TRANSACTIONS COVERED

- refer to transactions which involve grant, renewal or extension or increase of any

loan, discount, credit or advance in any form whatsoever.
- Credit card operations: GR: Credit card operationd of bank shall NOT apply to
DOSRI provided the ff reqs are present:
i.
the privilege of beoc,ing a CC holder is open to all qualified persons
ii.
the DOSRI concerned reimburses the bank for the billed amount, on or before
the payment fue date in the billing
XPN: the transaction shall be subject to applicable DOSRI regulations if the DOSRI:
i.
fail to reimburse/pay te bank w/in the period mentioned therein;
ii.
on the outset, opt for deferred payment scheme and the availment is booked
by the banl
TRANSACTIONS NOT COVERED
RESTRICTIONS UNDER GBL
(1) Procedural requirement written approval of all the directorsof the lending
bank (Exluding the director concerned)
RESOLUTION BU THE BOARD (approval) MAJORITY VOTE OF
DIRECTORS TRANSMITTAL OF THE COPY OF THE BR
(2) Arms length rule account should be upon terms not less favorable to the bank
(3) Reportorial requiremnent resolution approving the laon shall be entered into
records of the baml
(4) Aggregate ceiling- 15% of total loan portfolio of the banlk or 100% of net-worth,
whichever is lower
(5) Individual ceiling shall be limited to an amount equivalent to their respective
unencumbered deposits and book value of their paid-in capital contribution in the
bank
(6) Other restrictions: the investment by a bank in equipment and other chattels
under its fringe benefits program for officers and employees shall be included in
determining the extent of the investment of the bank in real estate and equipment f
RESTRICTIONS UNDER SEC 26 of NCBA
Secrecy of Bank Deposits
- the borrower shall be required by the lending bank to waive the secrecy of bank
deposits if the DOS is the borrower, if the borrower is their related interest, not
necessary to waive.
Bank Examination
- accounts are subject to examination and shall be held strictly confidential.
SECURITY/COLLATERALS
- unsecured loans maybe in the form of mcirofinancing;

liquidity of the banks and safety of funfs of the depositors require that the loans
obtained form the banks are secured by collaterals.

For real property: the loan shall not exceed 75% of the appraised value of the security +
60% of the appraised value of the improvement
For chattels and intangible properties: the loan shall not exceed 75% of the appraised
value of the security
FORECLOSURE OF MORTAGGE
Redemption Period
For Natural persons: within ONE YEAR after the sale of the real estate to redeem the
proeprty
For Juridical persons: (EJF) right to redeem property within THREE MONTHS not
after the registration of the certificate of foreclosure sale
-

Effect of Estoppel and/or agreement :the statutory period of redemption can be

extended by agreement of the parties. Thus, an agreement to provide for 2-year
redemption converts the elgal redemption conventional redemption;
Effect of Restraining Order:if baseless, this move might backfire because the
issuance of TRO in a abseless action will NOT toll the running of redemption
periof,
Expiration of Period: the right to redeem becomes functus officio on the date of
its expiry. Hence, the redemptioner has no right to redeem after the expiration of
the redemption period. XPN: even after the expiration of said period, bank may
allow to redeem. It Is not really one of redemption but a REPURCHASE.
Redemption Price: } amount due + interest + costs + expenses (incyrred by the
bank) income derived thereon
Possession: purchaser in the acution sale concerned shall have the right to enter
upon and take possession of such property immediately after the date of
confirmation of the auction sale and administer the same in accordance w/ law.
Bond: petition for TRO must be accompanied with filing of bond in an amount
fixed by the court

Mortgagee in good faith and in bad faith

- the subsequent declaration that the ittle is null and void is not a gorund to nullify
the mortgage rights of a bank that acted in good faith. This is subject to a caveat,
that the bank shall follow the standard procedure of due examination
- The mortaggee bank cannot ebc onsidered a mortaggee in good faith if it accepted
a mortagge that was executed by impostors.
Deposit as security
- Deed of Asisgnment: most common form; nature: pledge it is intended to secure
the payment of money
- Time deposit as security:

Assignment of rights
- the debtor may also secure his obligation to the bank by assignings rights by way
of security: the debtor may assign his receivables from other persons;
- Note that: in order for the assignment of rights to be considered as security, the
same intent must appear in the instrument itself
SINGLE BORROWER LIMIT
Ceiling GR: total amount of loans, credit accommodations, and guarantees as may be
defined by the Monetary Board that may be extended by a bank shall not exceed 20%
(currently 25%) of the net worth of such bank. Additional 10% may be increased
provided the additional liabilities of any borrower are adequately secured by trust
receipts, shipping documents, warehouse receipts or other similar documents transferring
or securing title w/c must eb fully covered by insurance.
LOAN PARTICIPATIONS AND SYNDICATED LOASN
- when the maount to be borrowed is huge, borrowers ma yarrange for a multi-lender
transaction;
LOAN PARTICIPATION
SYNDICATED LOAN
- loan negotiated between the
- each lender is a member of the
borrower and the lead lender;
syndicate and a party to the loan
- lead lender sells a percentage of
documents;
- lead bank may initially be the only
the loan to one/more participants in
lender
the loan
- borrower direct contractual
- also refers to the practice of selling
loans to other instittutions
relationship with each member of
the lending syndicate
- often involve revolving credit
arrangement;
TRUTH IN LENDING
Truth in Lending Act
to protect the citizens from wareness of true credit by assuring full disclosure of such
costv with a view of preventing the uninformed use of credit to the detriment of national
economy.
-

requires the lender to give the borrower all the details regarding the transaction;
this means that if theres no disclosure even though theres stipulation to the fact,
the contract cannot be given effect under the Truth in Lending Act;

When applicable to banks:

(ff. transactions)
1. any loan, mortgage, deed of trust,a dvance and discount;

2. any conditional sales contract, any contract to sell, contract of sale of property or
services;
3. any rental-purchase contract;
4. any contract or arrangement for the hire, bailment or leasing of property;
5. any option or demand, lien, pledge or other claim against, or for the delivery of
property or money;
6. any purchase or other acquisition of or any credit upon security of any obligation
or claima rising out of any of the foregoing and
7. any transaction or series of transactions having a similar purpose or effect
When not applicable to banks:
(ff. categories are outside the scope of Truth and Lending Act)
1. credit transactions w/c do not involve payment of any finance charge by the
debtor;
2. credit transactions w/ debtor is the one specifying a definite and fixed set of credit
terms such as bank deposits, insurance contracts, sale of bonds, etc.
Escalation clauses:
- truth in lending act may also eb violated if the agreement provides for escalation
clause w/ is dependent solely on the will of the bank
Subsequent compliance, not allwowed
- the duty to furnish disclosure statement shall be made PRIOR to the
consummation of the transaction.
- Hence, the bank canot escape liability by the emre fact that the borrower was
furnished with a copy that evidence the transaction.
- Subsequent compliance with the disclosure requirement, NOT be deemed in
substantial compliance with TLA.
Remedies:
- Criminal and Civil liabilities
Prescriptive period: (prescriptive period tp recover penalty) ONE YEAR from the date
of ofccurence of violation.
CONSUMER ACT
- to protect the consumer from alck of awareness of the true cost of credit to the
user, the State shall assure full disclosure of the true cost of credit;
- Charges and interests:
- Pre-payment: the person to who credit is extended may pre-pay in full or in aprt
at any time without penalty, the unpaid balance of any consumer credit
transaction.
Rule of 78/ Sum of the Digits only payment made on or ebofre the 15th day
following an installment due date = as of the installemtn due date; if payment

occurs after the 15th day, it shall be deemed to have been made on the succeeding
installment due date.
- Disclosure requirements:
Art 145 Exempted Transactions the foregoing reqts on consumer credit transactions
shall NOT apply to the ff credit transactions:
1. those involving extension of credits for business/ commercial purposes or to the
government and governmental agencises and instrumentalities, juridical entities or
to organizations;
2. those in w/c the debtor is the one specifying the definite set of credit terms such as
bank deposits, insurance contracts, sale of bonds or analogous transactions;