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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
Financial institutions, particularly banks, play a vital role in the country’s economic growth. Therefore, Republic Act (RA) No. 8791 or “The General Banking Law of 2000” was enacted to implement the State’s policy to promote and maintain a stable and efficient banking and financial system that is globally competitive, dynamic and responsive to the demands of a developing economy.
The said law provides that the State recognizes the vital role of banks in providing an environment conducive to the sustained development of the national economy and the fiduciary nature of banking that requires high standards of integrity and performance.
Definition and Classification of Banks
According to Section 3.1 of the said law, “banks” shall refer to entities engaged in the lending of funds obtained in the form of deposits.
Section 3.2 provides that banks shall be classified into:
(a) Universal banks;
(b) Commercial banks;
(c) Thrift banks, composed of:
(i) Savings and mortgage banks,
(ii) Stock savings and loan associations, and
(iii) Private development banks, as defined in Republic Act No. 7906 (hereafter the “Thrift Banks Act”);
(d) Rural banks, as defined in Republic Act No. 7353 (hereafter the “Rural Banks Act”);
(e) Cooperative banks, as defined in Republic Act No. 6938 (hereafter the “Cooperative Code”);
(f) Islamic banks as defined in Republic Act No. 6848, otherwise known as the “Charter of Al Amanah Islamic Investment Bank of the Philippines”; and
(g) Other classifications of banks as determined by the Monetary Board of the Bangko Sentral ng Pilipinas.
PROHIBITED TRANSACTIONS OF BANK DIRECTORS, OFFICERS, EMPLOYEES, OR AGENTS
Section 55 of the RA No. 8791 provides that no director, officer, employee, or agent of any bank shall –
(a) Make false entries in any bank report or statement or 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 jurisdiction, disclose to any unauthorized person any information relative to the funds or properties in the custody of the bank belonging to private individuals, corporations, or any other entity: Provided, That with respect to bank deposits, the provisions of existing laws shall prevail;
(c) Accept gifts, fees, or commissions or any other form of remuneration in connection with the approval of a loan or other credit accommodation from said bank;
(d) Overvalue or aid in overvaluing any security for the purpose of influencing in any way the actions of the bank or any bank; or
(e) Outsource inherent banking functions.
Violation of the Directors, Officers, Stockholders and Related Interests Law (DOSRI Law)
Sec. 83 of RA No. 337 or the Directors, Officers, Stockholders and Related Interests Law (DOSRI Law) also provides that no director or officer of any banking institution shall, either directly or indirectly, for himself or as the representative or agent of others, borrow any of the deposits of funds of such bank, nor shall he become a guarantor, indorser, or surety for loans from such bank to others, or in any manner be an obligor for moneys borrowed from the bank or loaned by it, except with the written approval of the majority of the directors of the bank, excluding the director concerned. Any such approval shall be entered upon the records of the corporation and a copy of such entry shall be transmitted forthwith to the Superintendent of Banks. The office of any director or officer of a bank who violates the provisions of this section shall immediately become vacant and the director or officer shall be punished by imprisonment of not less than one year nor more than ten years and by a fine of not less than one thousand nor more than ten thousand pesos.
In addition to the conditions established in the preceding paragraph, no director of a building and loan association shall engage in any of the operations mentioned in said paragraph except upon the pledge of shares of the association having a total withdrawal value greater than the amount borrowed.
In the case of Hilario P. Soriano vs. People of the Philippines, G.R. No. 240458, January 08, 2020 , the Supreme Court held that the following elements must be present to constitute a violation of the above-quoted provision:
(1) the offender is a director or officer of any banking institution;
(2) the offender, either directly or indirectly, for himself or as a representative or agent of another, performs any of the following acts:
(a) he borrows any of the deposits or funds of such bank; or
(b) he becomes a guarantor, indorser, or surety for loans from such bank to others; or
(c) he becomes in any manner an obligor for money borrowed from bank or loaned by it; and
(3) the offender has performed any of such acts without the written approval of the majority of the directors of the bank, excluding the offender, as the director concerned.
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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 0917-5772207/ 09778050020.
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