The General Banking Law of 2000

Role of Banks
To provide an environment conducive to the sustained dealing in notes, foreign and domestic bills of exchange,
development of the national economy and the fiduciary coin bullion, credits, and the remission of money; or with
nature of banking that requires high standards of both these powers, and with the privileges, in addition to
integrity and performance these basic powers, of receiving special deposits, and
making collection for the holders of negotiable paper, if
Role of the State the institution sees fit to engage in such business. In
To promote and maintain a stable and efficient funding these businesses, the bank invests the money that
banking and financial system that is globally it holds in trust of its depositors.
competitive, dynamic and responsive to the demands of
a developing economy *Shadow banking
The activities include lending by unregulated individuals,
State Policy for Banks entities charging higher-than-market interest rates, sale of
SECTION 2. of R.A 8791 (GBL OF 2000) dubious securities and other investment products, as well
Declaration of Policy as in-house financing by real estate developers. Shadow
banking threatens the financial stability of households and
. The State recognizes the vital role of banks in providing the economy as a whole.
an environment conducive to the sustained development
of the national economy and the fiduciary nature *The essence of banking.
of banking that requires high standards of integrity and The essence of banking is the taking of deposits from the
performance. In furtherance thereof, the State public and lending out these funds. The basic banking
shall promote and maintain a stable and efficient banking function is the mobilization of savings (through deposit
and financial system that is globally taking) and allocating resources. (through lending). Thus, a
competitive, dynamic and responsive to the demands of a financial institution obtaining deposits from the public,
developing economy. which was lent to persons deemed suitable by it, is
engaged in banking (Republic v. Security Credit &
What is a Bank? Acceptance Corp., 19 SCRA 58 [1967]). However, an
Banks are defined under the GBL as entities engaged in investment firm that purchased a promissory note on dis-
the lending of funds obtained in the form of deposits. count, which was secured by a Chattel Mortgage and a
Note however that banks may engage in other activities Continuing Undertaking, for purposes of reinvesting, is not
allowed by law which will be discussed in the succeeding engaged in a loan transaction or banking but is purely a
chapters of this book. purchase of receivables at a discount (Bañas v. Asia Pacific
Other Definitions: Corp., 343 SCRA 527 [2000]).
A bank is-
(i) A moneyed institute founded to facilitate the Non Bank Financial Intermediaries:
borrowing, lending and safe-keeping of money and to
deal, in notes, bills of exchange, and credits. Pawnshops are non-bank financial intermediaries, Section
3 of P.D. No. 114 defines pawnshop as "a person or entity
(ii) An investment company which loans out the money of engaged in the business of lending money on personal
it customers, collects the interest and charges a property delivered as security for loans and shall be
commission to both lender and borrower, in a bank. synonymous, and maybe used interchangeably, with
pawnbroker or pawn brokerage. Pawnshops are to be
(iii) Any person engaged in the business carried on by treated as non-bank financial intermediaries. They are
banks of deposit, of discount, or of circulation is doing under the regulatory supervision of the Bangko Sentral ng
banking business, although but one of these functions Pilipinas and covered by its Manual of Regulations for
exercised. Non-Bank Financial Institutions. The Manual includes
pawnshops in the list of non-bank financial intermediaries:
(iv) A financial institution with power to issue its A person or entity licensed and/or registered with any
promissory notes intended to circulate as money (known government regulatory body as a non- bank financial
as bank notes); or to receive the money of others on intermediary, such as investment house, in- vestment
general deposit to form a joint fund that shall be used by company, financing company, securities dealer/ broker,
the institution for its own benefit, for one or more of the lending investor, pawnshop, money broker xxx. Similarly,
purposes of making temporary loans and discounts, of RA. No. 9238 categorically confirmed the classification of
pawnshops as non-bank financial intermediaries (First
Planters Patonshop, Inc. CIR. 560 SCRA 606 [2008
 The bank licensing process shall incorporate an
assessment of the bank's ownership structure, directors
Financial intermediaries are defined as "persons or and senior management, its operating plan and internal
entities whose principal functions include lending, controls as well as its projected financial condition and
Investing or placement of funds or evidence of capital base.
indebtedness or equity deposited with them, acquired by
them, or otherwise coursed through them, either for their As the entity is a stock corporation, it must also register
own account or for the account of others (ibid.). with the Securities and Exchange Commission (SEC).
However, the SEC shall not register the articles of
Determination of Banking Functions: incorporation or the by-laws, of any bank, or any
amendment thereto, unless accompanied by a certificate
ing. No person or entity shall engage in banking operations of authority, stating the compliance of all the requisites,
without authority from the BSP. The determination of issued by the MB of the BSP (Sec. 14, GBL).
whether a person or entity is performing banking or quasi-
banking functions without Bangko Sentral authority shall Other Bank Activities....
be decided by the Monetary Board (MB) (Sec. 6, GBL). *Other activities/services of banks. The activities or
The activity of an entity, without a banking license, in services of banks are not only limited in the lending of
obtaining funds from the public which was lent to persons funds obtained in the form of deposits. They can engage in
suitable by it, is illegal and void (Republic v. Security Credit other activities/services.
& Acceptance Corp., 19 SCRA 58 [1967])
In addition to the operations specifically authorized, a
GBL SEC. 3.2: Banks shall be classified into: bank may perform the following services:
(a) Universal banks;
(b) Commercial banks; 1. Receive in custody funds, documents and valuable
(c) Thrift banks, composed of: (i) Savings and mortgage objects;
banks, (ii) Stock savings and loan associations, and (iii) 2.Act as financial agent and buy and sell, by order of and
Private development banks, as defined in Republic Act No. for the account of their customers, shares,evidences of
7906(hereafter the "Thrift Banks Act"); indebtedness and all types of securities;
(d) Rural banks, as defined in Republic Act No. 7353 3. Make collections and payments for the account of
(hereafter the "Rural Banks Act"); others and perform such other services for their
(e) Cooperative banks, as defined in Republic Act No. 6938 customers as are not incompatible with banking business;
(hereafter the "Cooperative Code"); 4. Upon prior approval of the Monetary Board, act as
(f) Islamic banks as defined in Republic Act No. 6848, managing agent, adviser, consultant or administrator of
otherwise known as the "Charter of Al Amanah Islamic investment management/advisory/consultancy accounts;
Investment Bank of the Philippines"; and 5. Rent out safety deposit boxes.
(g) Other classifications of banks as determined by the
Monetary Board of the Bangko Sentral ng Pilipinas. (6-Aa) The bank shall perform the above services as depository
or as an agent. Accordingly, it shall keep the funds,
Requisites for the organization of Banks... securities and other effects which it receives duly separate
Requisites for the organization of a bank. The Monetary from the bank's own assets and liabilities. (Sec. 53, GBL)
Board (MB) may authorize the organization of a bank or
quasi-bank subject to the following conditions: A commercial bank may also engage in the following:
1. Accept drafts;
1. The entity is a stock corporation; 2. Issue letters of credit;
2. Its funds are obtained from the public, which shall 3. Discount and negotiate promissory notes, drafts,bills of
mean twenty (20) or more persons; exchange and other evidences of debt;
3. The minimum capital requirements prescribed by 4. Accept or create demand deposits;
the MB for each category of banks are satisfied. 5. Receive other types of deposit and deposit substitutes:
6.Buy and sell foreign exchange and gold or silver bullion:
(Sec. 8. GBL) Section 8 of the GBL further provides that: 7. Acquire marketable bonds and other debt securities;
No new commercial bank shall be established within three 8. Extend credit. (Sec. 29, GBL)
(3) years from the effectivity of this Act. In the exercise of
the authority granted herein, the Monetary Board shall Classifications, Powers and Scope of Authorities of Banks.
take into consideration their capability in terms of their The Manual of Regulation of Banks (MORB), specifically
financial resources and technical expertise and integrity. Section X101 MORB (2013), provides the classification
Class of Banks (power/scope of operations)
Class of Banks (power/scope of operations) foreign exchange and gold or silver bullion; acquiring
marketable bonds and other debt securities; and
a. Classifications of banks. Banks are classified into the extending credit, subject to such rules as the Monetary
following subject to the power of the Monetary Board to Board may promulgate. These rules may include the de-
create other classes or kinds of banks: termination of bonds and other debt securities eligible for
in- vestment, the maturities and aggregate amount of
(1)Universal banks (UBs); such investment. It may also exercise or perform any or all
(2) Commercial banks (KBs); of the following:
(3) Thrift banks (TBS), as defined in Republic Act (R.A.) No.
7906, which shall be com posed of: (a) savings and (a) Invest in the equities of allied enterprises as provided
mortgage banks, (b) stock savings and loan associations, in Sections 31 and 32 of R.A. No. 8791:
and (c) private development banks; (b) purchase, hold and convey real estate as
(4) Rural banks (RBs), as defined in RA. No.7353; specified under Sections 51 and 52 of RA No. 8791;
(5)Cooperative banks (Coop Banks); and (c)receive in custody funds, documents and valuable
(6)Islamic banks (IBS), as defined in RA. No. 6848. objects
(d) act as financial agent and buy and sell, by order of and
Powers and scope of Authorities: for the account of their customers, shares, evidences of
b. Powers and scope of authorities. The following are the indebtedness and all types of securities;
powers and scope of authorities of banks. (e)make collections and payments for the ac- count of
others and perform such other services for their
(1) UBs. A UB shall have the authority to exercise, in customers as are not in- compatible with banking
addition to the powers and services authorized for a KB as business;
enumerated in Item "b(2)" and those provided by other (f)upon prior approval of the Monetary Board, act as
laws, the following: managing agent, adviser, consultant or administrator of
investment management/advisory/consultancy accounts;
(a) the powers of an investment house (IH) as provided (g)rent out safety deposit boxes; and engage in quasi-
under existing laws; banking functions.
(b) the power to invest in non-allied enterprises;
(c) the power to own up to one hundred percent (100%) (3) TBs. In addition to the powers provided in other laws, a
of the equity in a TB, an RB, a financial allied enterprise, or TB may perform any or all of the following services:
a non-financial allied enterprise; and
(d) in case of publicly-listed UBs, the power to own up (a) grant loans, whether secured or unsecured;
to one hundred percent (100%) of the voting stock of only (b) invest in readily marketable bonds and other debt
one (1) other UB or KB. securities, commercial papers and accounts receivable,
drafts, bills of ex- change, acceptances or notes arising out
A UB may perform the functions of an IH either of commercial transactions;
directly or indirectly through a subsidiary IH; in either (c)issue domestic letters of credit:
case, the underwriting of equity securities and securities (d)extend credit facilities to private and government
dealing shall be subject to pertinent laws and regulations employees:
of the Securities and Exchange Commission (SEC): (e) extend credit against the security of jewelry.
Provided. That if the IH functions are performed directly precious stones and articles of similar nature, subject to
by the UB, such functions shall be undertaken by a such rules and regulations as the Monetary Board may
separate and distinct department or other similar unit in prescribe;
the UB: Provided, further, That a UB cannot perform such (f) accept savings and time deposits;
functions both directly and indirectly through a subsidiary. (g) rediscount paper with the Land Bank of the
Philippines (LBP). Development Bank of the Philippines
(2) KBS. In addition to the general powers incident to (DBP), and other government-owned or -controlled
corporations and those provided in other laws, a KB shall corporations;
have the authority to exercise all such powers as maybe (h) accept foreign currency deposits as provided under
necessary to carry on the business of commercial banking, R.A. No. 6426, as amended;
such as accepting drafts and issuing letters of credit; (i) act as correspondent for other financial institutions
discounting and negotiating promissory notes, drafts, bills (Fls):
of exchange. and other evidences of debt; accepting or (j) purchase, hold and convey real estate as
creating demand deposits; receiving other types of specified under Sections 51 and 52 of R.A.No. 8791;
deposits and deposit substitutes; buying and selling (k) offer other banking services as provided in Section
53 of R.A. No. 8791. With prior approval of the Monetary
Board, and subject to such guidelines as may be
established by it, TBs may also perform the following
services:
 (l) open current or checking accounts;
(m) engage in trust, quasi-banking functions and money (6) IBS. In addition to the general powers incident to
market operations; corporations and those provided in other laws, as well as
(n) act as collection agent for government entities, in Circular No. 105, insofar as they are not inconsistent or
including but not limited to, the Bureau of Internal in- compatible with the provisions of R.A. No. 6848, an IB
Revenue (BIR), Social Security System (SSS) and the Bureau may perform any or all of the following services:
of Customs (BOC);
(o) act as official depository of national agencies and of (a)open savings accounts for safekeeping or custody
municipal, city or provincial funds in the municipality, city with no participation in profit and losses except unless
or province where the TB is located; otherwise authorized by the account holders to be
(p) issue mortgage and chattel mortgage certificates, invested;
buy and sell them for its own ac- count or for the account (b) accept investment account placements and invest
of others, or ac- cept and receive them in payment or as the same for a term with the IB's funds in islamically
amortization of its loan; permissible transactions on participation basis;
(q) invest in the equity of allied undertakings; (c) accept foreign currency deposits from banks,
(r) issue foreign letters of credit; and companies, organizations and individuals, including
(s) pay/accept/negotiate import/export draft/ foreign governments;
bills of exchange. (d) buy and sell foreign exchange;
(e) act as correspondent of banks and Institutions to
(4) RBS, In addition to the powers provided in other laws, handle remittances or any fund transfers;
an RB may perform any or all of the following services: (f) accept drafts and issue letters of credit or letters of
guarantee, negotiate notes and bills of exchange and
(a) extend loans and advances primarily for the purpose other evidence of indebtedness under the universally
of meeting the normal credit needs of farmers, fishermen accepted Islamic financial instruments;
or farm families as well as cooperatives, merchants, (g) act as collection agent insofar as the payment orders,
private and public employees; bills of exchange or other commercial documents are
(b)accept savings and time deposits; exclusive of riba or interest prohibitions;
(c) act as correspondent of other Fls; (h)Provide financing with or without collateral by way of
(d) rediscount paper with the LBP, DBP or any leasing, sale and leaseback, or cost plus profit sales
other bank, including its branches and agencies. Said arrangement;
banks shall specify the nature of paper deemed (i)Handle storage operations for goods or commodity
acceptable for rediscount, as well as the rediscount rate to financing secured by ware- house receipts presented to
be charged by any of these banks; the bank;
(e) act as collection agent; (J)Issue shares for the account of institutions and
(f) offer other banking services as provided in companies assisted by the bank in meeting subscription
Section 53 of R.A. No. 8791. With prior approval of the calls or augmenting their capital and/or fund requirements
Monetary Board, an RB may perform any or all of the as may be allowed by law;
following services: (k) Undertake various investments in all trans- actions
(g)accept current or checking accounts: Provided. That allowed by the Islamic Shari’a in such a way that shall not
such RB has net assets of at least P5.0 million; permit the haram(forbidden), nor forbid the halal
(h) accept negotiable order of withdrawal (NOW) (permissible):
accounts; (L) Act as an official government depository, or
(i) act as trustee over estates or properties of Its branches, subdivisions and instrumentalities and of
farmers and merchants; government-owned or -controlled corporations,
(j) act as official depository of municipal, city or particularly those doing business in the Autonomous
provincial funds in the municipality, city or province where Region:
it is located; (m ) Issue investment participation certificates,
(k) sell domestic drafts; and muquaradah (non-interest bearing bonds). Debentures,
(l) invest in allied undertakings. collaterals and/or the renewal and refinancing of the
same, with the approval of the Monetary Board to be used
(5) Coop Banks. A Coop Bank shall primarily provide by the IB in its financing operations for projects that will
financial, banking and credit services to cooperatives and promote the economic development primarily of the
their members, although it may provide the same services Autonomous Region;
to non-members or the general public. In addition to the (n) Carry out financing and joint investment operations
powers granted to Coop Banks under existing laws, any by way of mudarabah purchasing for others on a cost-plus
Coop Bank may perform any or all of the banking services financing arrangement, and invest funds directly in various
offered by other types of banks, subject to prior approval projects or through the use of funds whose owners desire
of the BSP. to invest jointly with other resources available to the IB on
a joint mudarabah basis; and
 undivided profit, net valuation of reserves and other
( adjustments as may be required by the BSP (Sec. 24. GBL).
O)invest in equities of the following allied undertakings:
Other limitations in the investments of a unibank:

Bank as Security Broker… 1) A universal bank can own up to one hundred per- cent
(100%) of the equity in a thrift bank, a rural bank or a
“A bank may act as a security broker. A bank may act as financial allied enterprise. A publicly- listed universal or
financial agent and buy and sell, by order of and for commercial bank may own up to one hundred percent
account of their customers, shares, evidences of indebted- (100%) of the voting stock of only one other universal or
ness and all types of securities (Sec. 53.2, GBL). commercial bank (Sec. 25, GBL).

“A bank cannot directly engage in the business of 2) A universal bank may own up to one hundred per- cent
insurance. A bank shall not directly engage in insurance (100%) of the equity in a non-financial allied enterprise
business; it cannot be the insurer (Sec. 54, GBL). However, (Sec. 26, GBL).
it is possible for a bank to indirectly engage in insurance
business by distributing products of insurance. A bank may 3) The equity investment of a universal bank, or of its
perform such other services for their customers that are wholly or majority-owned subsidiaries, in a single non-
not incompatible with banking business (Sec. 53.3. GBL) allied enterprise shall not exceed thirty-five percent (35%)
of the total equity in that enterprise nor shall it exceed
• The powers of an investment house. Banks may exercise thirty-five percent (35%) of the voting stock in that
the powers of an investments house (IH). The extent of enterprise (Sec. 27, GBL).
investment, however depends on the classification of a
bank Universal bank (unibank) is a commercial bank with 4) To promote competitive conditions in financial markets,
the authority to exercise the powers of an investment the Monetary Board may further limit to forty percent
house and in- vest in allied and non-allied enterprises (40%) equity investments of universal banks in quasi-
(Secs. 23 and 24, GBL). banks. This rule shall also apply in the case of commercial
A commercial bank, on the other hand can only invest banks (Sec. 28, GBL).

In allied enterprises (Sec. 30, GBL A commercial bank may Invest only in the equities of al-
lied enterprises as may be determined by the Monetary
✓ Non-allied enterprise is an activity that has no relation Board. Except as the Monetary Board may otherwise pre-
at all to banking, e.g. construction, trading, manufacturing, scribe:
mining.
1)The total investment in equities of allied enterprises
✓ Allied enterprises are classified into "financial allied shall not exceed thirty-five percent (35%) of the net worth
enterprises" (e.g. credit card, leasing companies, of the bank; and 2) The equity investment in any one
investment houses, financing insurance companies) and enterprise shall not exceed twenty-five percent (25%) of
"non-financial allied enterprise" (e.g. warehousing, safety the networth of bank
deposit box, providing computer services).
The acquisition of such equity or equities is subject to the
The General Banking Law provides for limitations in the prior approval of the Monetary Board which shall
investment of a unibank. Except as the Monetary Board promulgate appropriate guidelines to govern such
may otherwise prescribe: investments (Sec. 30, GBL).

1) The total investment in equities of allied and non- allied Other limitations in the investments of a commercial Bank:
enterprises shall not exceed fifty percent (50%) of the net
worth of the bank and 1)A commercial bank may own up to one hundred percent
(100%) of the equity of a thrift bank or a rural bank.
2) The equity investment in any one enterprise. whether Where the equity investment of a commercial bank is in
allied or non-allied, shall not exceed twenty-five percent other financial allied enter- prises, including another
(25%) of the net worth of the bank commercial bank, such investment shall remain a minority
holding in that enterprise (Sec. 31, GBL).
The acquisition of such equity or equities is subject to the
prior approval of the Monetary Board which shall 2)A commercial bank may own up to one hundred Percent
promulgate appropriate guidelines to govern such (100%) of the equity in a non-financial allied enterprise
investments (Sec. 24, GBL). (Sec. 32, GBL).

• Networth shall mean the total and unimpaired paid- in

capital including paid-in surplus, retained earnings and
 relative to the funds or prop- erties in the custody of the
bank belonging to private individuals, corporations, or any
• Primary distinction of a unibank from a commercial other entity: Provided, That with respect to bank deposits,
bank. A universal bank can exercise all the powers and the provisions of existing laws shall prevail;
functions of a commercial bank. In addition, a universal
bank can perform the functions of an investment house as (c)Accept gifts, fees or commissions or any other form of
well as invest in non-allied enterprises without prior remuneration in connection with the approval of a loan or
approval of the MB of the BSP, unlike a commercial bank other credit accommodation from said bank;
which needs prior BSP approval.
(d)Overvalue or aid in overvaluing any security for the
• The authority to acquire real estate. Any bank may purpose of influencing in any way the actions of the bank
acquire real estate as shall be necessary for its own use in or any bank; or
the conduct of its business: Provided, however, that the
total in- vestment in such real estate and improvements (e) Outsource inherent banking functions.
thereof, including bank equipment, shall not exceed fifty
percent (50%) of combined capital accounts: Provided, • Outsourcing shall refer to any contractual arrangement
further, that the equity investment of a bank in another between a bank and a qualified service provider for the
corporation engaged primarily in real estate shall be latter to perform designated activities on a continuing
considered as part of the bank’s total investment in real basis on behalf of the bank (Circular No. 765 dated 03
estate, unless otherwise provided by the MB (Sec. 51, August 2012; X162.3 MORB [2013]).
GBL).
2)No borrower of a bank shall
Notwithstanding the limitations in Sec. 51 of the GBL. A
bank may acquire, hold or convey real properties under (a)Fraudulently overvalue property offered as security for
the following circumstances: a loan or other credit accommodation from the bank;
(b)Furnish false or make misrepresentation or suppression
a)Such as shall be mortgaged to it in good faith by way of of material facts for the purpose of obtaining, renewing,
security for debts; or increasing a loan or other credit accommodation or
b)Such as shall be conveyed to it in satisfaction of debts (c)Extending the period thereof; Attempt to defraud the
previously contracted in the course of its dealings; 3) Such said bank in the event of a court action to recover a loan
as it shall purchase at sales under judgments, decrees, or other credit accommodation; or
mortgages, or trust deeds held by it and such as it shall (d)Offer any director, officer, employee or agent of a bank
purchase to secure debts due it (Sec. 52, GBL). any gift, fee, commission, or any other form of
compensation in order to influence such persons into
The above-enumerated properties are referred to as approving a loan or other credit accommodation appli-
ROPOA Real and Other Properties Owned or Acquired. cation.
Such properties maybe disposed off within five (5) years or
as 3)No examiner, officer or employee of the Bangko Sentral
or of any department, bureau, office, branch or agency of
Maybe prescribed by the MB. The bank may, after said the Government that is assigned to supervise, examine,
period, continue to hold the property for its own use, assist or render technical assistance to any bank shall
subject to the limitations in Sec. 51 of the GBL (Sec. 52, commit any of the acts enumerated in this Section or aid
GBL). in the commission of the same. The making of false
reports or misrepresentation or suppression of material
Prohibited Transactions Act…. facts by personnel of the Bangko Sentral ng Pilipinas shall
constitute fraud and shall be subject to the administrative
*Prohibited transactions/acts. The GBL specifically and criminal sanctions provided under the New Central
Provides for the following prohibited transactions in Bank Act.
banking (Sec. 55, GBL):
4) Consistent with the provisions of Republic Act No.
1)No director, officer, employee, or agent of any Bank 1405, otherwise known as the Banks Secrecy Law, no bank
shall shall employ casual or non-regular personnel or too
lengthy Probationary personnel in the conduct of its
(a)Make false entries in any bank report or statement or business involving bank deposits.
participate in any fraudulent transaction, thereby affecting
the financial interest of, or causing damage to, the bank or
any person;

(b)Without order of a court of competent juris- diction,

disclose to any unauthorized person any information
 and/or client funds and investments in government
*Prohibited transactions and Republic Act No. 9510 (An securities or funds."
Act Establishing the Credit Information System and other
purposes, otherwise known as the “Credit Information
System Act”). RA No. 9510 was approved on 31 October Bank and the Country’s economy
2008. It aims to provide a credit information system to
directly address the need for reliable credit information *The significance of banks in the economic life of the
concerning the credit standing and track record of country. The banking system is an indispensable
borrowers. The declaration of policy of the law states: institution in the modern world. It plays a vital role in the
economic life of every civilized nation. Whether banks act
“The State recognizes the need to establish a as mere passive entities for the safekeeping and saving of
comprehensive and centralized credit information system money, or as active instruments of business and
for the collection and dissemination of fair and accurate commerce, they have be- come an ubiquitous presence
information relevant to, or arising from, credit and credit- among the citizenry, who have to regard them with
related activities of all entities participating in the financial respect and even gratitude and, most of all, confidence
system. A credit Information system will directly address (PNB us. Velasco, 564 SCRA 512, 11 September 2008). The
the need for reliable credit information concerning the following are some cases that illustrate how banks
credit standing and track record of borrowers. influence the economy:

The operations and services of a credit information system Remember….

can be expected to: greatly improve the overall availability
of credit especially to micro, small and medium-scale “The business of banking is imbued with public interest.
enterprises; provide mechanisms to make credit more Apart from the significance of banks in the economy, the
cost-effective; and reduce the excessive dependence on business of banking is likewise imbued with public interest
collateral to secure credit facilities.
*Action of a bank in case of strikes or lock-outs. In case of
The State shall endeavor to have credit information strikes or lock-outs that are unsettled after seven (7) days,
provided at the least cost to all participants and shall banks should report the matter to the BSP which will in
ensure the protection of consumer rights and the turn report the same to the Secretary of Labor, who may
existence of fair competition in the industry at all times. assume jurisdiction over the dispute or certify the same to
the NLRC for compulsory arbitration. However, the
An efficient credit information system will also enable President of the Philippines may intervene at any time and
financial institutions to reduce their over-all credit risk, assume jurisdiction over such dispute in order to settle or
contributing to a healthier and more stable financial terminate the same (Sec. 22, GBL). Reason: The banking
system. industry is indispensable to the national interest (Sec. 22,
GBL).
“Under the law, a Credit Information Corporation shall be
formed whose primary purpose shall be to receive and *Quasi-banks. They are entities engaged in the borrowing
consolidate basic credit data, to act as a central registry or of funds through the issuance, endorsement or
central repository of credit information, and to provide assignment with recourse or acceptance of deposit
access to reliable, standardized information on credit substitutes for purposes of relending or purchasing of
history and financial condition of borrowers. The receivables and other obligations (Sec. 4 last par., GBL).
Corporation has the power, among others, to require
entities that provide credit facilities to submit basic credit Deposit substitutes are alternative form of obtaining
data and updates thereon on a regular basis. The funds from the public, other than deposits, through the
Corporation may also access credit and other relevant
information from government offices, judicial and Issuance, endorsement, or acceptance of debt
administrative tribunals, prosecutorial agencies and other instruments for the borrower’s own account, for the
related offices, as well as pension plans administered by purpose of relending or purchasing of receivables and
the government. In spite of the powers of the other obligations. These instruments may include, but
Corporation, the inviolable nature of the secrecy of bank need not be limited to, banker’s acceptances, promissory
deposits and/or the funds of client shall remain. Section notes, participations, certificates of assignment and similar
12 of the law states: instruments with recourse, and repurchase agreements
(Sec. 95, RA 7653, the New Central Bank Act (NCBA).
"Pursuant to Republic Act No. 1405 (Law on Secrecy of
Bank Deposits), Republic Act No. 6426 (The Foreign With Recourse: Term which may be used in indorsing
Currency Deposit Act), Republic Act No. 8791 (The General negotiable instrument and by which the endorser
Banking Law of 2000), Republic Act No. 9160 (Anti-Money indicates that he remains liable for payment of the
Laundering Law) and their amendatory laws, nothing in instrument (Black’s Law Dictionary).
this Act shall impair the secrecy of bank deposits and