Banking Laws and Jurisprudence Reviewer

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  • Topic: Bank, Deposit account, Cheque
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San Beda College of Law, Mendiola

By: Efren L. Dizon and Efren Vincent M. Dizon This Reviewer is made by: MANILA, ANTONIO CEASAR BERNARDO, JANSEN INTIG, JOY ESTELA DE JESUS, TRACY ANN. FROM SECTION 2S AY 2011-2012


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Chapter 1- Banks and Business of Banking Chapter 2 - Organization, Management, Administration Of Banks Chapter 3 - Deposit Functions Of Banks Chapter 4 - Investments, Loans and Other Bank Functions Chapter 5 - Prohibited Transactions and Cessation Of Banking Business Chapter 6 - Foreign Banks and Trust Operations MIDTERM COVERAGE: Chapter 1 - 6

Chapter 7 - The Banko Sentral ng Pilipinas Chapter 8- Currency, Monetary Stabilization and Functions of BSP Chapter 9 - Unclaimed Balances and Trust Receipts Chapter 10 - Deposit Insurance Chapter 11 - Anti-Money Laundering Chapter 12 – Special Purpose Vehicle FINALS COVERAGE: Chapter 7 - 12

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San Beda College of Law Banking Laws CHAPTER 1 – Banks and Business of Banking • Declaration of the state with regards to banking – recognize vital role of the banks to provide environment conducive to development of national economy o It also states that banks need high standards of integrity and performance Banks – entities engaged in the lending of funds obtained in the form of deposits (borrowing, lending, safe-keeping) Banks may engage in other activities allowed by the law other than lending


Nature of Banking Business

1. Debtor-Creditor Relationship • It is a contract of loan and not deposit • Contract between bank and depositor is 7. governed by the provisions of the NCC on simple loan (Consolidated Bank and Trust Corp vs. CA) 2. Fiduciary duty • Fiduciary relationship – bank’s obligation to observe high standard of integrity and performance (Phil. Banking Corp. vs. CA) 8. 3. Not a trust agreement 9. • It is not a trust agreement and failure to 10. pay a loan is not a breach of trust • It is not a trust agreement because banks do not accept deposits to enrich depositors but to earn for themselves 11. 4. Indispensable Institution • Has a vital role in economic life • Significance of banking institution to commercial transactions (Metropolitan Bank & Trust Co. vs. Cabilzo) 5. Impressed with public interest • Has public interest because people depend on the honesty and efficiency of banks • Stability of banks largely depends on the confidence of the people in the honesty and efficiency of banks. 6. Degree of diligence • Diligence higher than that of a good father. It must be extraordinary diligence • In Simex International vs. CA, the bank is under obligation to treat the accounts of its AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN. FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.

depositors with meticulous care and always have in mind the fiduciary nature of banks • Not enough that he exerted reasonable diligence to ascertain the safety of his clients • Such diligence is only required in its fiduciary relationship with its depositors and not to other transactions such as sale of foreign exchange demand draft • Sec 2 of GBL prescribes the statutory diligence required from banks – “high standards of integrity and performance” in serving its depositors. • Diligence required of banks is more than that of a good father (PBCom vs. CA) • Diligence extends to financial institutions (e.g. GSIS) Treatment of accounts with meticulous care • Must treat every account with utmost fidelity regardless of amount • There is no law mandating banks to call up their clients whenever a significant amount shall be withdrawn from their account Duty to keep records Banks are not gratuitous bailees Banks not expected to be infallible • However, they must bear the loss for not discovering mistakes if there are established procedures not followed Dealing with registered lands •...
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