation vs. Assignment 4, Other Issues (@) BSP approval and/or registration (©) Notarization (Article 2244(14), Civil Code) (©) Documentary Stamp Tax (DST) (Section 179, NIRC) (®_ Upon execution ii) Upon transfer (RMC No. 13-87; Section 199(, NIRC)(@ Truth-in-Lending Act (Republic Act No. 3765) Development Bank of the Philippines vs. Arcill 599 (2005) Bank of the Philippine Islands vs. Yu, 610 SCRA 412 (2010) la, Jt, 462 SCRA. B, Deposit Transactions 1. Savings, Current and Time Deposits (a) Depositary (RBU/FCDU) (b) Tax (©) Secrecy of Bank Deposit Republic Act No. 1405, as amended Ejercito vs. Sandiganbayan (Special Division), 509 ‘SCRA 190 (2006) Republic Act No. 6426, as amended China Banking Corporation vs. Court of Appeals, 511 SCRA 110 (2006) ‘Subsection 55.1(b), General Banking Law of 2000 2. Overdraft 3. Survivorship Issue Section 97, National Internal Revenue Code of 1997 ‘Ana Rivera vs. People's Bank and Trust Company, 73 Phil. $46 (1942) Vitug vs. Court of Appeals, 183 SCRA 755 (1990) BIR Ruling No. 010-2003 C. Deposit Substitute Activities 1, Quasi-banking ‘Section 6, General Banking Law of 2000 2. Reserves D, Letters of Credit Feati Bank and Trust Company vs. Court of Appeals, 196 SCRA 576 (1990) Transfield Philippines, Inc. vs. Luzon Hydro Corporation, 443 SCRA 307 (2004) Philippine National Bank vs. Pineda, 197 SCRA 1 (1991) 1. Types 2. UCP 600/1SP 98 E, Commercial Papers F. Security Devices and Other Credit Supports/Enhancements 1. Types (a) Real Estate Mortgage (6) Chattel Mortgage (©) Mortgage Trust Indenture (@) Pledge (©) Guarantee/Suretyship/Standby Letter of Credit Insular Bank of Asia & America vs, IAC, 167 SCRA 450 (1988)‘Transfield Philippines, Inc. vs. Luzon Hydro Corporation, 443 SCRA 307 (2004) Ong vs. Philippine Commercial Internation 705 (2005) International Finance Corporation vs. Imperial SCRA 149 (2005) {IN Development Corporation vs. Philippine Export and Foreign Loan ‘Guarantee Corporation, 468 SCRA 555 (2005) jal Bank, 448 SCRA 1 Textile Mills, Inc., 475 (f) Aval (g) Hold-out (b) Assignment by way of security People's Bank and Trust Co. vs. Odom, Lopez vs. Court of Appeals, 114 SCRA 671 (1982) Manila Banking Corporation vs. Teodoro, 169 SCRA 95 (1989) Integrated Realty Corp. vs. Philippine National Bank, 174 SCRA 295 (1989) ‘Yau Chu vs. Court of Appeals, Caltex (Phitippines), Inc. vs. Court of Appeals, () Trust Receipt ‘Allied Banking Corp. vs. Ordofiez, 192 SCRA 246 (1990) Ng vs. People, 619 SCRA 291 (2010) Colinares vs. Court of Appeals, 339 SCRA 609 (2000) of che Philippines vs. Prudential Bank, 475 SCRA 64 Phil. 126 (1937) 177 SCRA 793 (1989) 212 SCRA 448 (1992) Development Bank 0 1623 (2005) Rosario Textile Milis vs. Home Bankers Savings and Trust Company, 462 SCRA 88 (2005) Vintola vs. IBAA, 150 SCRA $78 (1987) People vs. Nitafan, 207 SCRA 726 (1992) @ Set-off'Netting “Traders Royal Bank vs. Castafiares, 636 SCRA 519 (2010) (k) Comfort Letter Section 41, General Banking Law of 2000 2. Certain Issues (a) Validity of "after-acquired property” and “after-incurred-obligation" clauses in a chattel mortgage Article 2091, Civil Code Torres vs. Limjap, 56 Phil. 141 (1931) People's Bank and Trust Co. vs. Dahican Lumber Company, 20 SCRA 84 (1967) Belgian Catholic Missionaries vs. Magallanes Press, 49 Phil. 647 (1926) ‘Acme Shoe, Rubber and Plastic Corp. vs. Court of Appeals, 260 SCRA 714 (1996) Ong Liong Tiak vs. Luneta Motor Co., 66 Phil. 459 (1938) Prudential Bank vs. Alviar, 464 SCRA 353 (2005) Cuyco vs. Cuyco, 487 SCRA 693 (2006) (b) No deficiency claim in a pledge (©) Deficiency claim in a chattel mortgage; exception (Article 1484, paragraph (3), Civil Code) ‘Garrido vs. Tuason, 24 SCRA 727 (1968)PCI Leasing and Finance, Inc. vs. Trojan Metal Industries, (638 SCRA 615 (2010) Magna Financial Services Group, Ine. vs. Colarina, 477 SCRA 245(2005) (@ Dacion en pago with repurchase (as an alternative to foreclosure of mortgage) (©) Effect of "stay order" on enforcement of security, (Foreclosure of real estate mortgage Section 47, General Banking Law of 2000 Republic Act No. 133 as amended Register of Deeds vs. China Banking Corporation, 4 SCRA 1145 (1962) Paderes vs. Court of Appeals, 463 SCRA 504 (2005) Banco Filipino Savings and Mortgage Bank vs. Court of Appeals, 463 SCRA 64 (2005) ‘Tanchan vs. Allied Banking Corporation, $71 SCRA 512 (2008) HII. Other Tax Matters A. Applicable Taxes 1, Income tax 2. DST 3. GRT B. Taxation of FCDUs and OBUs Republic Act No. 9294 BIR Ruling No. 052-10 Union Bank of the Philippines vs. Commissioner of Internal Revenue, CTA Case No. 7874, March 29, 2011 CC. Tax-minimizing structures 1, Omnibus agreement 2. "Originating bank" structure IV, Project Financing ‘A. Mechanism B. BOT and similar arrangements ¥; Derivative Transactions ‘A. Concept B. BSP Licensing Requirements C. ISDA Master Agreements ‘Onapal Philippines Commodities, Inc. vs. Court of Appeals, 218 SCRA 281 (1993) First Philippine Intemational Bank vs. Court of Appeals, 252 SCRA 259 (1996)VI. Securitization A. Concept B. Asset-hacked securities C. Securitization Act of 2004 (Republic Act No. 9267) VII. Due-Diligence Investigation VILL. Certain Financial Products/Esoteric Structures A, Trade AccountBrokering, B. Credit-Linked Notes/Deposits IX. Certain Other Matters A. Anti-Money Laundering Act B. Securities Regulation Code Rafael A. Morales, The Philippine General Banking Law (Annotated), Third Reference Boo! Edition (2007) 08/07/15 Ea ttn =