LAW

• Banks


  Entities engaged in the lending of funds obtained in the form of deposits from the public
• Investment company


  An entity that is engaged solely in investing, reinvesting, or trading in securities is not engaged in banking
• Investment company


  An entity that loans out the money of its customers, collects the interests, and charges a commission to both lender and borrower is engaged in banking
• Quasi-banks


  Entities engaged in the borrowing funds through the issuance, endorsement or assignment with recourse or acceptance of deposit substitutes for purposes of relending or purchasing of receivable and other obligations
• Deposit substitutes


  Alternative forms of obtaining funds from the public, other than deposits, through the issuance, endorsement, or acceptance of debt instruments for the borrower's own account, for the purposes of relending or purchasing of receivables and other obligations
• Nature of banking business

  • It has a vital role in providing an environment conducive to the sustained national economy
  • It is fiduciary in nature that requires high standards of integrity and performance
• Classifications of banks


  • Universal banks
  • Commercial banks
  • Rural banks
  • Thrift banks
  • Cooperative banks
  • Islamic banks
  • Other classification as determined by the MB of the BSP
• Universal bank


  Banks that have authority to exercise, in addition to the powers and functions of commercial banks, powers of an investment house and the power to invest in non-allied enterprises
• Commercial bank


  Banks that are given all such power necessary to engage in commercial banking in addition to general corporate powers
• Thrift bank


  Banks that have all the powers of a commercial bank, except to issue imported LC and to accept or open checking account except with prior approval by the MB
• Entry of foreign banks

  The Monetary Board may authorize foreign banks to operate in the Philippine banking system through acquiring, purchasing or owning up to 100% of the voting stock of an existing bank, investing in up to 100% of the voting stocks of a new banking subsidiary, or establishing branches with full banking authority
• Basic functions of banks

  • Deposit function
  • Loan function
  • Receive in custody funds, documents and valuable objects
  • Act as financial agent and buy and sell, by order of an for the account of their customers, shares, evidence of indebtedness and all types of securities
  • Make collections and payments for the account of others and perform such other services for their customers as are not incompatible with banking business
  • Upon prior approval of the MB, act as managing agent, adviser, consultant or administrator of investment management/advisory/consultancy accounts
  • Rent out safety deposit boxes
• Banks are prohibited from engaging in insurance business
• Bancassurance


  An arrangement between a bank and an insurance company, through which the insurer can sell its products to the bank's customers
• Outsourcing of functions is generally prohibited, e.g. a bank cannot hire another company to accept deposits
• Deposit function


  Fixed, savings, and current deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loan (Art. 1980 of the NCC). The bank is the debtor while the depositor is the creditor.
• Minors opening bank accounts

  They can open bank accounts in their own right if they are at least seven years of age, able to read and write and have sufficient discretion, and not otherwise disqualified by any other incapacity. The accounts should only be savings or time deposits.
• Parents may deposit for their minor children and guardians for their wards
• Married women are allowed to open bank accounts without the assistance of their husbands
• Kinds of deposits


  • Demand deposits / current account
  • Savings account
  • Negotiable order of withdrawal accounts (NOW)
  • Time deposit
  • Trust account
• Demand deposits / current account

  All those liabilities of banks which are denominated in Philippine currency and are subject to payment in legal tender upon demand by presentation of checks. Generally, only universal bank or commercial bank can accept or create demand deposits.
• Savings account


  The most common type of deposit, usually evidenced by a passbook. Banks are prohibited from issuing/accepting withdrawal slips or any other similar instruments designed to effect withdrawals of savings deposits without requiring the depositors concerned to present their passbooks and accomplishing the necessary withdrawal slips, except for bank authorized by the BSP to adopt the no passbook withdrawal system.
• Negotiable order of withdrawal accounts (NOW)

  Interest-bearing deposit accounts that combine the payable on demand feature of checks and investment feature of savings account
• Time deposit


  An account with fixed term
• Trust account


  A savings account, established under a trust agreement containing funds administered by the bank for the benefit of the trustor or another person or persons
• Classification of deposit accounts


  • Individual
  • Joint
• "And" account


  The signature of both co-depositors are required for withdrawals
• "And/or" account


  Either one of the co-depositors may deposit and withdraw form the account without knowledge, consent, and signature of the other
• A joint account may be subject to a survivorship agreement whereby the co-depositors agree to permit either of them to withdraw the whole deposit during their lifetime and transferring the balance to the survivor upon the death of one of them
• Anonymous account


  Generally prohibited, except in case of numbered accounts in foreign currency deposits where the client is identified in an official or other identifying documents
• Loan function


  • A bank shall grant loans and other credit accommodations only in amounts and for the periods of time essential for the effective completion of the operations to be financed
  • Such grant of loans and other credit accommodations shall be consistent with safe and sound banking practices
  • Before granting a loan or other credit accommodation, a bank must ascertain that the debtor is capable of fulfilling his commitments to the bank
• Loan payments


  • Amortizations schedule of bank loans and other credit accommodations shall be adopted to the nature of operations to be financed
  • For loans and other credit accommodations with maturities of more than five years, provisions must be made for periodic amortization payments, but such payments must be made annually
  • A borrower may at any time prior to the agreed maturity date prepay, in whole or in part, the unpaid balance of any bank loan and other credit accommodation, subject to such reasonable terms and conditions as may be agreed upon between the bank and its borrower
• Single borrower's limit


  • The total amount of loans, credit accommodations and guarantees that may be extended by a bank to any person, partnership, association, corporation, or other entity shall at no time exceed 25% of the net worth of such bank
  • The total amount may be increased by an additional 10% if the additional liabilities are adequately secured
  • Loans and other credit accommodations secured by REM shall not exceed 75% of the appraised value of the real estate security plus 60% of the appraised value of the insured improvements
• DOSRI accounts


  Directors, officers, stockholders with at least 1% ownership, and their related interests
• No director or officer of any bank shall, directly or indirectly, for himself or as the representative or agent of others, borrow from such bank, become a guarantor, endorser or surety for loans from such banks to others, or in any manner be an obligor or incur any contractual liability to the bank
• Non-compliance with the DOSRI requirements does not make the transaction void but only renders the officers and directors responsible criminally liable
• A loan transaction within the ambit of DOSRI regulation could also be the subject of Estafa