The Central Bank PDF

THE CENTRAL BANK SUBTITLE HERE A. CHARACTERISTICS AND NATURE OF BANGKO SENTRAL NG PILIPINAS (BSP) SUBTITLE HERE A. CHARACTERISTICS AND NATURE OF BANGKO SENTRAL NG PILIPINAS (BSP) a. It is a public corporation created by spec law particularly RA 7653. b. It is a fully government-owned and contr...

THE CENTRAL BANK SUBTITLE HERE A. CHARACTERISTICS AND NATURE OF BANGKO SENTRAL NG PILIPINAS (BSP) SUBTITLE HERE A. CHARACTERISTICS AND NATURE OF BANGKO SENTRAL NG PILIPINAS (BSP) a. It is a public corporation created by spec law particularly RA 7653. b. It is a fully government-owned and controlled corporation with original capital stock of P50B. c. It is an independent central monetary authority which is governed by the Monetary Board. d. It enjoys fiscal and administrative autonomy. e. The BSP shall be exempt for a period of five (5) years from the approval RA 7653 from all provincial, municipal and city taxes, fees, charges and assessments. national, f. The provision of any general or special law to the contrary notwithstanding, the importation and exportation by the Bangko Sentral of notes and coins, and of gold and other metals to be used for purposes authorized under this Act, and the importation of all equipment needed for bank note production, minting of coins, metal refining and other security printing operations shall be fully exempt from all customs duties and consular fees and from all other taxes, assessments and charges related to such importation or or exportation. CONT’D. g. Appointments in the Bangko Sentral, except as to those which are policy-determining, primarily confidential or highly technical in nature, shall be made only according to the Civil Service Law and regulations: Provided, That no qualification requirements for positions in the Bangko Sentral shall be imposed other than those set by the Monetary Board: Provided, further, That, the Monetary Board or Governor, in accordance with Sections 15(c) and 17(d) RA 7653, respectively, may without need of obtaining prior approval from any other government agency, appoint personnel in the Bangko Sentral whose services are deemed necessary order not to unduly disrupt the operations of the Bangko Sentral. h. Officers and employees of the Bangko Sentral, including all members of the Monetary Board, shall not engage directly or indirectly in partisan activities or take part in any election except to vote. i. The Bangko Sentral shall not acquire shares of any kind or accept them as collateral, and shall participate in the ownership or management of any enterprise, either directly or indirectly. j. The Bangko Sentral shall not engage in development banking or financing: Provided, however, That outstanding loans obtained or extended for development financing shall not B. PRIMARY RESPONSIBILITIES AND OBJECTIVES OF BSP SUBTITLE HERE B. PRIMARY RESPONSIBILITIES AND OBJECTIVES OF BSP a. It shall provide policy directions in the areas of money, banking, and credit. b. It shall have supervision over the operations of banks and exercise such regulatory powers as provided in RA 7653 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. c. Its primary objective is to maintain price stability conducive to a balanced and sustainable growth of the economy. d. It shall also promote and maintain monetary stability and the convertibility of the peso. C. GOVERNING BODY OF BSP (RSP MONETARY BOARD) SUBTITLE HERE COMPOSITION OF BSP MONETARY BOARD I. It is composed of seven members appointed by the president of the Philippines for a term of six (6) years II. The BSP governor shall serve as chairman of the monetary board. III. Another m ember of the Cabinet shall be designated by the President of the Philippines. IV. Five (5) members who shall come from the private sector, all of whom shall serve full-time.  B. QUALIFICATIONS OF MEMBERS OF THE BSP MONETARY BOARD i. Natural-born citizens of the Philippines. ii. 35 years of age with the exception of BSP governor who must be 40 years of age iii. Of good moral character, of unquestionable integrity, of known probity and patriotism, iv. With recognized competence in social and economic disciplines  C. INHIBITIONS AND DISQUALIFICATIONS OF MEMBERS OF THE BSP MONETARY BOARD i. Disqualifications imposed by RA 6713 ii. A member of the Monetary Board is disqualified from being a director, officer, employee, consultant, tant, lawyer, agent or stockholder of any bank, quasi-bank or any other institution which is subject to supervision or examination by the Bangko Sentral. iii. The members of the Monetary Board coming from the private sector shall not hold any other public office or or public employment during their tenure, iv. No person shall be a member of the Monetary Board if he has been connected directly with any multilateral barking 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  D. GROUNDS FOR REMOVAL OF MEMBER OF BSP MONETARY BOARD BY PRESIDENT OF THE PHILIPPINES i. If the member is subsequently disqualified under the provisions of RA 7653. ii. 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. iii. 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. iv. If the member no longer possesses the qualifications specified in Section 8 RA 7653. D. LEGAL TENDER POWER OVER COINS AND NOTE SUBTITLE HERE B. DEFINITION OF CURRENCY i. The word "currency" is hereby defined, for purposes of this Act, as meaning all Philippine C. EXCLUSIVE ISSUE POWER OF and coins issued or circulating in accordance with the provisions of RA 7653. BSP i. The Bangko Sentral shall have the sole power and authority to issue currency, within the territory of the Philippines. ii. No other person or entity, public or private, may put into circulation notes, coins or any other object or document which, in the opinion of the Monetary Board, might circulate as currency, nor reproduce or imitate the facsimiles of Bangko Sentral notes without prior authority from the Bangko Sentral. iii. The Monetary Board may issue such regulations as it may deem advisable in order to prevent the circulation of foreign currency or of currency substitutes as well as to prevent the reproduction of facsimiles of Bangko Sentral notes. CONT’D. iv. The Bangko Sentral shall have the authority to investigate, make arrests, conduct searches and seizures in accordance with law, for the purpose of maintaining the integrity of the currency. v. Violation of this provision or any regulation issued by the Bangko Sentral pursuant thereto shall constitute an offense punishable by imprisonment of not less than five (5) years but not more than ten (10) years. In case the Revised Penal Code provides for a greater penalty, then that penalty shall be imposed. D. LIABILITY FOR NOTES AND COINS I. Notes and Coins issued by the Bangko Sentral shall be liabilities of the Bangko Sentral and may be issued only against and in amounts not exceeding the assets of the Bangko Sentral. Said notes and coins shall be first and paramount lien on all assets of the Bangko Sentral. ii. The Bangko Sentral's holdings of its own notes and coins shall not be considered as part of its currency issue and, accordingly, shall not form part of the assets or liabilities of the Bangko Sentral, E. LEGAL TENDER POWER OF BSP i. All notes and coins issued by the Bangko Sentral shall be fully guaranteed by the Government of the Republic of the Philippines and shall be legal tender in the Philippines for all debts, both ii. Legal Tender - It refers to the type of currency which a debtor can compel a creditor to case of obligation to pay a sum of money. 1. 1 Centavo, 5 Centavos, 10 Centavos and 25 Centavos-Up to P100 only. 2. PI Coin, PS Coin and P10 Coin-Up to P1,000 only. 3. P20, P50, P100, P200, P500 and P1,000 bills or notes-Unlimited legal tender. 4. Checks representing demand deposits do not have legal tender power and their acceptance in the payment of debts, both public and private, is at the option of the creditor: Provided, however, That a check which has been cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor of cash in an amount equal to the amount credited to his account. Checks produce payment only when encashed or when they are impaired through the fault of creditor. CONT’D. iii. The Monetary Board, with the approval of the President of the Philippines, shall prescribe the denominations, dimensions, designs, inscriptions and other characteristics of notes issued by the Bangko Sentral: Provided, however, That said notes shall state that they are liabilities of the Bangko Seutral and are fully guaranteed by the Government of the Republic of the Philippines. Said notes shall bear the signatures, in facsimile, of the President of the Philippines and of the Governor of of the Bangko Sentral. iv. Similarly, the Monetary Board, with the approval of the President of the Philippines, shall prescribe the weight, fineness, designs, denominations and other characteristics of the coins issued by the Bangko Sentral. In the minting of coins, the Monetary Board shall give full consideration to the availability of suitable metals and to their relative prices and cost of minting F. PRINTING OF NOTES AND MINTING OF COINS i. The Monetary Board shall prescribe the amounts of notes and coins to be printed and minted, respectively, and the conditions to which the printing of notes and the minting of coins shall be subject. The Monetary Board shall have the authority to contract institutions, mints or firms for such operations. ii. All expenses incurred in the printing of notes and the minting of coins shall be for the account of the Bangko Sentral. G. INTERCONVERTIBILITY OF CURRENCY i. The Bangko Sentral shall exchange, on demand and without charge, Philippine currency of any denomination for Philippine notes and coins of any other denomination requested. If for any reason the Bangko Sentral is temporarily unable to provide notes or coins of the denominations requested, it shall meet its obligations by delivering notes and coins of the denominations which most nearly approximate those requested H. REPLACEMENT OF CURRENCY UNFIT FOR CIRCULATION i. The Bangko Sentral shall withdraw from circuiation and shall demonetize all notes and coins which for any reason whatsoever fue unfit for circulation and shall replace them by adequate notes and coins: Provided, however, Tact the Bangko Sentral shall not replace notes and coins the identification of which is impossible, coins which show signs of filing, clipping or perforation, and notes which have lost more than two-fifths (2/5) of their surface or all of the signatures inscribed thereon. Notes and coins in such mutilated conditions shall be withdrawn from circulation and demonetized without compensation to the bearer. E. SUPERVISION AND EXAMINATION OF HALOS AND QUASI-BANKING INSTITUTIONS SUBTITLE HERE a. The supervising and examining department head, personally or by deputy, shall examine the books of every banking insitution once in every twelve (12) months, and at such other times as the Monetary Board by an affirmative vote of five (5) members, may deem expedient and to make a report on the same Monetary Board Provided, That there shall be an interval of at least twelve (12) months between examinations b. The bank concerned shall afford to the head of the appropriate supervising and examining departments and to his authorized deputies full opportunity to examine its books, cash and available assets and general condition at any time during banking hours when requested to do so by the Bangko Sentral: Provided, however, That none of the reports and other papers relative to such examinations shall be open to inspection by the public except insofar as such publicity is incidental to the proceedings hereinafter authorized or is necessary for the prosecution of violations in connection with the business of such institutions c. Banking and quasi-banking institutions which are subject to examination by the Bangko Sentral shall pay to the Bangko Sentral, within the first thirty (30) days of each year, an annual fee in an amount equal to a percentage as may be prescribed by the Monetary Board of its average total assets during the preceding year as shown on its end-of-month balance sheets, after deducting cash on hand and amounts due from banks, including the Bangko Sentral and banks abroad. F. CONSERVATORSHIP OF BANKS SUBTITLE HERE GROUNDS FOR PLACING A BANK OR QUASI-BANK UNDER CONSERVATORSHIP i. 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 B. RESPONSIBILITIES OF BANK CONSERVATOR APPOINTED BY BSP MONETARY BOARD i. i. To take charge of the assets, liabilities, and the management of the bank. ii. ii. To reorganize the management of the bank. iii. iii. To collect all monies and debts due said institution. iv. iv. To exercise all powers necessary to restore its viability. v. v. To report and be responsible to the Monetary Board vi. vi. To have the power to overrule or revoke the actions of the previous management and board directors of the bank or quasi-bank. C. QUALIFICATIONS OF BANK CONSERVATOR i. He should be competent and knowledgeable in bank operations and management. D. PERIOD OF CONSERVATORSHIP i. The conservatorship shall not exceed one (1) year. E. GROUNDS FOR TERMINATION OF CONSERVATORSHIP i. 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. ii. 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 receivership and liquidation shall apply. G. PROCEEDINGS IN BANK RECEIVERSHIP SUBTITLE HERE  A. GROUNDS FOR BANK RECEIVERSHIP AND LIQUIDATION i. Bank 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; ii. Bank has insufficient realizable assets, as determined by the Bangko Sentral, to meet its liabilities; or iii. Bank cannot continue in business without involving probable losses to its depositors or creditors; or iv. Bank 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; 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 as receiver of the banking institution. B. RECEIVERS OF BANK AND QUASI BANKS i. PDIC for Banking institution ii. For a quasi-bank, any person of recognized competence in banking or finance may be designed as receiver C. PROCEDURES FOR BANK OR QUASI-BANK RECEIVERSHIP i. 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, with the exception of administrative expenditures, pay or commit any act that will involve the transfer or disposition of any asset of the institution: Provided, That the receiver may deposit or place the funds of the institution in non-speculative investments. ii. 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. H. PROCEDURES FOR BANK LIQUIDATION SUBTITLE HERE A. GROUND FOR BANK LIQUIDATION.i. If the receiver determines that the institution cannot be rehabilitated or permitted to resume business in accordance with the next preceding paragraph, 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. B. PROCEDURES FOR BANK LIQUIDATION i. The receiver shall 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. In case of quasi-banks, the liquidation plan shall be adopted by the Monetary Board. Upon acquiring jurisdiction, the court shall, upon motion by the receiver after due notice, adjudicate disputed claims against the institution, assist the enforcement of individual liabilities of the stockholders, directors and officers, and decide on other issues as may be material to implement the liquidation plan adopted. The receiver shall pay the cost of the proceedings from the assets of the institution. ii. The receiver shall convert the assets of the institutions to money, 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 he may, in the name of the institution, and with the assistance of counsel as he may retain, institute such actions as may be necessary to collect and recover accounts and assets of, or defend any action against, 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. I. NATURE OF ACTIONS OF MONETARY BOARD FOR CONSERVATORSHIP, RECEIVERSHIP AND LIQUIDATION SUBTITLE HERE a. The actions of the Monetary Board taken for conservatorship, receivership and liquidation 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 Shift directors of the institution of the order directing, receivership, liquidation or conservatorship. b. The designation of a conservator or the appointment of a receiver under this section shall be vested Page Down J. exclusively with the Monetary Board. c. The designation of a conservator is not a precondition to the designation of a receiver. "CLOSE NOW HEAR LATER ORDER BY BSP MONETARY BOARD" SUBTITLE HERE a. The "close now, hear later" doctrine has already been justified as a measure for the protection of the public interest. Swift action is celled for on the part of the BSP when it finds that a bank is in dire straits. Unless adequate and determined efforts are taken by the government against distressed and mismanaged banks, public faith in the banking system is certain to deteriorate to the prejudice of the national economy itself, not to mention the losses suffered by the bank depositors, creditors, and stockholders, who all deserve the protection of the government. b. Due process does not necessarily require a prior hearing; a hearing or an opportunity to be heard may be subsequent to the closure. One can just imagine the dire consequences of a prior hearing: bank runs would be the order of the day, resulting in panic and hysteria. In the process, fortunes may be wiped out and disillusionment will run the gamut of the entire banking community. a. The doctrine is founded on practical and legal considerations to obviate unwarranted dissipation of the bank's assets and as a valid exercise of police power to protect the depositors, creditors, stockholders, and the general public. Swift, adequate and determined actions must be taken against financially distressed and mismanaged banks by government agencies lest the public faith in the banking system deteriorate the prejudice of the rational economy. b. Accordingly, the MB can immediately implement its resolution prohibiting a banking institution to do business in the Philippines and, thereafter, appoint the PDIC as receiver. The procedure for the involuntary closure of a bank is summary and expeditious in nature. Such action of the MB shall be final and executory, but may be later subjected to a judicial scrutiny via a petition for certiorari to be filed by the stockholders of record of the bank representing a majority of the capital stock. Obviously, this procedure is designed to protect the interest of all concerned, that is, the depositors, creditors and stockholders, the bank itself and the general public. The protection afforded public interest warrants the exercise of a summary closure. K. SANCTIONS ON BANKS AND QUASI-BANKS BY MONETARY BOARD OF BSP SUBTITLE HERE  GROUNDS FOR SANCTIONING BANKS AND QUASI-BANKS i. Willful violation of banking laws and rules and regulations of BSP; ii. Willful delay in submission of reports to BSP; iii. Refusal to permit examination into the affairs of the institution; iv. Willful making of a false or misleading statement to the Board or the appropriate supervising and examining department or its examiners; v. A false or misleading statement to the Board or the appropriate supervising and examining department or its examiners; any willful failure or refusal to comply with, or violation of, any banking law or any order, instruction or regulation issued by the Monetary Board, or any order,instruction or ruling by the Governor; vi. Commission of irregularities; or vii. Conducting business in an unsafe or unsound manner as may be determined by the Monetary Board B. ADMINISTRATIVE SANCTIONS THAT MAY BE IMPOSED i fines in amounts as may be determined by the Monetary Board to be appropriate, but in no case to exceed Thirty thousand pesos (P30,000) a day for each violation, taking into consideration the attendant circumstances, such as the nature and gravity of the violation or irregularity and the size of the bank or quasi-bank; ii. suspension of rediscounting privileges or access to Bangko Sentral credit facilities; iii. suspension of lending or foreign exchange operations or authority to accept new deposits or make new investments; iv. suspension of interbank clearing privileges; and/or v. revocation of quasi-banking license.