NEW CENTRAL BANK ACT

STATE POLICIES
JAN MARCUS A. TANG, CPA

December 10, 2016

BANGKO SENTRAL NG
PILIPINAS (BSP)
Bangko Sentral ng Pilipinas
Creation
• commonly abbreviated as BSP
• is the central bank of the Philippines
• established on July 3, 1993, pursuant to the provision
of Republic Act 7653 or the New Central Bank Act of
1993

Objectives
• The BSP’s primary objective is to maintain price
stability conducive to a balanced and sustainable
economic growth.
• The BSP also aims to promote and preserve monetary
stability and the convertibility of the national currency.
Responsibilities
Under the New Central Bank Act, the BSP performs the following functions,
all of which relate to its status as the Republic’s central monetary authority.

• Liquidity Management
The BSP formulates and implements monetary policy aimed at influencing
money supply consistent with its primary objective to maintain price stability.

• Currency issue
The BSP has the exclusive power to issue the national currency. All notes and
coins issued by the BSP are fully guaranteed by the Government and are
considered legal tender for all private and public debts.

• Lender of last resort

The BSP extends discounts, loans and advances to banking institutions for
liquidity purposes.

• Financial Supervision
The BSP supervises banks and exercises regulatory powers over non-bank
institutions performing quasi-banking functions.
Responsibilities
• Management of foreign currency reserves
The BSP seeks to maintain sufficient international reserves to meet any
foreseeable net demands for foreign currencies in order to preserve
the international stability and convertibility of the Philippine peso.

• Determination of exchange rate policy

The BSP determines the exchange rate policy of the Philippines.
Currently, the BSP adheres to a market-oriented foreign exchange rate
policy such that the role of Bangko Sentral is principally to ensure
orderly conditions in the market.

• Other activities
The BSP functions as the banker, financial advisor and official
depository of the Government, its political subdivisions and
instrumentalities and government-owned and -controlled
corporations.
Organizational Structure
as of March 2016
The Monetary Board
• It exercises the powers and functions of the BSP, such
as the conduct of monetary policy and supervision of
the financial system;

• In the exercise of its authority, the Monetary Board

shall:
1. Issue rules and regulations it considers necessary for the
effective discharge of the responsibilities and exercise of
the powers vested upon the Monetary Board and the
Bangko Sentral;

2. Direct the management, operations, and administration of

the Bangko Sentral, reorganize its personnel, and issue such
rules and regulations as it may deem necessary or
convenient for this purpose.
The Monetary Board
3. Establish a human resource management system which shall
govern the selection, hiring, appointment, transfer, promotion,
or dismissal of all personnel.

4. Adopt an annual budget for and authorize such expenditures

by the Bangko Sentral in the interest of the effective
administration and operations of the Bangko Sentral in
accordance with applicable laws and regulations; and

5. Indemnify its members and other officials of the Bangko

Sentral, including personnel of the departments performing
supervision and examination functions against all costs and
expenses reasonably incurred by such persons in connection
with any civil or criminal action, suit or proceedings to which he
may be, or is, made a party by reason of the performance of his
functions or duties, unless he is finally adjudged in such action
or proceeding to be liable for negligence or misconduct.
Functional Sectors
Monetary Stability Sector
mainly responsible for the operations/activities related to monetary
policy formulation and implementation

Supervision and Examination Sector

mainly responsible for the regulation of banks and other BSP-supervised
financial institutions

Resource Management Sector

mainly responsible for the management of human, financial, and physical
resources of the Bank

Security Plant Complex

responsible for the production of Philippine currency, security documents,
and commemorative medals and medallions
BANKS IN DISTRESS
Conservatorship
• Monetary Board may appoint a conservator with such powers as
the Monetary Board shall deem necessary

Situation
• Whenever it finds that a bank or a quasi-bank is in a state of
continuing inability or unwillingness to maintain a condition of
liquidity deemed adequate to protect the interest of depositors
and creditors

Power
• take charge of the assets, liabilities, and the management
thereof, reorganize the management, collect all monies and debts
due said institution, and exercise all powers necessary to restore
its viability.
• overrule or revoke the actions of the previous management and
board of directors of the bank or quasi-bank.
When Conservatorship is Terminated
• when the Monetary Board is satisfied that the
institution can continue to operate on its own and
the conservatorship is no longer necessary.

• when the Monetary Board, on the basis of the

report of the conservator or of its own findings,
determine that the continuance in business of the
institution would involve probable loss to its
depositors or creditors, in which case the
provisions of Section 30 shall apply.
Receivership
Whenever, upon report of the head of the supervising or
examining department, the Monetary Board finds that a bank or
quasi-bank:

1. is unable to pay its liabilities as they become due in the

ordinary course of business:

2. has insufficient realizable assets, as determined by the Bangko

Sentral, to meet its liabilities; or

3. cannot continue in business without involving probable losses

to its depositors or creditors; or

4. has willfully violated a cease and desist order under Section 37

that has become final, involving acts or transactions which
amount to fraud or a dissipation of the assets of the
institution;
Receivership
• The receiver shall immediately gather and take charge of all the
assets and liabilities of the institution, administer the same for
the benefit of its creditors, and exercise the general powers of a
receiver under the Revised Rules of Court
 but shall not pay or commit any act that will involve the transfer or
disposition of any asset of the institution (except administrative
expenditures)

• Provided, That the receiver may deposit or place the funds of the
institution in non-speculative investments.
 The receiver shall determine as soon as possible, but not later than ninety
(90) days from take-over, whether the institution may be rehabilitated or
otherwise placed in such a condition so that it may be permitted to resume
business with safety to its depositors and creditors and the general public:

• Provided, That any determination for the resumption of business

of the institution shall be subject to prior approval of the
Monetary Board.
Liquidation
• When receiver determines that the institution cannot
be rehabilitated or permitted to resume business
the Monetary Board shall notify in writing the board
of directors of its findings and direct the receiver to
proceed with the liquidation of the institution

• The assets of an institution under receivership or

liquidation shall be deemed in custodia legis in the
hands of the receiver and shall, from the moment the
institution was placed under such receivership or
liquidation, be exempt from any order of garnishment,
levy, attachment, or execution.
Liquidation
The receiver shall:

1. file ex parte with the proper regional trial court, and without
requirement of prior notice or any other action, a petition for
assistance in the liquidation of the institution pursuant to a
liquidation plan adopted by the Philippine Deposit Insurance
Corporation for general application to all closed banks.

2. undertake liquidation process

A. convert the assets of the institutions to money
B. dispose of the same to creditors and other parties, for the
purpose of paying the debts of such institution in accordance with
the rules on concurrence and preference of credit under the Civil
Code of the Philippines and
C. retain, institute such actions as may be necessary to collect and
recover accounts and assets of, or defend any action against, the
institution.
Other matters
Disposition of Revenues and Earnings
• All revenues and earnings realized by the receiver in winding up the
affairs and administering the assets of any bank or quasi-bank shall be
used to pay the costs, fees and expenses
 salaries of such personnel whose employment is rendered necessary in
the discharge of the liquidation together with other additional expenses
caused thereby.
 The balance of revenues and earnings, after the payment of all said
expenses, shall form part of the assets available for payment to creditors.

Disposition of Banking Franchise

• The Bangko Sentral may, if public interest so requires, award to an
institution, upon such terms and conditions as the Monetary Board may
approve, the banking franchise of a bank under liquidation to operate in
the area where said bank or its branches were previously operating
 Provided, That whatever proceeds may be realized from such award shall
be subject to the appropriate exclusive disposition of the Monetary
Board.
SECRECY OF BANK DEPOSITS
Republic Act No. 1405
Absolute Confidentiality
• All deposits of whatever nature in banks or banking
institutions in the Philippines and investments in
government bonds are absolutely confidential in
nature. (Sec. 2, Rep. Act No. 1405)

• The General Banking Law prohibits bank directors,

officers, employees or agents from disclosing to any
unauthorized person, without order of a competent
court, any information relative to funds or properties
belonging to private individuals, corporations, or any
other entity in the custody of the bank. (Sec. 55[b], Rep. Act
No. 8791)
Prohibited Acts and Persons Liable
The following are liable under this Law:
1. Any person or government official who, or any
government bureau or office that, examines,
inquires or looks into a bank deposit or government
bond investment in any of the instances not allowed
in Section 2;
2. Any official or employee of a banking institution who
makes a disclosure concerning bank deposits to
another in any instance not allowed by law (Sec. 3, Rep.
Act No. 1405); and
3. Any person who commits a violation of any of the
provisions of the law (Sec. 5, Rep. Act No. 1405).
Instances when Confidentiality of
Bank Deposits is Not Absolute
• Bank deposits and investments in government
bonds may be examined, inquired or looked into
under limited exceptions in Republic Act No. 1405
and in other laws.
I. Exceptions under the Law on
Secrecy of Bank Deposits
Section 2 of Republic Act No. 1405 provides that bank deposits and
government bond investments may be examined, inquired and
looked into in the following instances:

1. Upon written permission or consent in writing by the

depositor. For consent to be valid, it should be made knowingly,
voluntarily and with sufficient awareness of the relevant
circumstances and likely consequences.

2. In cases of impeachment of the President, Vice President,

members of the Supreme Court, members of the Constitutional
Commission (Commission on Elections, Civil Service Commission
and Commission on Audit) and the Ombudsman for culpable
violation of the Constitution, treason, bribery, graft and
corruption, other high crimes or betrayal of public trust. (Art. XI,
Sec. 2, 1987 Philippine Constitution)
I. Exceptions under the Law on
Secrecy of Bank Deposits
3. Upon order of a competent court in cases of bribery or
dereliction of duty of public officials.

4. In cases where the money deposited or invested is the subject

matter of the litigation. The money deposited should be the
very thing in dispute.
(Mellon Bank, N.A. v. Magsino, 190 S.C.R.A. 633 [1990])
II. Exceptions under Other Laws
Bank deposits and investments may be examined, inquired or looked into
as provided for under other laws in the following instances:

1. The Ombudsman has the power to issue subpoena and subpoena

duces tecum, take testimony in any investigation or inquiry, as well
as examine and access bank accounts and records.

The power of the Ombudsman to subpoena deposit information of a

government official may be exercised when the following conditions
concur:
a. there must be a case pending before a court of competent
jurisdiction;
b. the account must be clearly identified;
c. the inspection must be limited to the subject matter of the
pending case; and
d. the bank personnel and the account holder must be notified
to be present during the inspection. (Marquez v. Desierto, 359
S.C.R.A. 772 [2001])
II. Exceptions under Other Laws
2. Bank deposits of a public official, his spouse and unmarried children
may be taken into consideration in the enforcement of Section 8 of
The Anti-Graft and Corrupt Practices Act (Rep. Act No. 3019).

3. Directors, officers, stockholders and related interests who contract a

loan or any form of financial accommodation with their bank or
related bank are required to execute a written waiver of secrecy of
deposits pursuant to The New Central Bank Act.

4. The Commissioner of Internal Revenue is authorized to inquire

into bank deposit accounts in relation to:
a. an application for compromise of tax liability or a determination
of a decedent’s gross estate under The National Internal Revenue
Code
b. a request for tax information of specific taxpayers made by
a foreign tax authority pursuant to a tax treaty under The
Exchange of Information on Tax Matters Act of 2009
II. Exceptions under Other Laws
5. The Anti-Money Laundering Council may be authorized to examine and
inquire into bank deposits or investments with banks or non- bank
financial institutions
a. with court order, when there is probable cause that the deposits or
investments are related to an unlawful activity or a money laundering
offense (Secs. 3[i] and 4 of Rep. Act No. 9160); and
b. without need of court order, when probable cause exists that a particular
deposit or investment with any banking institution is related to certain
predicate crimes, such as kidnapping for ransom, violation of the
Comprehensive Dangerous Drugs Act, hijacking and other violations under
Republic Act No. 6235, destructive arson and murder (Sec. 11 of Republic
Act No. 9160).
6. The Bangko Sentral is authorized to
a. inquire into or examine bank deposits or investments in the course of a
periodic or special examination to ensure compliance with The Anti-
Money Laundering Law, in accordance with the rule of examination of
the Bangko Sentral; and
b. conduct annual testing which is limited to the determination of the
existence and true identity of the owners of numbered accounts
II. Exceptions under Other Laws
7. The Philippine Deposit Insurance Commission and the Bangko Sentral
may inquire into bank deposits when there is a finding of unsafe or
unsound banking practices. (Sec. 8, Rep. Act No. 3591, as amended)

8. The Court of Appeals, designated as a special court, may issue an

order authorizing law enforcement officers to examine and gather
information on the deposits, placements, trust accounts, assets and
records in a bank or financial institution in connection with anti-
terrorism case. (Rep. Act No. 9372).

9. The Commission on Audit is authorized to examine and audit

government deposits pertaining to the revenue and receipts of, and
expenditures or uses of funds and properties, owned or held in trust by,
or pertaining to, the Government or any of its subdivisions, agencies or
instrumentalities, including government-owned and controlled
corporations with original charters. (See Art. IX-D, 1987 Constitution and
Pres. Dec. No. 1445)
II. Exceptions under Other Laws
10. The Presidential Commission on Good Government, in the conduct of
its investigations to recover ill-gotten wealth accumulated by former
President Ferdinand E. Marcos, his immediate family, relatives,
subordinates and close associates, may issue subpoenas requiring the
attendance and testimony of witnesses and/or the production of books,
papers, contracts, records, statement of accounts and other
documents. (Sec. 3 [e], Exec. Order No. 1 [1986])
III. Jurisprudence Interpreting Exceptions

1. Plunder is analogous to bribery. The exception in

the law that is applicable in bribery also applies to
plunder. The overt or criminal acts as described in
Section 1(d) of Republic Act No. 7080 would make the
similarity between plunder and bribery even more
pronounced since bribery is essentially included among
these criminal acts.
(Ejercito v. Sandiganbayan, 509 S.C.R.A. 190 [2006])

2. Cases of unexplained wealth are similar to cases of

bribery or dereliction of duty and no reason is seen why
these two classes of cases cannot be excepted from the
rule making bank deposits confidential.
(Phil. National Bank v. Gancayco, 122 Phil. 503 [1965])
Instances when Confidentiality of Foreign
Currency Deposits is Not Absolute
III. Exceptions under Jurisprudence on Grounds of Equity

1. Account of a Non-resident Alien

The garnishment of a foreign currency deposit account of a

non-resident alien found guilty of raping a minor was allowed
on the basis of equity.
(Salvacion v. Central Bank of the Philippines, 278 S.C.R.A. 27 [1997])

2. Account of a Co-payee of a Check

A co-payee of a check who filed a suit for recovery of sum of

money was considered, in a pro hac vice ruling by the
Supreme Court, as a depositor in view of the distinctive
circumstances of the case.
(China Banking Corporation v. Court of Appeals, 511 S.C.R.A. 110 [2006])
Authorized Disclosures
• Garnishment of Deposits
Authorized Disclosures
Disclosures by authorized and responsible bank officials are
allowed in the following instances:

1. reporting of unclaimed balances to the Treasurer of the

Philippines
2. turn-over to the Commissioner of Internal Revenue of
the amount in bank accounts as may be sufficient to satisfy
the writ of garnishment issued to collect delinquent taxes
3. submission of report, and turn-over to, the court officer or
executing sheriff of garnished amounts pursuant to a writ of
garnishment in satisfaction of a judgment
4. disclosure by a bank officer or employee upon order of the
court in connection with a deposit in a closed bank that was
used in the perpetration of anomalies.