1. What is a bank?

Banks are entities engaged in the lending of funds obtained in the form of deposits from the public.

2. Can an entity be considered as a bank, given that it is a stock corporation but its funds are obtained only from 19
persons?
No. A bank must be a stock corporation and its funds must be obtained from the public, that is, 20 or more persons.
(Sec. 8, GBL)

3. In the case of Teodoro Banas vs. Asia Pacific Finance Corporation, one of the pivotal issues raised is whether or
not the disputed transaction between the petitioners and Asia Pacific Finance Corporation violated banking laws.
a. Are banking laws applicable to the respondent corporation?
b. What is the doctrine of this case?

No. Banking laws are inapplicable to the respondent corporation. It was not established that the respondent
corporation was engaged in banking functions The corporation was organized as an investment house engaged in the
investing, re-investing and trading of securities. An investment house can perform this function without violating
banking laws.

Doctrine of the case: An investment company is prohibited from lending the funds obtained from the public through
receipt of deposits.

4. In the case of Republic vs. Security Credit and Acceptance Corporation, the issue raised is whether or not the
respondent corporation violated banking laws for having engaged in banking operations without the required
authority under the General Banking Act. Was the corporation engaged in banking operations? What was the
doctrine enunciated in this case?

Yes. The respondent corporation engaged in banking operations without the required authority under the General
Banking Acts.

An investment company which loans out money to its customers, collects interests and charges a commission to
both the borrower and the lender is engaged in banking. An investment company is deemed to be engaged in
banking functions if they accept deposits and loan out the money they receive.

5. Distinguish a bank from a quasi-bank.

Banks-Entities engaged in the lending of funds obtained from the public in the form of deposits.

Quasi-banks- These are entities which do not accept deposits.

6. ABC Corporation is engaged in lending of funds to small vendors in various public markets. To fund the lending,
ABC Corporation raised funds through borrowings from friends and investors. Is ABC Corporation engaged in the
business of banking?

A. What is quasi-banking?

It is the borrowing of funds through the issuance, endorsement, assignment with recourse or acceptance of deposit
substitutes for the purpose of relending or purchasing receivables and other obligations.

B. What are deposit substitutes?

It is an alternative form of obtaining funds from the public other than deposits through the issuance, endorsement or
acceptance of debt instruments for the borrower’s own account for the purpose of relending or purchasing
receivables and other obligations.

NB: Universal and Commercial Banks are allowed to engage in quasi banking functions even without prior authority
from the Monetary Board while other banks are required to first secure authority from the Monetary Board before it
may engage in quasi banking functions.

C. What do you understand by “purchasing of receivables and other obligations”?

It is the:

 Acquisition of claims collectible in money which includes interbank borrowing and borrowings between
financial institution;
 Acquisition of securities of any amount and maturity from domestic and foreign sources.

D. How about “Relending of receivables and other obligations?

It the extension of a loan by an institution with antecedent borrowing transactions.

7. The GBL recognizes the vital role of banks in providing a conducive environment for sustained development of
the national economy and the fiduciary nature of banking requires high standards of integrity and performance. Most
banks are organized and financed by private individuals for private gains. Does this mean that it is no longer subject
to reasonable regulation by the State?
Banks are subject to reasonable regulation by the Police Power of the State because of its nature and relation to the
fiscal affairs of the people and the revenues of the state. It considered as a public institution affected with public
interest and thus the police power of the State extends to the regulation of the banking business.

8. What is the degree of care required to be observed by a bank with respect to handling of deposits? This is the case
of Simex International vs. CA

Banks must observe the highest degree of care in handling bank deposits because it is impressed with public interest.

9. However, a contrary ruling was decided by the SC in the case of Reyes vs. Court of Appeals. What is the doctrine
laid down by the court in this case?

The highest degree of care applies only when the bank is acting in its fiduciary capacity-Acting as the depositary of
deposits of the depositors and not in commercial transactions which do not involve fiduciary relationship with its
depositors.

NB: It is submitted that the bank should exercise the highest degree of care in all its transactions with the public and
not just on the handling of the deposits of its depositors since the banking industry plays a pivotal role in the
economy and is imbued with public interest.

10. Since the banking industry is indispensable to national interest, a special rule is provided in case of strikes or
lockouts in the banking industry. Discuss the rule in case of strikes and lockouts.

If the strike or lockout has been unsettled for more than 7 days, the BSP shall report the matter to the Secretary of
Labor who may either assume jurisdiction over the dispute or certify the same to the NLRC for compulsory
arbitration.

The President may also at any time intervene and assume jurisdiction over the dispute in order to terminate the
same.

Under the present rule, the CEO of banks are required to immediately report to the Deputy Governor of the
Supervision and Examination Section of the BSP on the cause and status of the strike or lock out, the banks stand on
the legality of the strike or lock out and the bank operation affected thereby.