General Banking Law
General Banking Law
1. R.A. 8791 Declaration of Policy - Under Section 2 of the
General Banking Law of 2000 (GBL), the State recognizes
the:
(a) Vital role of banks in providing an environment conducive
to the sustained development of the national economy; and
(b) Fiduciary nature of banks that requires highest standards of
integrity and performance.
In Furtherance Thereof: State shall 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.
First Planters Pawnshop v. BIR
560 SCRA 606 (2008)
General Banking Act (R.A. 337) characterized "banking institution" and
"bank" as synonymous and specifically includes commercial banks, savings bank
and mortgage banks, development banks, rural banks, stock savings and loan
association, and branches and agencies in the Philippines of foreign banks.
General Banking Law of 2000 (GBL) provides that "Banks" shall refer to
entities engaged in the lending of funds obtained in the form of deposits. It also
includes cooperative banks, Islamic banks and other banks as determined by the
MB in the classification of banks.
It defines "Financial intermediaries" as persons or entities the principal
functions of which include lending, investing, or placement of funds, evidences of
indebtedness or equity deposited, acquired, or otherwise coursed through them,
for their own account or for the account of others.
a. Banking Industry "Impressed with Public Interest" -
Philippine Banking Corp. v. Court of Appeals
419 SCRA 487 (2004)
Section 2 of GBL expressly imposes a fiduciary duty on banks
when it declares the "fiduciary nature of banking that requires high
standards of integrity and performance," which requires a bank to
assume a degree of diligence higher than that of a good father of a
family. It imposes upon a bank higher level of accountability than on
its client who negligently signed blank forms and entrusted
certificates of deposits to branch manager without retaining copies
of the certificates.
Philippine National Bank v. Pike 470 SCRA 328 (2005)
We have repeatedly emphasized that since the banking business is
impressed with public interest, of paramount importance is the trust
and confidence of the public in general. The diligence required of
banks is more than that of a good father of a family, but the highest
degree of diligence, and high standards of integrity and
performance are even required. The nature of bank's functions
requires it "to treat its depositors' accounts with meticulous care,
always having in mind the fiduciary nature of their relationship."
Here, even if withdrawals were affected before passage of GBL,
nonetheless, its Section 2 categorical declaration of the "fiduciary
nature of banking that requires high standards of integrity and
performance," is only a statutory affirmation of Supreme Court
decisions in esse at time of such withdrawals.
Banco de Oro. v. JAPRL Dev. Corp.
551 SCRA 342 (2008)
Banks are engaged in the lending of funds obtained
through deposits from the public they borrow the
public's excess money thru deposits and lend them
out, redistributing wealth in the economy by
channeling idle savings to profitable investments.
Since banks deal with the public's money, their viability
depends largely on their ability to return those deposits
on demand, and much importance is given to sound
lending practices and good corporate governance.
GSIS v. Santiago
414 SCRA 563 (2003)
Extension of Highest Fiduciary Obligation to
GFIs The due diligence required of banks
extend even to persons, or institutions
regularly engaged in the business of lending
money secured by real estate mortgage, such
as the GSIS.
b. MINORITY SCHOOL:High Degree of Diligence Does Not Cover Transactions
Outside of Bank Deposits
Reyes v. Court of Appeals 363 SCRA 51 (2001)
By reason of erroneous reading of cable message by its employee, respondent Bank had
the impression that Westpac-New York had not yet made available the amount for
reimbursement to Westpac-Sydney despite the fact that respondent Bank has a sufficient
deposit dollar account with Westpac-New York. Nevertheless, the demand draft was not
served. Can respondent Bank be held liable?
NOTE: See jurisprudence below where the doctrine of highest degree of diligence was
required in other banking operations.
2. Organization of Banks and Quasi-Banks MB may authorize the
organization of a bank or quasi-bank subject to following conditions:
(a) Must be a stock corporation, issuing only par value shares;
(b) Minimum capital requirements prescribed by MB for each category
of banks are satisfied; and
(c) Funds are obtained from the public, i.e., 20 or more persons.
SEC shall not register articles of incorporation
and/or by-laws of any bank, or any amendment
thereto, unless accompanied by a MB
Certificate of Authority.
Union Bank v. SEC 359 SCRA 480 (2001)
PSE-Listed Banks Subject to SEC Reportorial Rules - A bank listed in
Philippine Stock Exchange (PSE) must adhere not only to the banking
and other allied special laws, but also to the rules promulgated by SEC,
which is tasked not only with enforcement of Securities Regulation
Code, but also supervision of all corporations, partnerships or
associations which are grantees of primary franchises. That such bank
is under BSP supervision, does not exempt it from complying with
SRC's continuing disclosure requirements. There is no over-supervision
here; each regulating agency operates within sphere of its powers;
stringent requirements are imposed are understandable, considering
importance given to the interests of the investing public.
