QUIZZES:

True or False:
1. The fiduciary nature of the relationship of a
depositor with the depositary bank imposes on the
latter the obligation to discharge the highest
standard of trust and integrity and a violation
thereof is considered a breach of trust. False
2. The humble wage-earner has not hesitated to
entrust his life’s savings to the bank knowing that
they will be safe in the custody of the banks. True
3. Banks are gratuitous bailees of the funds deposited
with them by their clients. False
4. The public relies on the banks’ fiduciary duty to
observe the highest degree of diligence but any
violation of this duty by the bank is not a valid
ground for the grant of exemplary damages to the
depositor. False
5. Thrift banks may not act as correspondent for
other financial institutions. False
6. A non-stock corporation may act as a trustee or
administer any trust or hold property in trust or on
deposit for the benefit of others. False
7. A bank cannot use any of its branches as outlets
for the sale of the financial products of its allied
undertaking or its investment house units. True
8. A bank may declare dividends greater than its
accumulated net profits then on hand, deducting
there from its losses and bad debts. False
9. The appointment of a receiver is vested
exclusively with the Monetary Board. True
10. The MB cannot appoint a conservator connected
with BSP. False
11. In a judicial foreclosure of mortgage, there is an
equivalent right of redemption. False
12. No late payment of penalty fee shall be collected
from cardholders unless the collection thereof is
fully disclosed in the contract between the issuer
and the cardholder. True
13. A bank which had been ordered closed by the
monetary board does not retain its juridical
personality which can sue and be sued through its
liquidator. False
Fill in the blanks
1. The law governing the creation, organization and
operation of rural banks is Rural Banks Act.
2. The total investment in equities of allied enterprise
shall not exceed 35 % of the net worth of the bank.
3. Subsidiary shall refer to a corporation or firm
more than 50% of the outstanding voting stock of
which is directly or indirectly owned.
4. The rule that the total amount of loans that may be
extended by a bank to any person or entity shall at
no time exceed 20% of the net worth of such bank
is called Single Borrower’s Limit.
5. Credit Risk Transfer shall refer to any agreement
that allows the bank to transfer the credit risk
associated with its loan or other credit
accommodation to a third party.
6. The term Legal Compensation refers to that
situation when two persons, in their own right, are
creditors and debtors of each other.
7. The contracts between cardholders and credit card
companies are called contracts of adhesion
because their terms are prepared by only one party
while the other merely affixes his signature
signifying his conformity thereto.
8. Net worth means the total unimpaired paid-in
capital including paid-in surplus, retained earnings
and undivided profit, net of valuation reserves and
other adjustments as maybe required by BSP.
9. Letter of Credit refers to a financial device availed
of by businessmen as a convenient mode of
dealing with sales of goods to satisfy the
seemingly irreconcilable interests of a seller who
refuses to part with his goods before he is paid.
10. Survivorship agreement is the agreement that
allows joint depositors to withdraw the whole
deposit during their lifetime and transferring the
balance to the survivor upon the death of one of
them.
11. In the case of Consolidated Bank and Trust Co.,
the SC ruled that the contract between the bank
and its depositor is governed by the provisions of
the Civil Code on simple loan/mutuum.
12. In the case of Serrano vs. Central Bank of the Phil.,
the SC held that bank deposits are in the nature of
irregular deposits.
13. In Simex International Case, the SC said that the
banking system is an indispensable institution that
plays a vital role in the economic life of the nation.
14. It is basic that after consolidation of title in the
buyer’s name for failure of the mortgagor to
redeem, the writ of possession becomes a matter
of right and its issuance to a purchaser is merely a
ministerial function.
15. Acceleration Clause means any provision in the
contract between the bank and the cardholder that
gives the bank the right to demand the obligation
San Beda College of Law
Banking Laws
34
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.
in full in case of default or non-payment for
whatever reason.
16. The law that protects its citizens from a lack of
awareness of the true cost of credit to the user by
assuring full disclosure of such cost is Truth in
Lending Act.
17. The agreement between the parties in a loan
transaction which stipulate that the rate of interest
agreed upon may be increased in the event that the
applicable maximum rate of interest is increased
by the MB is called escalation clause.
18. Joint and Solidary Agreement is an agreement
where the contracting parties consent to be jointly
and severally liable in a loan obligation.
19. A bank guarantee is an irrevocable commitment of
a bank binding itself to pay sum of money in the
event of non-performance of a contract by a third
party.
20. Assignment of credit is an agreement by virtue of
which the owner of credit, known as the assignor,
by a legal cause, such as sale or dation in payment
transfers his credit to another known as the
assignee who acquires the power to enforce it.
21. All foreign currency deposit are of absolute
confidential nature as a general rule and said
deposit shall be exempt from attachment pursuant
to RA No. 6426 otherwise known as Foreign
Currency Deposit Act of the Philippines.
22. Negotiable Order of Withdrawal Accounts are
interest bearing deposit accounts that combine the
payable on demand feature of checks and
investment feature of savings account.
23. Independent Auditor means a person other than an
officer or employee of the bank, its subsidiaries or
affiliates or related companies, or its majority
shareholders.
24. Interest Rate Differential refers to the difference or
margin between interest rates such as the
difference between domestic and foreign interest
rates.
25. Secrecy of Bank Deposit Act is the law that was
passed to give encouragement to people to deposit
their money in banking institutions.
26. The Securities and Exchange Commission shall
not register the articles of incorporation of any
bank unless accompanied by certificate of
authority issued by the monetary board.
27. The equity investment of a universal bank or its
wholly or majority owned subsidiaries, in a single
non-allied enterprise shall not exceed 20% of the
total equity.
28. Demand deposit are all those liabilities of the
Banko Sentral and of the other banks which are
denominated in the Philippine currency and are
subject to payment in legal tender upon demand
by presentation of depositor’s check.
29. The rule intended to maintain the quality of bank
management and afford better protection to
depositors and the public in general is called fit
and proper rule
30. Off shore banking units refer to a branch,
subsidiary or affiliate of a foreign banking
corporation which is duly authorized by the Banko
Sentral to transact offshore banking business in the
Philippines
31. A bank is bound by the negligence of its
employees under the principle of Respondeat
Superior
32. Quasi banks refer to entities engaged in the
barrowing of funds through the issuance,
endorsement or assignment with recourse or
acceptance of deposit substitutes for the purpose
of relending or purchasing receivables and other
obligation
33. The business of banking is imbued with public
interest in order to assure the stability of banks
which largely depends on the confidence of the
people in the honesty and efficiency of banks.