MODULE ACTIVITIES

PART I – DEFINITIONS. Define the following terms, as they are so defined by pertinent

laws and jurisprudence.

 1. Bank- an entity engaged in the lending of funds obtained in the form of

deposits from the public (Sec. 3.1)

An investment company which loans out the money of its customers, collects the

interest and charges a commission to both lender and borrower is a bank.

(Republic v. Security Credit and Acceptance Corporation, GR No. 20583, Jan. 23,

1967)

2. Bank deposit- is in the nature of irregular deposits.

-It is consist of money placed into banking institutions for safety keeping. These

deposits are made to deposits accounts such as saving accounts, checking

accounts, and money market accounts.

3. DOSRI Account- is short for Directors, Officers, Stockholders, and their Related

Interests. Due to the risks of fraud inherent in their positions, the law imposes several

restrictions (not a total prohibition) on their borrowings and security arrangements with

the bank to which they are affiliated.

Requisites for the DOSRI restrictions to apply:

- The borrower is a director, officer, or any stockholder of a bank (and related

interests
 - He contracts a loan or any form of financial accommodation;

- The loan or financial accommodation is from:

His bank;

- A bank that is a subsidiary of a bank holding company of which both his

bank and lending bank are subsidiaries; or

- A bank in which a controlling proportion of the shares is owned by the same

interest that owns a controlling proportion of the shares of his bank;

- The loan or financial accommodation of the director, officer or stockholder,

singly or with that of his related interest, is in excess of 5% of the capital and

surplus of the lending bank or in the maximum amount permitted by law,

whichever is lower.

4. Redemption period- the period within which the mortgagor, whose mortgaged

property has been sold in a foreclosure sale due to his nonpayment, may redeem or

repurchase the property from the buyer in the foreclosure sale.

5. Insured deposit –

the amount due to any bona fide depositor for legitimate deposits in an insured bank

of the date of closure but not to exceed P500,000.000. Full payment of the amount of

the insured deposit will be made subject to payment of the depositor’s obligation thereafter.

6. Splitting of deposit- occurs whenever a deposit account with an outstanding

balance of more than the statutory minimum amount of insured deposit maintained

under the name of natural or juridical persons is broken down and transferred into two

(2) or more accounts in the name/s of natural or juridical persons or entities who have

no beneficial ownership on transferred deposits in their names within one hundred

twenty (120) days immediately preceding or during a bank-declared bank holiday, or

immediately preceding a closure order issued by the Monetary Board of the Bangko

Sentral ng Pilipinas for the purpose of availing of the maximum deposit insurance

coverage.
7. Dormant account- is an account that has had no financial activity for a long

period of time, except for the posting of interest.

PART II

DISCUSSIONS.

Answer the following:

1. Explain the fiduciary nature of banks

Republic Act No. 8791 Section 2 declares that the State recognizes the “fiduciary

nature of banking that requires high standards of integrity and performance. The

fiduciary relationship means that the bank’s obligation to observe high standards of

integrity and performance is deemed written into every deposit agreement between a

bank and its depositor. The fiduciary nature of banking requires banks to assume a

degree of diligence higher than that of a good father of a family. The banks must

observe “high standards of integrity and performance” in servicing their depositors.

2. Commercial bank

Bank of Commerce – one of the country’s progressive commercial banks. The

bank offers a wide range of banking products and services including deposit and cash

management products, corporate banking, consumer banking, credit and services, e-

banking solutions, trade and remittances, treasury and trust services.

Universal bank

Bank of the Philippine Island (BPI) – was originally known as El Banco

Espanol Felipino de Isabel II, responsible for starting the country’s banking and finance

industry. Playing a unique role in the early economic history of the Philippines, the bank

performed many functions that in effect made it the country’s Central Bank, including

providing credit to the National Treasury and printing and issuing currency in its own

name.

Thrift bank
 Philippine Savings Bank (PSBank) –a subsidiary of Metrobank and is the

second largest savings bank in the Philippines. This fuelled the growth and sharpened

the focus of PS Bank to offer products and services that championed its clients’ needs.

Rural bank

CARD Bank, Inc. (a MF RB) – Center for agriculture and Rural Development,

Inc, (CARD, Inc.), which was organized on December 10, 1986 by a group of 15 rural

development practitioners as a social development foundation through responsible

financial services. It is a microfinance-oriented rural bank.

Islamic bank

Al Amanah Islamic Bank – in 1973, Presidential Decree No. 264 created the

Amanah Islamic Bank with an initial capitalization of 50 million pesos. Intended to

become a development bank, it invested 75% of its total loanable funds on providing,

among others, reasonable medium and long-term credit facilities for the people of the

Muslim-dominated provinces.

Cooperative bank

Metro South Cooperative Bank (MSCB) – it is the only cooperative bank in the

National Capital Region. It is a unique bank registered with the Cooperative

Development Authority (CDA) as a cooperative, and with the Bangko Sentral ng

Pilipinas, as a bank under the rural banking system. It started its commercial operation

in March 24, 1997.

Demand Deposit Savings Account

1. Only universal banks can 1. Most common type of

accept or create this kind of deposit.

deposit account.
2. Can be opened in all

2. Offer greater liquidity and types of banks.

ease of access.
3. Normally open for the

3. Let you withdraw money purpose of earning interest.

without notice.
4. Interest rates are fixed.

NOW Accounts Similarities Time Deposits

1. Are interest bearing 1. All accounts are not 1. Are investment deposits

deposits that combine the subject to interest ceiling. made for a predetermined

payable on demand feature period, ranging from a few

2. At least seven days interest than saving account.

written notice.

4. State the effect of miscredit by the bank in a depositor’s account.

account, a depositor is entitled to recover from the bank the amount that was

erroneously deducted from his account.

5. A partnership was organized and desires to open a bank account in its name. The

bank argues that it is not allowed and required the partners to make an and/or account

instead. Is the bank correct?

No. It is inadequate.

Under Article 1768, it provides that partnership has a juridical personality separate and

distinct from that of each of the partners. Thus, a partnership being a juridical person

has the right to open such bank account in its name provided however, that what the

partnership wants to open is a current account where one deposits money in order to

carry out a business transaction.

6. What is the difference between an “And/or” account versus an “and” account?

The civil code explains:

If the joint account is an “and/or” account, this implies that anyone of the depositors may

withdraw funds therefrom and the signature of 1 is enough to authorize the bank to

allow such withdrawal, while in the “and” account, the depositor are joint creditors of the

banks and the signatures of all depositors are necessary to allow the withdrawal.

7. What are the exceptions from the Secrecy of Bank Deposits Law for Philippine

currency deposits? For foreign currency deposits?

Philippine Currency Deposit

 Impeachment cases;

 Upon the order of a competent court in cases of bribery or dereliction of

duty of public officials;

 Upon the order of a competent court in cases where the money deposited

or invested is the subject of litigation;

unexplained wealth under the Anti-Graft and corrupt practices Act, R.A.

No. 3019

 Upon inquiry by the Commissioner of Internal Revenue for the purpose of

determining the net estate of a deceased depositor;

 Upon the order of a competent court, by the Anti-Money Laundering

Council where there is probable cause of money laundering.

 Disclosure to the Treasurer of the Philippines for dormant deposits for at

least ten years under the Unclaimed Balances Act;

 Report of banks to Anti-Money Laundering Council (AMLC) of covered

and/or suspicious transactions;

 Upon order of the Court of Appeals, examination by law enforcement

officers in terrorism cases under the Human Security Act of 2007;

 Investigation where the AMLC is authorized to look into or examine

deposits and investments with any banking institution or non-bank

financial institution and their subsidiaries and affiliates without a court

order;

 Philippine Deposit Insurance Corporation’s (PDIC) inquiry into and

examination of deposit accounts and all information related thereto in case

there is a finding of unsafe or unsound banking practice under the Eight

paragraph of section 8 of R. A. No.3591, as amended by R.A. 9576;

 Examination and inquiry into deposit records by PDIC when there is failure

of prompt corrective action as declared by the Monetary Board due to

capital deficiency;

 When there is a waiver in case of DOSRI loans;

 Disclosure to the BSP in the course of examination to ensure compliance

with the Anti-Money Laundering Act and testing of numbered accounts.

 When there is written consent of the depositor under Section 8 of the

Foreign Currency Deposit Act;

 When there is probable cause of money laundering as provided for under

Section 11 of the Anti-Money Laundering Act; and

 When there is probable cause of terrorism under the Human Security Act.

8. Are anonymous bank accounts allowed? Why or why not?

All anonymous bank accounts are not allowed under the civil code. Under

Section 9 (a) of Republic Act No. 9160 and Circular No. 251 issued by the BSP prohibit

anonymous account or accounts under fictitious names.

However, the exception to the above rule is provided for in the Foreign Currency

Deposits Act, which allows the opening of “Numbered accounts” for foreign currency

deposits. However, it is still required that necessary measures are undertaken by the

bank to record and establish the true identity of the depositor.

9. Why is the unilateral freezing of bank accounts by banks prohibited?

The unilateral freezing of bank accounts by banks is prohibited for the reason

that it allows the banks to open the floodgates of public distrust in the banking industry

even if its depositor on its mere suspicion that the funds therein were proceed of

fraudulent acts. In addition, a person whose name appears as depositor in the

passbook and other document is presumed to be the owner of the money in the bank

accoint and the bank cannot preclude him from withdrawing his deposit despite

whatever allegation it may associated through fraud.

Under article 559 of the new Civil Code, one of the reasons why banks cannot

just freeze the account of its depositor is to honor the claim of 3rd person.
10. Can the bank be held liable for allowing the withdrawal of a bank account by a

trustee who later on misappropriates the said amount? Why or why not?

Yes.

The bank held liable for allowing the withdrawal of a bank account by a trustee who later

on misappropriates the said amount only if the bank assisted the fiduciary in

accomplishing the misappropriation and has knowledge about the receipt. Moreover,

the bank is also liable if there is already a court order which recognizes the right of third

person or which effectively prohibits the bank from releasing from the account.

11. Can information obtained in violation of the Bank Secrecy Law be admitted in

evidence in a court proceeding? Why or why not?

Yes.

Any information obtained in violation of the Bank Secrecy Law is still admissible in

evidence. However, the person/s responsible for the violation shall be subjected to a

penalty of imprisonment of not more than five (5) years or a fine of not more than twenty

thousand pesos (P20,000), or both, in the discretion of the court.

12. Outline the procedure for the escheat of a dormant bank deposit.

Executive Order No. 268, Section 1. Escheat Procedures for Philippine Postal

Savings Bank Dormant Accounts. The escheat of dormant accounts of the Philippine

Postal Savings Bank shall be exempt from the procedures prescribed under Sections

2000 and 2000-A of the Revised Administrative Code and the same shall be affected in

accordance with the following procedures:

(a) A notice to all depositors of the dormant accounts of said bank shall be

published in a newspaper of general circulation once a week for three

consecutive weeks requiring them to withdraw the outstanding balances of

their deposits within six (6) months from the date of the last publication.

(b) Any and all such deposits remaining unclaimed after the expiration of the six-

month period from the last publication of the notice shall, without further act or
proceedings, be deemed escheated in favour of PNB as trustee of the assets

of PPSB and thereafter the same shall be disposed of in accordance with the

provisions of Presidential Decree No. 241 after all the expenses in connection

with the notice herein required shall have been paid.