New Central Bank Act Flashcards
What is Bangko sentral ng pilipinas?
It is the State’s central monetary authority.
It is the government agency charged with the responsibility of administering the monetary, banking and credit system of the country and is granted the power of supervision and examination over banks and non-bank financial institutions performing quasi-banking functions, including savings and loan associations.
It is a government-owned corporation which enjoys fiscal and administrative autonomy.
What is the initial capitalization of the Central Bank?
Its capital shall be P 200,000,000,000.00 to be fully subscribed by the Philippine Government.
Responsibilities of the BSP
- To provide policy directions in the areas of money, banking, and credit.
- To supervise bank operations.
- To exercise regulatory and examination powers over quasi-banking operations of non-bank financial institutions.
- To exercise regulatory and examination powers over money service businesses and payment system operators, as may be determined by the Monetary Board.
PRIMARY OBJECTIVES OF THE BSP
- To maintain price stability conducive to a balanced and sustainable growth of the economy and employment;
- To promote and maintain monetary stability and convertibility of the peso; and
- To promote financial stability and closely work with the National Government.
Corporate powers expressly conferred upon bsp by its charter
- Adopt, alter, and use a corporate seal.
- Enter into contracts.
- Lease or own, or otherwise dispose of, real, and personal property.
- Sue and be sued.
- Acquire and hold assets and incur liabilities in connection with, or as may be essential to, the conduct of its operations.
- Compromise, condone, or release any claim of or settles liability to Bangko Sentral.
- Do and perform any and all things that may be necessary or proper to carry out the purpose of the New Central Bank Act.
FUNCTIONS OF THE BSP
- Banker of the government – the BSP shall be the official depository of the Government and shall represent in all monetary fund dealings.
- Custodian of reserves.
- Financial advisor of the government.
- Government agent.
- Source of credit.
- Issuer of currency.
- Clearing channel or house; especially where the PCHC does not operate.
- Supervisor of the banking system – shall include the power to:
a. Supervise and conduct regular or special examinations of banking institutions and quasi-banks, which power extends to subsidiaries and affiliates engaged in allied activities. This power may not be restrained by a restraining order or writ of injunction unless there is convincing proof that the action of the BSP is plainly arbitrary and made in bad faith, and a bonds executed in favor of the BSP.
b. Summarily and without need for prior hearing, forbid the institution from doing business in the Philippines and designate the PDIC as receiver in case of banks and direct PDIC to proceed with the liquidation of the closed bank.
c. Initiate criminal prosecution of erring officers of banks. - Extends rediscounts, discounts, loans and advances to banking institutions in order to influence the volume of credit consistent with the objective of price stability and financial stability.
Who exercises the power and function of the BSP?
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.
What are the Powers and functions of the Monetary board?
- Issue rules and regulations it considers necessary for the effective discharge of the responsibilities and exercise of its powers.
- Direct the management, operations and administration of the BSP, reorganize its personnel, and issue such rules and regulations as it may deem necessary or convenient for this purpose.
- Establish a human resource management system.
- Adopt annual budget for and authorize such expenditures by the BSP as are in the interest of the effective administration and operations of the BSP in accordance with applicable laws and regulations.
- Indemnify its members and other officials of the BSP, 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 (unless the person is finally adjudged to be liable for the willful violation of the New Central Bank Act, performed in evident bad faith or with gross negligence). (SEC.15)
What is the COMPOSITION OF THE MONETARY BOARD?
The Monetary Board shall be composed of seven (7) members appointed by the President with a 6-year term. No member of the Monetary Board may be reappointed more than once.
Members
1. The BSP Governor who shall be the Chairman of the Monetary Board (with a deputy Governor designated as his alternate)
2. A Cabinet member to be designated by the President (with an Undersecretary in his Department designated as his alternate)
3. Five (5) members who shall come from private sectors, all of whom shall serve full-time
Qualifications of a Monetary Board member
- Citizenship – natural born citizens of the Philippines.
- Age - General Rule: At least 35 years old.
Exception: Governor must be at least 40 years old - Of good moral character.
- Of unquestionable integrity.
- Of known probity and patriotism.
- With recognized competence in social and economic disciplines.
What is ILLIQUIDITY ?
ILLIQUIDITY – occurs when the bank is not liquid. It means that the bank cannot meet its current liabilities. It is handled by conservatorship.
Distinguish conservatorship from recievership.
A conservator is appointed if the bank is in a continuing state of lack of liquidity adequate to protect the interest of the bank’s creditors and depositors (meaning, its assets are more than liabilities but are not in cash or readily convertible cash), whereas a receiver is generally appointed if the bank is insolvent.
A conservator takes charge of the assets, liabilities and management of the bank in distress, whereas a 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 the receiver under the Rules of Court.
The bank is allowed to do business if it is only under conservatorship but cannot do business if it is placed under receivership.
A conservator has one (1) year from appointment to restore the financial viability, whereas the receiver, upon its appointment based on any of the statutory grounds, must proceed with the liquidation of the closed bank.
When is a Conservator appointed?
A Conservator is appointed whenever the Monetary Board, on the basis of a report submitted by the appropriate supervising or examining department, finds that a bank or 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.
POWERS OF A CONSERVATOR
- Collect all monies and debts due to the said institution.
- To take charge of the assets, liabilities, and the management thereof.
- Reorganize the management thereof.
- And such other powers as the Monetary Board deems necessary.
- Exercise all powers necessary to restore its viability, with the power to overrule or revoke the actions of the previous management and board of directors of the bank or quasi-bank.
- To bring court actions to assail or repudiate contracts entered into by the bank.
MAY A CONSERVATOR REVOKE A VALID CONTRACT OF THE BANK?
The vast and far-reaching powers of the conservator of a bank must be related to the preservation of the assets of the bank, the reorganization of the management thereof, and the restoration of its viability. Such powers cannot extend to the post-facto repudiation of perfected transactions, otherwise they would infringe against the non-impairment clause of the Constitution. The law merely gives the conservator the power to revoke contracts that are, under existing law, deemed to be defective. Hence, the conservator merely takes the place of a bank’s board of directors, so what the board cannot do, the conservator cannot do either.(First Philippine International Bank v. Court of Appeals, G.R. No. 115849, January 24, 1996)
When is conservatorship terminated?
- Conservatorship is terminated when the Monetary Board is satisfied that the institution can operate on its own and the conservatorship is no longer necessary; or
- 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 on receivership and liquidation shall apply.
What is a receiver?
Receiver – one appointed when the Monetary Board, upon report of the head of the supervising or examining department, finds that a bank or quasi-bank:
1. 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.
2. Has insufficient realizable assets, as determined by the BSP, to meet its liabilities. (Balance Sheet Test)
3. Unable to continue business without involving probable losses to its depositors and creditors.
4. Has willfully violated a cease and desist order under Sec. 37 NCBA that has become final, involving acts or transactions which amount to fraud or 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 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 R.A. No. 3531, as amended. The Monetary Board shall notify in writing, through the receiver, the board of directors of the closed banks of its decision.
May a closed bank under receivership sue or be sued?
A closed bank under receivership can only sue or be sued through its receiver, the PDIC. Hence, the petition filed by the petitioner bank which has been placed under receivership is dismissible if it did not join PDIC as a party to the case.
A bank under receivership can only be sue or be sued through its receiver, the PDIC. Thus, a petition filed on behalf of a bank under receivership that is neither filed through nor authorized by the PDIC must be dismissed for want of jurisdiction.
The mandatory inclusion of the PDIC as a representative party is grounded on its statutory role as the fiduciary of the closed bank which, under the New Central Bank Act, is authorized to conserve the latter’s property for the benefit of its creditors.
Can A BANK UNDER RECEIVERSHIP BE REHABILITATED?
Under Section 30 of R.A. No. 7653, the receiver has 90 days from appointment to rehabilitate the bank. If it fails, it shall recommend to BSP the bank’s closure and liquidation. If it succeeds, it shall recommend to BSP the resumption of bank’s business.
HOWEVER, R.A. No. 11211, which became effective on March 1, 2019, removed the authority of the receiver to rehabilitate the closed bank. Upon its appointment for any of the statutory grounds, the receiver must proceed with the liquidation of the closed bank.
what is LIQUIDATION?
Acts of liquidation are those which constitute the conversion of the assets of the banking institution to money or the sale, assignment or disposition of the same to creditors and other parties for the purpose of paying debts of such institution.
The liquidator of a bank can prosecute and defend suits against the bank.
ToF. BSP can liquidate the bank even without tax clearance from the Bureau of Internal Revenue.
True. Unlike in voluntary dissolution of a corporation under the Revised Corporation Code, BSP can liquidate the bank even without tax clearance from the Bureau of Internal Revenue.
True or False: Once liquidation proceedings have begun, the majority stockholders of a bank can no longer file a separate action to challenge the closure order; instead, they must raise issues on the validity of closure as affirmative defenses in the liquidation proceeding to avoid multiple suits or conflicting rulings.
true
Grounds for Closure of a Bank or Quasi-Bank
- Unable to pay its liabilities as they become due in the ordinary course of business. (Cash Flow Test)
- Insufficiency of realizable assets to meet its liabilities. (Balance Sheet Test)
- Inability to continue business without involving probable losses to its depositors and creditors.
- Willful violation of a cease and desist order under Sec. 37 that has become final, involving acts or transactions which amount to fraud or a dissipation of the assets.
- Notification to the BSP or public announcement of a unilateral closure.
- Has been dormant for at least sixty (60) days or in any manner has suspended the payment of its deposit/deposit substitute.
- Persisting in conducting its business in an unsafe or unsound manner
What is the Close Now Hear later doctrine?
- It is the rule that allows BSP to order the closure of the bank even without prior notice and hearing. BSP may rely on the report of the head of its supervising and examining department, or of the conservator, if one is appointed.
- It is grounded on practical and legal considerations to prevent 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.
- It is justified as a measure for the protection of the public interest.
