BANKING LAW

The New Central Bank Act (R.A. No. 7653, as amended by R.A. No. 11211)

REPUBLIC ACT 7653, as amended by RA 11211

[STATE POLICIES]

Section 1. Declaration of Policy. - The State shall maintain a central monetary

authority that shall function and operate as an independent and accountable body corporate
in the discharge of its mandated responsibilities concerning money, banking and credit. In
line with this policy, and considering its unique functions and responsibilities, the central
monetary authority established under this Act, while being a government-owned corporation,
shall enjoy fiscal and administrative autonomy.
Section 2. Creation of the Bangko Sentral. - There is hereby established an
independent central monetary authority, which shall be a body corporate known as the
Bangko Sentral ng Pilipinas, hereafter referred to as the Bangko Sentral.
The capital of the Bangko Sentral shall be Fifty billion pesos (P50,000,000,000), to be
fully subscribed by the Government of the Republic, hereafter referred to as the Government,
Ten billion pesos (P10,000,000,000) of which shall be fully paid for by the Government upon
the effectivity of this Act and the balance to be paid for within a period of two (2) years from
the effectivity of this Act in such manner and form as the Government, through the Secretary
of Finance and the Secretary of Budget and Management, may thereafter determine.
Section 3. Responsibility and Primary Objective. - The Bangko Sentral shall provide
policy directions in the areas of money, banking, and credit. It shall have supervision over
the operations of banks and exercise such regulatory powers as provided in this Act and
other pertinent laws over the operations of finance companies and non-bank financial
institutions performing quasi-banking functions, hereafter referred to as quasi-banks, and
institutions performing similar functions.
The primary objective of the Bangko Sentral is to maintain price stability conducive to
a balanced and sustainable growth of the economy. It shall also promote and maintain
monetary stability and the convertibility of the peso.
Section 4. Place of Business. - The Bangko Sentral shall have its principal place of
business in Metro Manila, but may maintain branches, agencies and correspondents in such
other places as the proper conduct of its business may require.
Section 5. Corporate Powers. - The Bangko Sentral is hereby authorized to adopt,
alter, and use a corporate seal which shall be judicially noticed; to enter into contracts; to
lease or own real and personal property, and to sell or otherwise dispose of the same; to sue
and be sued; and otherwise to do and perform any and all things that may be necessary or
proper to carry out the purposes of this Act.
The Bangko Sentral may acquire and hold such assets and incur such liabilities in
connection with its operations authorized by the provisions of this Act, or as are essential to
the proper conduct of such operations.
The Bangko Sentral may compromise, condone or release, in whole or in part, any
claim of or settled liability to the Bangko Sentral, regardless of the amount involved, under
such terms and conditions as may be prescribed by the Monetary Board to protect the
interests of the Bangko Sentral.

[MONETARY BOARD, FUNCTIONS, AND ITS POWERS]

ARTICLE II
THE MONETARY BOARD
 Section 6. Composition of the Monetary Board. - The powers and functions of the
Bangko Sentral shall be exercised by the Bangko Sentral Monetary Board, hereafter referred
to as the Monetary Board, composed of seven (7) members appointed by the President of the
Philippines for a term of six (6) years.
The seven (7) members are:

(a) the Governor of the Bangko Sentral, who shall be the Chairman of the Monetary Board.
The Governor of the Bangko Sentral shall be head of a department and his appointment shall
be subject to confirmation by the Commission on Appointments. Whenever the Governor is
unable to attend a meeting of the Board, he shall designate a Deputy Governor to act as his
alternate: Provided, That in such event, the Monetary Board shall designate one of its
members as acting Chairman;

(b) a member of the Cabinet to be designated by the President of the Philippines. Whenever
the designated Cabinet Member is unable to attend a meeting of the Board, he shall
designate an Undersecretary in his Department to attend as his alternate; and

(c) five (5) members who shall come from the private sector, all of whom shall serve full-time:
Provided, however, That of the members first appointed under the provisions of this
subsection, three (3) shall have a term of six (6) years, and the other two (2), three (3) years.

No member of the Monetary Board may be reappointed more than once.

Section 7. Vacancies. - Any vacancy in the Monetary Board created by the death,
resignation, or removal of any member shall be filled by the appointment of a new member to
complete the unexpired period of the term of the member concerned.
Section 8. Qualifications. - The members of the Monetary Board must be natural-born
citizens of the Philippines, at least thirty-five (35) years of age, with the exception of the
Governor who should at least be forty (40) years of age, of good moral character, of
unquestionable integrity, of known probity and patriotism, and with recognized competence
in social and economic disciplines.
Section 9. Disqualifications. - In addition to the disqualifications imposed by Republic
Act No. 6713, a member of the Monetary Board is disqualified from being a director, officer,
employee, consultant, lawyer, agent or stockholder of any bank, quasi-bank or any other
institution which is subject to supervision or examination by the Bangko Sentral, in which
case such member shall resign from, and divest himself of any and all interests in such
institution before assumption of office as member of the Monetary Board.
The members of the Monetary Board coming from the private sector shall not hold any
other public office or public employment during their tenure.
No person shall be a member of the Monetary Board if he has been connected directly
with any multilateral banking or financial institution or has a substantial interest in any
private bank in the Philippines, within one (1) year prior to his appointment; likewise, no
member of the Monetary Board shall be employed in any such institution within two (2) years
after the expiration of his term except when he serves as an official representative of the
Philippine Government to such institution.
Section 10. Removal. - The President may remove any member of the Monetary Board
for any of the following reasons:

(a) If the member is subsequently disqualified under the provisions of Section 8 of this Act;
or

(b) If he is physically or mentally incapacitated that he cannot properly discharge his duties
and responsibilities and such incapacity has lasted for more than six (6) months; or
(c) If the member is guilty of acts or operations which are of fraudulent or illegal character or
which are manifestly opposed to the aims and interests of the Bangko Sentral; or

(d) If the member no longer possesses the qualifications specified in Section 8 of this Act.

Section 11. Meetings. - The Monetary Board shall meet at least once a week. The
Board may be called to a meeting by the Governor of the Bangko Sentral or by two (2) other
members of the Board.
The presence of four (4) members shall constitute a quorum: Provided, That in all
cases the Governor or his duly designated alternate shall be among the four (4).
Unless otherwise provided in this Act, all decisions of the Monetary Board shall
require the concurrence of at least four (4) members.
The Bangko Sentral shall maintain and preserve a complete record of the proceedings
and deliberations of the Monetary Board, including the tapes and transcripts of the
stenographic notes, either in their original form or in microfilm.
Section 12. Attendance of the Deputy Governors. - The Deputy Governors may attend
the meetings of the Monetary Board with the right to be heard.
Section 13. Salary. - The salary of the Governor and the members of the Monetary
Board from the private sector shall be fixed by the President of the Philippines at a sum
commensurate to the importance and responsibility attached to the position.
Section 14. Withdrawal of Persons Having a Personal Interest. - In addition to the
requirements of Republic Act No. 6713, any member of the Monetary Board with personal or
pecuniary interest in any matter in the agenda of the Monetary Board shall disclose his
interest to the Board and shall retire from the meeting when the matter is taken up. The
decision taken on the matter shall be made public. The minutes shall reflect the disclosure
made and the retirement of the member concerned from the meeting.
Section 15. Exercise of Authority. - In the exercise of its authority, the Monetary Board
shall:

(a) 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. The rules and regulations issued shall be reported to the President and the Congress
within fifteen (15) days from the date of their issuance;

(b) 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 legal units of the Bangko Sentral shall be under the exclusive
supervision and control of the Monetary Board;

(c) establish a human resource management system which shall govern the selection, hiring,
appointment, transfer, promotion, or dismissal of all personnel. Such system shall aim to
establish professionalism and excellence at all levels of the Bangko Sentral in accordance
with sound principles of management.

A compensation structure, based on job evaluation studies and wage surveys and
subject to the Board's approval, shall be instituted as an integral component of the Bangko
Sentral's human resource development program: Provided, That the Monetary Board shall
make its own system conform as closely as possible with the principles provided for under
Republic Act No. 6758: Provided, however, That compensation and wage structure of
employees whose positions fall under salary grade 19 and below shall be in accordance with
the rates prescribed under Republic Act No. 6758.
On the recommendation of the Governor, appoint, fix the remunerations and other
emoluments, and remove personnel of the Bangko Sentral, subject to pertinent civil service
laws: Provided, That the Monetary Board shall have exclusive and final authority to promote,
transfer, assign, or reassign personnel of the Bangko Sentral and these personnel actions
are deemed made in the interest of the service and not disciplinary: Provided, further, That
the Monetary Board may delegate such authority to the Governor under such guidelines as it
may determine.

(d) adopt an annual budget for and authorize such expenditures by the Bangko Sentral as are
in the interest of the effective administration and operations of the Bangko Sentral in
accordance with applicable laws and regulations; and

(e) 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.

In the event of a settlement or compromise, indemnification shall be provided only in

connection with such matters covered by the settlement as to which the Bangko Sentral is
advised by external counsel that the person to be indemnified did not commit any negligence
or misconduct.
The costs and expenses incurred in defending the aforementioned action, suit or
proceeding may be paid by the Bangko Sentral in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf of the member,
officer, or employee to repay the amount advanced should it ultimately be determined by the
Monetary Board that he is not entitled to be indemnified as provided in this subsection.
Section 16. Responsibility. - Members of the Monetary Board, officials, examiners, and
employees of the Bangko Sentral who willfully violate this Act or who are guilty of
negligence, abuses or acts of malfeasance or misfeasance or fail to exercise extraordinary
diligence in the performance of his duties shall be held liable for any loss or injury suffered
by the Bangko Sentral or other banking institutions as a result of such violation, negligence,
abuse, malfeasance, misfeasance or failure to exercise extraordinary diligence.
Similar responsibility shall apply to members, officers, and employees of the Bangko
Sentral for: (1) the disclosure of any information of a confidential nature, or any information
on the discussions or resolutions of the Monetary Board, or about the confidential operations
of the Bangko Sentral, unless the disclosure is in connection with the performance of official
functions with the Bangko Sentral, or is with prior authorization of the Monetary Board or the
Governor; or (2) the use of such information for personal gain or to the detriment of the
Government, the Bangko Sentral or third parties: Provided, however, That any data or
information required to be submitted to the President and/or the Congress, or to be published
under the provisions of this Act shall not be considered confidential.
ARTICLE III
THE GOVERNOR AND DEPUTY GOVERNORS OF THE BANGKO SENTRAL
Section 17. Powers and Duties of the Governor. - The Governor shall be the chief
executive officer of the Bangko Sentral. His powers and duties shall be to:

(a) prepare the agenda for the meetings of the Monetary Board and to submit for the
consideration of the Board the policies and measures which he believes to be necessary to
carry out the purposes and provisions of this Act;

(b) execute and administer the policies and measures approved by the Monetary Board;

(c) direct and supervise the operations and internal administration of the Bangko Sentral. The
Governor may delegate certain of his administrative responsibilities to other officers or may
assign specific tasks or responsibilities to any full-time member of the Monetary Board
without additional remuneration or allowance whenever he may deem fit or subject to such
rules and regulations as the Monetary Board may prescribe;

(d) appoint and fix the remunerations and other emoluments of personnel below the rank of a
department head in accordance with the position and compensation plans approved by the
Monetary Board, as well as to impose disciplinary measures upon personnel of the Bangko
Sentral, subject to the provisions of Section 15(c) of this Act: Provided, That removal of
personnel shall be with the approval of the Monetary Board;

(e) render opinions, decisions, or rulings, which shall be final and executory until reversed or
modified by the Monetary Board, on matters regarding application or enforcement of laws
pertaining to institutions supervised by the Bangko Sentral and laws pertaining to quasi-
banks, as well as regulations, policies or instructions issued by the Monetary Board, and the
implementation thereof; and

(f) exercise such other powers as may be vested in him by the Monetary Board.

Section 18. Representation of the Monetary Board and the Bangko Sentral. - The
Governor of the Bangko Sentral shall be the principal representative of the Monetary Board
and of the Bangko Sentral and, in such capacity and in accordance with the instructions of
the Monetary Board, he shall be empowered to:

(a) represent the Monetary Board and the Bangko Sentral in all dealings with other offices,
agencies and instrumentalities of the Government and all other persons or entities, public or
private, whether domestic, foreign or international;

(b) sign contracts entered into by the Bangko Sentral, notes and securities issued by the
Bangko Sentral, all reports, balance sheets, profit and loss statements, correspondence and
other documents of the Bangko Sentral.

The signature of the Governor may be in facsimile whenever appropriate;

(c) represent the Bangko Sentral, either personally or through counsel, including private
counsel, as may be authorized by the Monetary Board, in any legal proceedings, action or
specialized legal studies; and

(d) delegate his power to represent the Bangko Sentral, as provided in subsections (a), (b)
and (c) of this section, to other officers upon his own responsibility: Provided, however, That
in order to preserve the integrity and the prestige of his office, the Governor of the Bangko
Sentral may choose not to participate in preliminary discussions with any multilateral
banking or financial institution on any negotiations for the Government within or outside the
Philippines. During the negotiations, he may instead be represented by a permanent
negotiator.

Section 19. Authority of the Governor in Emergencies. - In case of emergencies where

time is sufficient to call a meeting of the Monetary Board, the Governor of the Bangko
Sentral, with the concurrence of two (2) other members of the Monetary Board, may decide
any matter or take any action within the authority of the Board.
The Governor shall submit a report to the President and Congress within seventy-two
(72) hours after the action has been taken.
At the soonest possible time, the Governor shall call a meeting of the Monetary Board
to submit his action for ratification.
Section 20. Outside Interests of the Governor and the Full-time Members of the Board.
- The Governor of the Bangko Sentral and the full-time members of the Board shall limit their
professional activities to those pertaining directly to their positions with the Bangko Sentral.
Accordingly, they may not accept any other employment, whether public or private,
remunerated or ad honorem, with the exception of positions in eleemosynary, civic, cultural
or religious organizations or whenever, by designation of the President, the Governor or the
full-time member is tasked to represent the interest of the Government or other government
agencies in matters connected with or affecting the economy or the financial system of the
country.
Section 21. Deputy Governors. - The Governor of the Bangko Sentral, with the
approval of the Monetary Board, shall appoint not more than three (3) Deputy Governors who
shall perform duties as may be assigned to them by the Governor and the Board.
In the absence of the Governor, a Deputy Governor designated by the Governor shall
act as chief executive of the Bangko Sentral and shall exercise the powers and perform the
duties of the Governor. Whenever the Government is unable to attend meetings of
government boards or councils in which he is an ex officio member pursuant to provisions of
special laws, a Deputy Governor as may be designated by the Governor shall be vested with
authority to participate and exercise the right to vote in such meetings.

[BSP & Banks in Distress: Sec. 29 & 30]

[Remedy for Closed Banks]

Section 29. Appointment of Conservator. - Whenever, on the basis of a report submitted by

the appropriate supervising or examining department, the Monetary Board 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, the Monetary
Board may appoint a conservator with such powers as the Monetary Board shall deem
necessary to 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. The conservator shall report and be responsible to the
Monetary Board and shall have the power to overrule or revoke the actions of the previous
management and board of directors of the bank or quasi-bank.
The conservator should be competent and knowledgeable in bank operations and
management. The conservatorship shall not exceed one (1) year.
The conservator shall receive remuneration to be fixed by the Monetary Board in an
amount not to exceed two-thirds (2/3) of the salary of the president of the institution in one
(1) year, payable in twelve (12) equal monthly payments: Provided, That, if at any time within
one-year period, the conservatorship is terminated on the ground that the institution can
operate on its own, the conservator shall receive the balance of the remuneration which he
would have received up to the end of the year; but if the conservatorship is terminated on
other grounds, the conservator shall not be entitled to such remaining balance. The Monetary
Board may appoint a conservator connected with the Bangko Sentral, in which case he shall
not be entitled to receive any remuneration or emolument from the Bangko Sentral during the
conservatorship. The expenses attendant to the conservatorship shall be borne by the bank
or quasi-bank concerned.
The Monetary Board shall terminate the conservatorship when it is satisfied that the
institution can continue to operate on its own and the conservatorship is no longer
necessary. The conservatorship shall likewise be terminated should 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.
Sec. 30. Proceedings in Receivership and Liquidation. - Whenever, upon report of the
head of the supervising or examining department, the Monetary Board finds that a bank or
quasi-bank:
"(a) has notified the Bangko Sentral or publicly announced a unilateral closure, or has been
dormant for at least sixty (60) days or in any manner has suspended the payment of its
deposit/deposit substitute liabilities, or is unable to pay its liabilities as they become due in
the ordinary course of business: Provided, That this shall not include inability to pay caused
by extraordinary demands induced by financial panic in the banking community;
"(b) has insufficient realizable assets, as determined by the Bangko Sentral, to meet its
liabilities; or
"(c) cannot continue in business without involving probable losses to its depositors or
creditors; or
"(d) has willfully violated a cease and desist order under Section 37 of this Act that has
become final, involving acts or transactions which amount to fraud or a dissipation of the
assets of the institution; in which cases, the Monetary Board may summarily and without
need for prior hearing forbid the institution from doing business in the Philippines and
designate the Philippine Deposit Insurance Corporation (PDIC) as receiver in the case of
banks and direct the PDIC to proceed with the liquidation of the closed bank pursuant to this
section and the relevant provisions of Republic Act No. 3591, as amended. The Monetary
Board shall notify in writing, through the receiver, the board of directors of the closed bank
of its decision.
"The actions of the Monetary Board taken under this section or under Section 29 of this Act
shall be final and executory and may not be restrained or set aside by the court except on
petition for certiorari on the ground that the action taken was in excess of jurisdiction or with
such grave abuse of discretion as to amount to lack or excess of jurisdiction. The petition for
certiorari may only be filed by the stockholders of record representing the majority of the
capital stock within ten (10) days from receipt by the board of directors of the institution of
the order directing receivership, liquidation or conservatorship. The designation of a
conservator under Section 29 of this Act or the appointment of a receiver under this section
shall be vested exclusively with the Monetary Board. Furthermore, the designation of a
conservator is not a precondition to the designation of a receiver.
"The authority of the Monetary Board to summarily and without need for prior hearing forbid
the bank or quasi-bank from doing business in the Philippines as provided above may also
be exercised over non-stock savings and loan associations, based on the same applicable
grounds. For quasi-banks and non-stock savings and loan associations, any person of
recognized competence in banking, credit or finance may be designated by the Bangko
Sentral as a receiver.