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LAW BOC BANKING COMMERCIAL LAW

c. Acquisition of Inconvertible Currencies ii. To discourage private hoarding; [Sec.

1]
General Rule: The BSP shall avoid the iii. To encourage the people to deposit
acquisition and holding of currencies which are their money in banks; and
not freely convertible. iv. To discourage private hoarding, so that
the funds can be used by the bank to
Exception: The acquisition of such currencies grant loans to assist in economic
in an amount exceeding the minimum balance development.
necessary to cover current demand for said
currencies only when and to the extent that The absolute confidentiality rule in R.A. No.
such acquisition is considered by the MB to be 1405 actually aims at protection from
in the national interest. unwarranted inquiry or investigation if the
purpose of such inquiry or investigation is
d. In Times of Crises merely to determine the existence and nature,
as well as the amount of the deposit in any
The MB may exercise its emergency given bank account. [BSP Group, Inc. v. Go,
restrictions on exchange operations G.R. No. 168644 (2010)]
 These restrictions may be exercised by a
majority vote of the entire MB, i.e. 5 votes. 2. Prohibited Acts
 The vote must be approved by the
President. a. Examination, inquiry, or looking into
deposits and investments in Philippine
The restrictions the BSP may choose to impose government bonds by persons,
are: government officials, bureaus, or offices;
a. Temporary suspension or restriction of [Sec. 2]
sales of exchange by the BSP; b. Disclosure by banking institutions' officials
b. Subjecting all transactions in gold and or employees to unauthorized persons
foreign to license by the BSP; or regarding information about covered
c. Requiring that any foreign exchange deposits and investments. [Sec. 3]
thereafter obtained by any person
residing in or any entity operating in the
Philippines be delivered to the BSP or to
3. Deposits and Investments
an agent bank, at effective exchange Covered
rates. [Sec. 74]
These restrictions do not apply to Foreign General Rule
Currency Deposits under RA 6426.
All peso deposits of whatever nature with
banks or banking institutions in the Philippines
B. LAW ON SECRECY OF are considered as of an absolutely confidential
BANK DEPOSITS nature. [Sec. 2]
[RA 1405, as Amended]
Also covered are investments in bonds issued
The section numbers hereinafter generally by the Government of the Philippines, its
pertain to RA 1405, unless otherwise indicated. political subdivisions and its instrumentalities,
whether denominated in pesos or foreign
currency. Note that investments in bonds in
1. Purpose
foreign currency are still covered by RA 1405.
The Foreign Currency Deposit Act does not
i. To encourage the people to deposit
cover those investments.
their money in banking institutions;

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Labelling RA 1405 as the Law on Secrecy of Zones of Privacy

Bank Deposits is less than accurate. To be
more accurate, RA 1405 should be called the Under the RA 1405, bank deposits are
Law on Secrecy of Bank Deposits and statutorily protected or recognized zones of
Investments in Government Bonds. privacy. [People v. Estrada, G.R. No. 164368
(2009); Marquez v. Desierto, G.R. No. 135882
Deposits and Funds Covered by (2001); Ople v. Torres, G.R. No. 127685
Other Laws on Confidentiality (1998)]

i. Foreign currency deposits, which are It is conceded that while the fundamental law
governed by the Foreign Currency has not bothered with the triviality of specifically
Deposit Act addressing privacy rights relative to banking
ii. Funds placed in a bank not in the accounts, there, nevertheless, exists in our
nature of a deposit by private jurisdiction a legitimate expectation of privacy
individuals or entities. These may also governing such accounts. The source of this
not be disclosed, under Subsec. 55.1 of right of expectation is statutory, and it is found
the General Banking Law of 2000. in R.A. No. 1405, otherwise known as the Bank
Secrecy Act of 1955. [BSB Group, Inc., v. Go,
G.R. No. 168644 (2010)]
Trust Accounts

The term "deposits" is to be understood broadly 4. Exceptions

and not limited to accounts giving rise to
creditor-debtor relations between the bank and Deposits:
depositor. The deposit of money which may be a. Upon written permission of the depositor;
used by banks for authorized loans to 3rd b. In cases of impeachment;
persons also falls under RA 1405. Therefore, c. Upon order of competent court in cases of
trust accounts are also covered. [Ejercito v. SB bribery and dereliction of duty;
Special Division, G.R. Nos. 157294-95 (2006)] d. In cases where the money deposited or
invested is the subject matter of litigation.
But see Morales, The Philippine General
Banking Law (Annotated) (2017), pp. 220-221. If the case is for the recovery of money as a
result of failure to inform regarding improper
Construction of Confidentiality crediting, the money in the account is not the
subject matter of litigation. This is because the
By force of statute, all bank deposits are amount sought to be recovered is different from
absolutely confidential, and that nature is the amount that is already in the account. By
unaltered even by the legislated exceptions. the terms of RA 1405, the ‘money deposited’
itself should be the subject matter of the
litigation. [Union Bank v. Court of Appeals,
There is disfavor towards construing these
G.R. No. 134699 (1999)]
exceptions in such a manner that would
authorize unlimited discretion on the part of the
government or of any party seeking to enforce In contrast, where the case is for the recovery
of amounts converted by the depositors, the
those exceptions and inquire into bank
amount sought to be recovered is exactly the
deposits. If there are doubts in upholding the
money that is supposedly in the account. If the
absolutely confidential nature of bank deposits
case necessarily involves inquiring into the
against affirming the authority to inquire into
whereabouts of the illegally acquired amount,
such accounts, then such doubts must be
this falls under the exceptions to bank secrecy
resolved in favor of confidentiality.
under RA 1405. [Mellon Bank, N.A. v. Magsino,
[Republic v. Eugenio, G.R. No. 174629 (2008)]
G.R. No. 71479 (1990)]

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Other Exceptions the bank premises. [Sec. 2, Unclaimed

The Commissioner of Internal Revenue Balances Law, Act No. 3926, as
can inquire into the bank accounts of the amended by PD 679]
following taxpayers: 2. The PDIC and/or the BSP can inquire
i. A decedent in order to determine into or examine deposit accounts and
his gross estate; or all information related thereto in case
ii. A taxpayer who has filed an there is a finding of unsafe and
application to compromise his tax unsound banking practice. [Sec. 8,
liability on the ground of financial paragraph 8, RA 3591, as amended by
incapacity; [NIRC, Sec. 6(f)] RA 9576].
iii. A taxpayer, information on whose
account is requested by a foreign Not necessarily an exception: Power of the
tax authority. Ombudsman to “examine and have access to
b. Unexplained wealth under Sec. 8 of the bank accounts and records” under Sec. 15[8]
Anti-Graft and Corrupt Practices Act (RA of RA 6770. [Morales, The Philippine General
3019). [PNB v. Gancayco, G.R. No. L- Banking Law (Annotated) (2017) citing
18343 (1965); Banco Filipino v. Purisima, Marquez v. Desierto, infra]
G.R. No. L-56429 (1988); Marquez v.
Desierto, G.R. No. 135882 (2001)] 5. Garnishment of Deposits,
c. Inquiry by the Anti-Money Laundering
Council under the AMLA (RA 9160, the
Including Foreign Deposits
Anti-Money Laundering Act of 2001, as
amended) after obtaining a court order, General rule: The prohibition against
when there is probable cause that the examination of or inquiry into a bank deposit
deposits or investments involved are in any under Republic Act 1405 does not preclude its
way related to an unlawful activity or a being garnished to insure satisfaction of a
money laundering offense [Sec. 11, AMLA, judgment. [China Banking Corporation v.
see infra], except that no court order is Ortega, G.R. No. L-34964 (1973); Philippine
required if the covered investments are Commercial and Industrial Bank v. Court of
related to: Appeals, G.R. No. 84526 (1991)]
1. Kidnapping for Ransom [RPC];
2. Dangerous Drugs [2002 In the garnishment of deposits to insure
Comprehensive Dangerous Drugs satisfaction of a judgment, there is no real
Act]; inquiry, and if the existence of the deposit is
3. Hijacking and other violations of RA disclosed, the disclosure is purely incidental
6235; to the execution process. It is hard to
4. Destructive arson and murder; conceive that it was ever within the intention of
5. Felonies similar to (i) to (iv) above Congress to enable debtors to evade payment
which are punishable under the penal of their just debts, even if ordered by the Court,
laws of other countries; and through the expedient of converting their
6. Terrorism and conspiracy to commit assets into cash and depositing the same in a
terrorism under the Human Security bank. [China Banking Corporation v. Ortega,
Act of 2007. G.R. No. L-34964 (1973)]
d. BSP inquiry or examination in the course of
its periodic or special examination of the Exception: Foreign Currency Deposits
bank. [Sec. 11, AMLA] The foreign currency deposits shall be exempt
1. Disclosure of certain information about from attachment, garnishment, or any other
bank deposits which have been order or process of any court, legislative body,
dormant for at least 10 years, to the government agency or any administrative body
Treasurer of the Philippine in a sworn whatsoever. [Sec. 8, FCDA – Foreign Currency
statement, a copy of which is posted in Deposit Act]

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6. Penalties for Violation Classification of Banks

Any violation of this law will subject offender Universal Bank (UB)
upon conviction, to an imprisonment of not As the name implies, a universal bank has the
more than five years or a fine of not more than most banking power, as it has the same powers
twenty thousand pesos or both, in the as a commercial bank, plus the powers:
discretion of the court. [Sec.5]  To operate an investment house, whether
as an integral unit or as a subsidiary.
C. GENERAL BANKING  In turn, an investment house underwrites
LAW OF 2000 (GBL) securities either on firm underwriting (good
The section numbers hereinafter generally as sold) or best efforts (excess to be
pertain to RA 8791, unless otherwise indicated. returned to the issuer)
 To invest in non-allied enterprises
1. Definition and classification
Commercial Bank (KB)
of banks Has the powers defined in Secs. 29. and 53,
infra.
a. Definition of Banks
"Banks" shall refer to entities engaged in the Thrift Bank
lending of funds obtained in the form of Thrift banks are banks that focus on basic
deposits. [Subsec. 3.1] banking services for their clients, with an
emphasis on individuals and small businesses.
How Banks are Structured Thrift banks are primarily governed by RA
Generally, banks are stock corporations. 7906, the Thrift Banks Act.
However, cooperative banks may also be
formed under the Cooperative Code. Thrift banks include:
 Savings and mortgage banks;
N.B. Note that under RA 10641, qualified  Savings and loan associations; and
foreign banks, with MB approval, may now  Private development banks.
enter the local banking system, through any of
the following modes: Rural Banks
1. Acquiring, purchasing, or owning up to These are banks that are formed for the
100% of the voting stock of an existing purpose of providing adequate credit facilities
domestic bank; to farmers and merchants, or to cooperatives
2. Investing in up to 100% of the voting of such farmers and merchants and in general,
stock of a new banking subsidiary the people of the rural communities.
incorporated under the laws of the
Philippines; or They are primarily governed by RA 7353 (Rural
3. Establishing branches with full banking Banks Act).
authority.
Cooperative Banks
However, the foreign bank must be These are banks organized as cooperatives
established, reputable, and financially sound. under RA 6938, the Cooperative Code.

Further, it must be widely-owned and publicly Islamic Banks

listed in the country of origin. There is currently only one Islamic Bank in the
Philippines, the Al-Amanah Islamic Bank,
which aims to provide banking under the
Shari’a principles governing banking.

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