Professional Documents
Culture Documents
NEL EDIZA
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- ANSWERS TO THE 2ND LONG EXAM- BANKING LAW –
I. Discuss the Fit and Proper Rule and its purpose [5%]
ANSWER:
Section 16 of the GBL provides the “Fit and Proper Rule” which states that “to maintain the quality
of bank management and afford better protection to depositors and the public in general, the
Monetary Board shall prescribe, pass upon and review the qualifications and disqualifications of
individuals elected or appointed bank directors or officers and disqualify those found unfit.”
“After due notice to the board of directors of the bank, the Monetary Board may disqualify, suspend
or remove any bank director or officer who commits or omits an act which render him unfit for the
position.”
“In determining whether an individual is fit and proper to hold the position of a director or officer of
a bank, regard shall be given to his integrity, experience, education, training, and competence.”
Sec. 19 of the GBL prohibits appointive or elective public official, whether full-time or part-time,
from serving as officer of any private bank, save in cases where:
1. Such service is incident to financial assistance provided by the government or a
GOCC to the bank;
2. Unless otherwise provided in the Rural Banks Act; or
3. Unless otherwise provided under existing laws.
II. Give the two prohibited acts under the Law on Secrecy of Bank Deposits [5%]
ANSWERS:
1. Upon written consent of the depositor (RA 1405,Sec. 2)
2. In cases of impeachment (ibid)
3. Upon order of competent court in cases of bribery or dereliction of duty of public officials
(ibid)
4. In cases where the money deposited or invested is the subject matter of the litigation (ibid)
5. Upon order of the Commissioner of Internal Revenue in respect of the bank deposits of a
decedent for the purpose of determining such decedent’s gross estate (NIRC, Sec. 6[F][1])
6. Upon the order of the Commissioner of Internal Revenue in respect of bank deposits of a
taxpayer who has filed an application for compromise of his tax liability by reason of financial
incapacity to pay his tax liability (ibid)
7. The Commissioner of Internal Revenue is authorized to inquire into bank deposits of a
specific taxpayer upon request for tax information from a foreign tax authority pursuant to an
international convention or agreement on tax matters to which the Philippines is a party (ibid)
8. In case of dormant accounts/deposits for at least 10 years under the Unclaimed Balances
Act (Act No. 3936, Sec. 2)
9. The prohibition against examination of bank deposit does not preclude its garnishment to
satisfy a judgment against the depositor (Oñate v. Abrogar, G.R. No. 107303, February 21, 1994)
10. Presidential Commission on Good Government (PCGG) may require the production of
bank records material to its investigation (Opinion of the Secretary of Justice, February 27, 1987)
11. The Anti-Money Laundering Council (AMLC) may inquire into any deposit with any bank in
case of violation of the RA 9160 or the AMLA if there is probable cause that it is related to an
unlawful activity (RA 9160, as amended, Sec. 11)
12. The PDIC and the BSP may examine deposit accounts and all information related to them
in case of a finding of unsafe or unsound banking practices (RA 3591, as amended, Sec. 8)
13. With court order:
a. In cases of unexplained wealth under Sec. 8 of the Anti-Graft and Corrupt Practices Act
(PNB v. Gancayco, L-18343, September 30, 1965)
b. In cases filed by the Ombudsman and upon the latter’s authority to examine and have
access to bank accounts and records (Marquez v. Desierto, GR 138569, September 11, 2003)
14. Without court order: If the AMLC determines that a particular deposit or investment with
any banking institution is related to the following (HK-MADS):
a. Hijacking,
b. Kidnapping,
c. Murder,
ANSWER:
NO. The contention of GIL NOTHING is not tenable. In the case of Banco Filipino v. Purisima, it
was held that the inquiry into illegally acquired property-or property not legitimately acquired-
extends to cases where such property is concealed by being held or recovered in the name
of other persons. This proposition is made clear by RA 3019 which quite categorically states that
the term “legitimately acquired property of a public officer or employee shall not include property
unlawfully acquired by the respondent, but its ownership is concealed by its being recorded in the
name of, or held by, respondent’s spouse, ascendants, descendants, relatives or any other
persons. To sustain the petitioner’s theory, and restrict the inquiry only to property held by or in the
name of the government official or employee, or his spouse and unmarried children is unwarranted
in the light of the provisions of the statutes in question, and would make available to persons in
government who illegally acquire property an easy and fool-proof means of evading investigation
and prosecution; all they have to do would be to simply place the property in possession or name
of persons other than their spouse and unmarried children. This is an absurdity that we will not
ascribe to the lawmakers.
VI.
Bonnie Richards is suspected jueteng lord who is rumored to be enjoying police and
military protection. The envy of many drug lords who had not escaped the dragnet of the
law, Bonnie was summoned to a hearing of the Committee on Racketeering and Other
Syndicated Crimes of the House of Representatives, which was conducting congressional
investigation-in aid of legislation on the involvement of police and military personnel, and
possibly even of local government officials, in the illegal activities of suspected gambling
and drug lords. Subpoenaed to attend the investigation were officers of certain identified
banks with a directive to them to bring the records and documents of bank deposits of
individuals mentioned in the subpoenas, among them Bonnie.
Bonnie and the banks opposed the production of the bank records of deposits on the
ground that no such inquiry is allowed under the Law on Secrecy of Bank Deposits (R.A.
1405 as amended). Is the opposition of Bonnie and the banks valid? Explain.
ANSWER:
IX.
R.A. 6832 creating a Commission to conduct a Thorough Fact-Finding Investigation of the
failed Coup d’etat of December 1989, recommend measures to prevent the occurrence of
similar attempts at a violent seizure of power and for other purposes, provides that the
Commission may ask the Monetary Board to disclose information on and/or to grant
authority to examine any bank deposits, trust or investment funds, or banking transactions
in the name of and/or utilized by a persons, natural or juridical, under investigation by the
Commission, in any bank or banking institution in the Philippines, when the Commission
has reasonable ground to believe that said deposits, trust or investment funds, or banking
transactions have been used in support or in furtherance of the objectives of the said coup
Money laundering is committed by any person who, knowing that any monetary instrument or
property represents, involves, or relates to the proceeds of any unlawful activity:
a. transacts said monetary instrument or property;
b. converts, transfers, disposes of, moves, acquires, possesses or uses said monetary
instrument or property;
c. conceals or disguises the true nature, source, location, disposition, movement or
ownership of or rights with respect to said monetary instrument or property;
d. attempts or conspires to commit money laundering offenses referred to in paragraphs (a),
(b) or (c);
e. aids, abets, assists in or counsels the commission of the money laundering offenses
referred to in paragraphs (a),
(b) or (c) above; and
XIV.
DENIZ LUCERO PADILLA is the president of Western Bank. His wife applied for a loan with
the said bank to finance an internet cafe. The loan officer told her that her application will
not be approved because the grant of loan to related interests of bank directors, officers,
and stockholders is prohibited by the General Banking Law. Explain whether the loan
officer is correct.
ANSWER:
NO. The loan officer should have advised the wife to ask her husband to secure approval of the
bank’s Board of Directors for the intended loan and to limit the same in an amount not to exceed
its unencumbered deposits and book value of its paid in capital contribution in the bank; if the
intended loan should exceed the foregoing limit, the borrower should have the same secured by a
non- risk assets determined by the Monetary Board, unless the loan shall be in the form of a fringe
benefit. (GBL, Sec. 36)
A bank officer violates the DOSRI law when he acquires bank funds for his personal benefit, even
if such acquisition was facilitated by a fraudulent loan application. Directors, officers, stockholders,
and their related interests cannot be allowed to interpose the fraudulent nature of the loan as a
defense to escape culapability or their circumvention of the law. The prohibition under the law
covers loan by a bank director or officer which are made directly, indirectly, for himself or as the
representative or agent of others. At the same time, he is liable for estafa through falsification of
commercial documents. The bank money which came to his possession as a result of the
fraudulent loan application was not his. He remained bank’s fiduciary with respect to that money,
which makes it capable of misappropriation or conversion in his hands (Soriano v. People of the
Philippines, et al., G.R. No. 162336, February 1, 2010, in Divina, 2014).
XV.
[REPEATED] REFER TO THE 1ST LONG EXAM
a. UNIVERSAL BANKS – these used to be called expanded commercial banks and their
operations are primarily governed by the General Banking laws. They can exercise the powers of
an investment house and invest in non-allied enterprises. They have the highest capitalization
requirement.
b. COMMERCIAL BANKS – these are ordinary or regular commercial banks, as distinguished
from a universal bank. They have a lower capitalization requirement than a universal bank and
cannot exercise the powers of an investment house and invest in non-allied enterprises.
c. THRIFT BANKS – shall include savings and mortgage banks, private development banks, and
stock savings and loans association organized under existing laws.
d. RURAL BANKS - banks which are designed to make needed credit available and readily
accessible in the rural areas on reasonable terms.
e. COOPERATIVE BANKS – one organized, the majority share of which is owned and controlled
by cooperatives, primarily to provide financial and credit services to cooperatives.
XVI.
What is the “Truth in Lending Act”?
Who are covered under the Truth in Lending Act? [5%]
ANSWERS:
It is Republic Act No. 3765, which is an act requiring the disclosure of finance charges in connection
with the extension of credit.
The declared policy behind the law is to protect the people from lack of awareness of the true cost
of credit by assuring full disclosure of such cost, with a view of preventing the uninformed use of
credit to the detriment of the national economy.
The law covers any creditor, which is defined as any person engaged in the business of extending
credit (including any person who as a regular business practice make loans or sells or rents
property or services on a time, credit, or installment basis, either as principal or as agent) who
requires as an incident to the extension of credit, the payment of a finance charge.