A central monetary authority;

An independent and accountable

body; and
A GOCC but enjoys fiscal and
administrative autonomy. [NCBA
Sec. 1-2]

THE NEW CENTRAL BANK

ACT
RA 7653
Approved: June 14, 1993

STATUTORY BASIS
Art. XII Sec. 20. [PHIL. CONST.] The
Congress shall establish an independent
central monetary authority, the members
of whose governing board must be
natural-born Filipino citizens, of known
probity, integrity, and patriotism, the
majority of whom shall come from the
private sector. They shall also be subject
to
such
other
qualifications
and
disabilities as may be prescribed by law.
The authority shall provide policy
direction in the areas of money, banking,
and credit. It shall have supervision over
the operations of banks and exercise such
regulatory powers as may be provided by
law over the operations of finance
companies
and
other
institutions
performing similar functions.
Until the Congress otherwise provides,
the Central Bank of the Philippines,
operating under existing laws, shall
function
as
the
central
monetary
authority.

BANGKO
SENTRAL
PILIPINAS (BSP)

NG

The
central
monetary
authority
maintained by the State to function
and operate as an independent and
accountable body corporate in the
discharge
of
its
mandated
responsibilities concerning money,
banking and credit [NCBA Sec. 1]

CREATION OF THE BSP

Capitalization Requirement [NCBA
Sec. 2]
Php 50B fully subscribed by the
Government of the Republic
Php 10B of which is fully paid upon
the effectivity of the NCBA
Php 40B (balance) is to be paid
within 2 years
NATURE OF THE BSP

RESPONSIBILITY
AND
PRIMARY
OBJECTIVE
The primary objective of the BSP is to
maintain price stability conducive
to a balanced and sustainable
growth of the economy.
It shall also promote and maintain
monetary
stability
and
the
convertibility of the peso. [NCBA
Sec. 3]
AUTHORITY OF THE BSP
Supervisory Powers [GBL Sec. 4]
o issuance of rules of conduct or
the establishment of standards
of
operation
for
uniform
application to all institutions or
functions covered
o conduct of examination to
determine compliance with laws
and regulations
o Overseeing to ascertain that
laws
and
regulations
are
complied with
o Regular
investigation
which
shall not be oftener than once a
year from the last date of
examination
o Inquiring into the solvency and
liquidity of the institution
o Enforcing
prompt
corrective
action
o supervision over the operations
of and exercise regulatory
powers over quasi-banks, trust
entities and other financial
institutions which under special
laws
Policy Direction; Ratios, Ceilings
and Limitations. [GBL Sec. 5]

MONETARY BOARD (MB)

Exercises the powers and functions of

the BSP [NCBA Sec. 6]

AUTHORITY OF THE MB [NCBA Sec.

15]
Issue rules and regulations it considers
necessary for the effective discharge
of the responsibilities and exercise of
the powers vested upon the Monetary
Board and the Bangko Sentral. The
rules and regulations issued shall be
reported to the President and the
Congress within fifteen (15) days from
the date of their issuance;
Direct the management, operations,
and administration of the Bangko
Sentral, reorganize its personnel, and
issue such rules and regulations as it
may deem necessary or convenient
for this purpose. The legal units of the
Bangko Sentral shall be under the
exclusive supervision and control of
the Monetary Board;
Establish
a
human
resource
management system which shall
govern
the
selection,
hiring,
appointment, transfer, promotion, or
dismissal of all personnel. Such
system
shall
aim
to
establish
professionalism and excellence at all
levels of the Bangko Sentral in
accordance with sound principles of
management.
Adopt an annual budget for and
authorize such expenditures by the
Bangko Sentral as are in the interest of
the
effective
administration
and
operations of the Bangko Sentral in
accordance with applicable laws and
regulations; and
indemnify its members and other officials
of
the
Bangko
Sentral,
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 to which he may be, or is,
made a party by reason of the
performance of his functions or duties,
unless he is finally adjudged in such
action or proceeding to be liable for
negligence or misconduct.
COMPOSITION OF THE MB [NCBA Sec.
6]
7 members appointed by the President
for a term of 6 year

A. Governor of the BSP

o Chairman of the MB
o Head of a department
o Appointment shall be subject to
confirmation by the Commission
on Appointments
B. Cabinet Member
o Designated by the President
(OBITER:
Usually
the
DoF
Secretary but the Pres may
assign another member of the
cabinet)
C. 5 Members
o Coming from the private sector
o Shall serve full-time
o TERMS:
First appointees
3 Members: 6 years
2 Members: 3 years
o No member of the MB may be
reappointed more than once.
QUALIFICATIONS FOR THE MB [NCBA
Sec. 8]
Natural-born
citizens
of
the
Philippines
at least 35 years of age, with the
exception of the Governor who
should at least be 40 years of age
of good moral character
of unquestionable integrity
of known probity and patriotism,
and
with recognized competence in
social and economic disciplines.
DISQUALIFICATIONS FOR THE MB
[NCBA Sec. 9]
disqualifications imposed by Republic
Act No. 6713
a member of MB is disqualified from
being a director, officer, employee,
consultant,
lawyer,
agent
or
stockholder of any bank, quasi-bank or
any other institution which is subject
to supervision or examination by the
Bangko Sentral
members of the MB coming from the
private sector shall not hold any other
public office or public employment
during their tenure
1 year prior to appointment: No
person shall be member of the MB if
he has been connected directly with

any multilateral banking or financial

institution or has a substantial interest
in any private bank in the Philippines
2 years after term expiration: no
member of the MB shall be employed
in any such institution

HOW VACANCIES IN THE MB ARE

CREATED
[NCBA Sec. 7]
A. Death
B. Resignation
C. Removal [NCBA Sec. 10]
The President may remove any
member of the MB for any of the
following reasons:
a) subsequently disqualified under the
provisions of Section 8 of NCBA
b) physically
or
mentally
incapacitated
that he
cannot
properly discharge his duties and
responsibilities and such incapacity
has lasted for more than 6 months
c) guilty of acts or operations which
are
of
fraudulent
or
illegal
character or which are manifestly
opposed to the aims and interests
of the BSP
d) no
longer
possesses
the
qualifications specified in Section 8
of NCBA
Effect: A new member will be appointed
to complete the unexpired period of the
term of the member concerned.
CIVIL LIABILITY OF THE MEMBERS OF
THE MB
Members of the Monetary Board, officials,
examiners, and employees of the BSP are
liable when:
willfully violate the provisions of NCBA
are guilty of negligence, abuses or
acts of malfeasance
misfeasance or fail to exercise
extraordinary
diligence
in
the
performance of his duties
Disclose confidential information, or
information relating to MB discussions
or
resolutions,
or
about
BSPs
confidential operations.
Exceptions:
o Disclosure is in connection with
the performance of official
functions with the BSP

MB or BSP Governors prior

authorization
Use confidential information for their
personal gain or- to the detriment of
the Government, BSP, or 3rd Parties
[NCBA Sec.16]
o

HOW
BSP
HANDLE
BANKS
IN
DISTRESS
Grant emergency loans to the bank
o Without collateral: not more
than 7 days for the purpose of
providing liquidity [NCBA Sec.
83]
o Upon
the
approval
of
5
members of the MB: grant
emergency loans in the amount
not exceeding 50% of its total
deposit. Loan shall be released
in 2 tranches. [NCBA Sec.84]
Appoint a conservator
CONSEVATORSHIP [NCBA Sec. 29]
ILLIQUIDITY occurs when the bank
is not liquid. It means that the bank
cannot meets its current liability.
LIQUIDITY is the ability of an asset to
be converted into cash. An nntity is
liquid when it is able to pay its
liabilities when they fall due.
Illiquidity
is
handled
by
conservatorship.

Basis for the Appointment of

Conservator:
Report submitted by the appropriate
supervising or examining department
In RA 7653, only a report of the head
of the supervising or examining
department is necessary. It is an
established
rule
in
statutory
construction that where the words of a
statute are clear, plain and free from
ambiguity, it must be given its literal
meaning
and
applied
without
attempted
interpretation.
[Rural
Bank of San Miguel, Inc. vs.
Monetary Board, Bangko Sentral
ng Pilipinas (2007)]
Grounds for Conservatorship:
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
Length of conservatorship: Not
more than 1 year
Requisites in placing a bank under
Conservatorship:
1. There
must
be
a
report
submitted by the appropriate
supervising
or
examining
department of the BSP;
2. There must be a finding that the
bank or quasi-bank falls under
either of the grounds for
conservatorship
3. The board of Directors must be
informed in writing of the order
of
the
MB
directing
conservatorship.
Powers of a conservator:
to take charge of the assets,
liabilities, and the management
thereof
reorganize the management of
the bank
collect all monies and debts due
said institution
exercise all powers necessary to
restore its viability
Qualifications and Remunerations
competent and knowledgeable
in
bank
operations
and
management
remuneration to be fixed by MB
in an amount not to exceed 2/3
of the salary of the president of
the institution in 1 year, payable
in 12 equal monthly payments
conservator shall receive the
balance of the remuneration if
terminated on the ground that
the institution can operate on
its own
conservator shall not be entitled
to such remaining balance if
terminated on other grounds

RECEIVERSHIP
&
LIQUIDATION
[NCBA Sec 30]
INSOLVENCY when the actual
market value of assets are insufficient
to pay its liabilities, not considering
capital stock and surplus which are not
liabilities for such purpose. An entity is
insolvent when it is unable to meet
current and long-term obligations. A
bank is solvent when current assets
are more than current liabilities,
providing the ability to pay debt. It is
able to meet its long term obligations
and liabilities
Insolvency is handled by a
receivership and/or closure.
Grounds for Receivership:
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;
Has
insufficient
realizable
assets, as determined by the
BSP, to meet its liabilities
Cannot continue in business
without
involving
probable
losses to its depositors or
creditors
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
Additional grounds from GBL:
A bank or quasi-bank notifies
the Bangko Sentral or publicly
announces a bank holiday, or in
any manner suspends the
payment of its deposit liabilities
continuously for more than 30
days [GBL Sec. 53]
a bank, quasi-bank or trust
entity persists in conducting its
business in an unsafe or
unsound manner[GBL Sec. 56]
Requisites for Receivership:

Appoint a receiver and order the

liquidation of the bank

1. Report of the head of the

supervising
department
involving the bank
2. Finding of the MB of the
existence of any of the grounds
for receivership
3. Decision of the MB to forbid the
institution from doing business,
which decision may be done
summarily and without prior
hearing
4. Notice in writing to the BOD
informing the institution of the
order of the MB.

Who may be Receiver:

For Banks: PDIC
For Quasi-banks: any person of
recognized
competence
in
banking or finance
Duties of the receiver:
immediately gather and take
charge of all the assets and
liabilities of the institution,
administer the same for the
benefit of its creditors
exercise the general powers of a
receiver under the Revised
Rules of Court
May deposit or place the funds
of the institution in nonspeculative investments.
The receiver shall determine as
soon as possible, but not later
than ninety (90) days from takeover, 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

The designation of a receiver or

conservator
is
vested
exclusively with the MB.
The
designation
of
a
conservator
is
not
a
precondition to the designation
of a receiver.
No prior hearing is necessary in
the appointing of a receiver. It is
enough that subsequent judicial
review is provided for.

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
The receiver 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.
In Banco Filipino Savings and
Mortgage Bank v. Monetary
Board, the validity of the
closure and receivership of
Banco Filipino was put in issue.
But the pendency of the case
did not diminish the authority of
the designated liquidator to
administer and continue the
banks transactions. The Court
allowed the banks liquidator to
continue receiving collectibles
and receivables or paying off
creditors claims and other
transactions
pertaining
to
normal operations of a bank.
Among these transactions were
the prosecution of suits against
debtors for collection and for
foreclosure of mortgages. The
bank was allowed to collect
interests on its loans while
under liquidation, provided that
the
interests
were
legal.
[Banco Filipino Savings and
Mortgage Bank vs. Ybaez
(2004)]
Close
Now-Hear
Late
Scheme
It is well-settled that the closure
of a bank may be considered as
an exercise of police power. The
action of the MB on this matter
is final and executory. Such
exercise may nonetheless be
subject to judicial inquiry and
can be set aside if found to be
in excess of jurisdiction or with
such grave abuse of discretion
as to amount to lack or excess
of jurisdiction. [Rural Bank of

San
Miguel,
Inc.
vs.
Monetary
Board,
Bangko
Sentral ng Pilipinas (2007)]
The issuance by the RTC of writs
of preliminary injunction is an
unwarranted interference with
the powers of the MB. Secs. 29
and 30 of RA 7653 refer to the
appointment of a conservator or
a receiver for a bank, which is a
power of the MB for which they
need the ROEs done by the
supervising
or
examining
department.
The
writs
of
preliminary injunction issued by
the trial court hinder the MB
from fulfilling its function under
the law. The actions of the MB
under Secs. 29 and 30 of RA
7653 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
writs of preliminary injunction
order are precisely what cannot
be done under the law by
preventing the MB from taking
action under either Sec. 29 or
Sec. 30 of RA 7653. sUnder the
law, the sanction of closure
could be imposed upon a bank
by the BSP even without notice
and hearing. The apparent lack
of procedural due process would

not result in the invalidity of

action by the MB. This was the
ruling in Central Bank of the
Philippines v. Court of Appeals,
220 SCRA 536 (1993). This
close now, hear later scheme
is grounded on practical and
legal considerations to prevent
unwarranted dissipation of the
banks assets and as a valid
exercise of police power to
protect
the
depositors,
creditors, stockholders, and the
general public. The writ of
preliminary injunction cannot,
thus, prevent the MB from
taking action, by preventing the
submission of the ROEs. The
close now, hear later doctrine
has already been justified as a
measure for the protection of
the public interest. Swift action
is called 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.
[BSP-MB
vs.
Antonio-Valenzuela (2009)]

COMPARISON OF CONSERVATORSHIP, CLOSURE AND RECEIVERSHIP, AND

LIQUIDATION

Conservators
hip

Closure/Receivership

cept

Con

A bank suffering from

illiquidity
is
placed
under
conservatorship to protect its
creditors and allow it to become
liquid.

An insolvent bank is placed

under the control of a receiver, who
will decide whether to rehabilitate it
or liquidate it.

nds

Grou

A bank or quasi bank is:

1) In a state of continuing inability
to maintain liquidity deemed to
protect
the
interests
of

Under the GBL

When a banking institution:

1) Notifies the BSP or publicly
announces a bank holiday; or

Liquidation

The assets of a
bank which is not capable
of being rehabilitated are
sold, and the proceeds are
used to pay off the banks
debts
1) The condition of the
bank
is
one
of
insolvency
2) Its continuance would
involve probable loss

depositors or creditors; or
2) Unwillingness to do so

Who
carries it out

Pow
er
and
duties
thereof

Conservator, who is an
individual appointed by the BSP
1) To take charge of the assets,
liabilities,
and
the
management thereof;
2) To
reorganize
the
management;
3) To collect all monies and debts
due said institution;
4) To
exercise
all
powers
necessary to restore its
viability;
5) To report and be responsible
to the MB;
6) To overrule or revoke the
actions of the management
and the BOD of the bank;
7) Notably does not have the
power to takeover bank affairs.

Whe
n
Terminated

After 1 year

2) Suspends the payment of its

deposit liabilities continuously
for more than 30 days in any
manner
3) Persistence
in
conducting
business in an unsafe or
unsound manner
Under the NCBA
Whenever the MB finds
that a bank or quasibank:
1) Unable to pay its liabilities as
they become due in the
ordinary course of business
2) Has
insufficient
realizable
assets, as determined by the
BSP, to meet its liabilities
3) Cannot continue in business
without
involving
probable
losses to its depositors or
creditors
4) 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

Receiver, who in the case

of banks is the PDIC
1) Immediately gather and take
charge of all the assets and
liabilities of the institution;
2) Administer the assets for the
benefit of the creditors
3) Exercise general powers of a
receiver under the Revised
Rules of Court
4) Within 90 days, decide whether
the bank can be rehabilitated or
should be liquidated;
5) Not to pay or commit any act
that will involve disposition of
any of the institution

Within 90 days if liquidation

is decided upon. Until the bank is
viable again, if rehabilitation is
decided upon.

to its creditors
3) In both cases, the MB
determines that the
bank
cannot
be
rehabilitated

Liquidation Court
and Receiver

COURT
1) Adjudicate
disputed
claims against the
institution
2) Assist the enforcement
of individual liabilities
of the stockholders,
directors, and officers,
and
3) Decide on other issues
as may be material to
implement
the
liquidation plan
RECEIVER:
1) Convert the assets of
the
institution
to
money; and
2) To dispose the same
for the purpose of
paying the debts of the
institution

When the debts

have
been
paid
in
accordance
with
the
liquidation plan.

Comparison of the actions of the MB:

Supervision and
Examination
Sec. 25

Conservators
hip
Sec. 29

Basis

Prohi
bit

No
TRO/Injunction

Rem
edy

Grou
nd

Perio
d

Rule
58
(Preliminary
Injunction)
Bad
faith/Arbitrarines
s
Any time before
the completion of
the examination

LEGAL TENDER POWER

When the currency is offered in
payment of a debt, public or
private, the
same
must
be
accepted.
Philippine currency notes: no limit
to their legal tender power.

Receivership
and Liquidation
Sec 30

No
TRO/Injunct
ion
Rule
65
(Certiorari)

GAD

GAD

10
days
from
the
receipt
of
the
order
(Close nowHear Later
Scheme)

10
days
from
the
receipt
of
the
order
(Close nowHear Later
Scheme)

No
TRO/Injunct
ion
Rule
65
(Certiorari)

Coins in denomination of 1-, 5- and

10-piso: legal tender in amounts
not exceeding P1,000.00
Coins in denomination of 1-, 5- and
10- and 25- sentimo: legal tender
in amounts not exceeding P100.00