NEW CENTRAL BANK ACT

RE: RECEIVERSHIP AND LIQUIDATION

 
Section 29. Appointment of Conservator. - Whenever, on the basis of a report submitted by the appropriate supervising or examining department, the Monetary Board finds that a 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,  the  Monetary  Board  may  appoint  a conservator  with  such  powers  as  the  Monetary  Board  shall  deem necessary  to  take  charge  of  the  assets,  liabilities,  and  the management  thereof,  reorganize  the  management,  collect  all monies  and  debts  due  said  institution,  and  exercise  all  powers necessary to restore its viability. The conservator shall report and be responsible to the Monetary Board and shall have the power to overrule  or  revoke  the  actions  of  the  previous  management  and board of directors of the bank or quasi-bank. The conservator should be competent and knowledgeable in bank operations and management. The conservatorship shall not exceed
one (1) year.
 
The  conservator  shall  receive  remuneration  to  be  fixed  by  the Monetary Board in an amount not to exceed two-thirds (2/3) of the salary of the president of the institution in one (1) year, payable in twelve  (12)  equal  monthly  payments:  Provided,  That,  if  at  any time within one-year period, the conservatorship is terminated on the  ground  that  the  institution  can  operate  on  its  own,  the conservator shall receive the balance of the remuneration which he would  have  received  up  to  the  end  of  the  year;  but  if  the conservatorship  is  terminated  on  other  grounds,  the  conservator shall  not  be  entitled  to  such  remaining  balance.  The  Monetary Board  may  appoint  a  conservator  connected  with  the  Bangko
Sentral,  in  which  case  he  shall  not  be  entitled  to  receive  any remuneration  or  molument  from  the  Bangko  Sentral  during  the conservatorship.  The  expenses  attendant  to  the  conservatorship shall be borne by the bank or quasi-bank concerned. 

The Monetary Board shall terminate the conservatorship when it is satisfied that the institution can continue to operate on its own and the  conservatorship  is  no  longer  necessary.  The  conservatorship shall  likewise  be  terminated  should  the  Monetary  Board,  on  the basis  of  the  report  of  the  conservator  or  of  its  own  findings, determine that the continuance in business of the institution would involve  probable  loss  to  its  depositors  or  creditors,  in  which  case the provisions of Section 30 shall apply.
 
Section   30.   Proceedings   in   Receivership   and   Liquidation.   - Whenever,   upon   report   of   the   head   of   the   supervising   or examining  department,  the  Monetary  Board  finds  that  a  bank  or quasi-bank:
 
(a)  is  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;
 
(b) has insufficient realizable assets, as determined by the Bangko Sentral, to meet its liabilities; or
 
(c)  cannot  continue  in  business  without  involving  probable  losses to its depositors or creditors; or
 
(d) has 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; in  which cases,  the  Monetary  Board  may  summarily  and  without  need  for
prior  hearing  forbid  the  institution  from  doing  business  in  the Philippines   and   designate   the   Philippine   Deposit   Insurance Corporation as receiver of the banking institution.

For a quasi-bank, any person of recognized competence in banking or finance may be designed as receiver.
 
The  receiver  shall  immediately  gather  and  take  charge  of  all  the assets and liabilities of the institution, administer the same for the benefit  of  its  creditors,  and  exercise  the  general  powers  of  a receiver  under the Revised Rules  of Court but 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:  Provided,  That  the  receiver  may  deposit  or  place  the funds  of  the  institution  in  non-speculative  investments.  The receiver  shall  determine  as  soon  as  possible,  but  not  later  than ninety  (90)  days  from  take  over,  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 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.
 
If   the   receiver   determines   that   the   institution   cannot   be rehabilitated  or  permitted  to  resume  business  in  accordance  with the  next preceding  paragraph, the Monetary  Board  shall notify in writing the board of directors of its findings and direct the receiver to  proceed  with  the  liquidation  of  the  institution.  The  receiver shall:
 
(1) file ex parte with the proper Regional Trial Court, and without requirement  of  prior  notice  or  any  other  action,  a  petition  for assistance  in  the  liquidation  of  the  institution  pursuant  to  a liquidation  plan  adopted  by  the  Philippine  Deposit  Insurance Corporation for general application to all closed banks. In case of quasi-banks, the liquidation plan shall be adopted by the Monetary Board. Upon acquiring jurisdiction, the court shall, upon motion by
the  receiver  after  due  notice,  adjudicate  disputed  claims  against the institution, assist the enforcement of individual liabilities of the stockholders, directors and officers, and decide on other issues as may  be  material  to  implement  the  liquidation  plan  adopted.  The receiver  shall  pay  the  cost  of  the  proceedings  from  the  assets  of the institution.
 
(2) convert the assets of the institutions to money, dispose of the same to creditors and other parties, for the purpose of paying the debts   of   such   institution   in   accordance   with   the   rules   on concurrence  and  preference  of  credit  under  the  Civil  Code  of  the Philippines  and  he  may,  in  the  name  of  the  institution,  and  with the assistance of counsel as he may retain, institute such actions as may be necessary to collect and recover accounts and assets of,
or  defend  any  action  against,  the  institution.  The  assets  of  an institution  under  receivership  or  liquidation  shall  be  deemed  in custodia  legis  in  the  hands  of  the  receiver  and  shall,  from  the moment  the  institution  was  placed  under  such  receivership  or liquidation,  be  exempt  from  any  order  of  garnishment,  levy, attachment, or execution.
 
The  actions  of  the  Monetary  Board  taken  under  this  section  or under Section 29 of this Act shall be final and executory, and 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  petition  for  certiorari  may  only be filed by the stockholders of record representing the majority of the capital stock within ten (10) days from receipt by the board of directors  of  the  institution  of  the  order  directing  receivership, liquidation or conservatorship.
 
The  designation  of  a  conservator  under  Section  29  of  this  Act  or the  appointment  of  a  receiver  under  this  section  shall  be  vested exclusively with the Monetary Board. Furthermore, the designation of  a  conservator  is  not  a  precondition  to  the  designation  of  a receiver.
 
Section 31. Distribution of Assets. - In case of liquidation of a bank or quasi-bank, after payment of the cost of proceedings, including reasonable expenses and fees of the receiver to be allowed by the court,  the  receiver  shall  pay  the  debts  of  such  institution,  under order  of  the  court,  in  accordance  with  the  rules  on  concurrence and preference of credit as provided in the Civil Code. 

Section  32.  Disposition  of  Revenues  and  Earnings.  -  All  revenues and earnings realized by the receiver in winding up the affairs and administering  the  assets  of  any  bank  or  quasi-bank  within  the purview  of  this  Act  shall  be  used  to  pay  the  costs,  fees  and
expenses  mentioned  in  the  preceding  section,  salaries  of  such personnel   whose   employment   is   rendered   necessary   in   the discharge   of   the   liquidation   together   with   other   additional expenses  caused thereby. The balance  of revenues  and earnings,
after  the  payment  of  all  said  expenses,  shall  form  part  of  the assets available for payment to creditors.
 
Section 33. Disposition of Banking Franchise. - The Bangko Sentral may,  if  public  interest  so  requires,  award  to  an  institution,  upon such  terms  and  conditions  as  the  Monetary  Board  may  approve, the banking franchise of a bank under liquidation to operate in the
area  where  said  bank  or  its  branches  were  previously  operating: Provided,  That  whatever  proceeds  may  be  realized  from  such award  shall  be  subject  to  the  appropriate  exclusive  disposition  of the Monetary Board.
 

REPUBLIC ACT No.8791   March 7, 2000

PROVIDING FOR THE REGULATION OF THE ORGANIZATION AND OPERATIONS OF BANKS, QUASI-BANKS

 
CHAPTER V
PLACEMENT UNDER CONSERVATORSHIP
 
Section  67.  Conservatorship.  -  The  grounds  and  procedures  for placing a bank under conservatorship, as well as, the powers and duties of the conservator appointed for the bank shall be governed by  the  provisions  of  Section  29  and  the  last  two  paragraphs  of Section  30  of  the  New  Central  Bank  Act:  Provided,  That  this Section  shall  also  apply  to  conservatorship  proceedings  of  quasi-banks. (n)
 
CHAPTER VI
CESSATION OF BANKING BUSINESS
 
Section 68. Voluntary Liquidation. - In case of voluntary liquidation of any bank organized under the laws of the Philippines, or of any branch or office in the Philippines of a foreign bank, written notice of such liquidation shall be sent to the Monetary Board before such liquidation  shall  be  sent  to  the  Monetary  Board  before  such liquidation  is  undertaken,  and  the  Monetary  Board  shall  have  the right  to  intervene  and  take  such  steps  as  may  be  necessary  to
protect the interests of creditors. (86)
 
Section  69.  Receivership  and  Involuntary  Liquidation.  -  The grounds  and  procedures  for  placing  a  bank  under  receivership  or liquidation,  as  well  as  the  powers  and  duties  of  the  receiver  or liquidator  appointed  for  the  bank  shall  be  governed  by  the provisions of Sections 30, 31, 32, and 33 of the New Central Bank Act: Provided, That the petitioner or plaintiff files with the clerk or judge of the court in which the action is pending a bond, executed
in  favor  of  the  Bangko  Sentral,  in  an  amount  to  be  fixed  by  the court.  This  Section  shall  also  apply  to  the  extent  possible  to  the receivership and liquidation proceedings of quasi-banks. (n)
 
Section  70.  Penalty  for  Transactions  After  a  Bank  Becomes Insolvent. - Any director or officer of any bank declared insolvent or placed under receivership by the Monetary Board who refuses to turn  over  the  bank's  records  and  assets  to  the  designated receivers, or who tampers with banks records, or who appropriates for   himself   for   another   party   or   destroys   or   causes   the misappropriation  and  destruction  of  the  bank's  assets,  or  who
receives  or  permits  or  causes  to  be  received  in  said  bank  any deposit, collection of loans and/or receivables, or who pays out or permits  or  causes  to  be  transferred  any  securities  or  property  of said  bank  shall  be  subject  to  the  penal  provisions  of  the  New Central Bank Act. (85a)
 

THREE LEVELS OF REHABILITATION

1.   Conservatorship
2.   Receivership
3.   Liquidation 

CONSERVATORSHIP: CONSERVATOR

     With  such  powers  as  the  Monetary  Board  shall  deem necessary to take charge of the assets, liabilities, and the management thereof, reorganize the management, collect all monies and debts due said institution, and exercise all powers necessary to restore its viability. 
     The  conservator  shall  report  and  be  responsible  to  the Monetary  Board  and  shall  have  the  power  to  overrule  or revoke the actions of the previous management and board of directors of the bank or quasi-bank.
 

WHO  CAN  BE  A  CONSERVATOR? 

     The  conservator  should  be  competent  and  knowledgeable in bank operations and management. 
 

HOW LONG SHOULD THE CONSERVATORSHIP LAST?

     The conservatorship shall not exceed one (1) year.
 

WOULD  YOU  WANT  TO  BE  A  CONSERVATOR?    HOW  IS  A CONSERVATOR COMPENSATED?

     The conservator shall receive remuneration to be fixed by the Monetary Board in an amount not to exceed two-thirds (2/3) of the salary of the president of the institution in one (1) year, payable in twelve (12) equal monthly payments
     Provided, That,  if at  any time within  one-year  period, the conservatorship  is  terminated  on  the  ground  that  the institution  can  operate  on  its  own,  the  conservator  shall receive  the  balance  of  the  remuneration  which  he  would have  received  up  to  the  end  of  the  year;  but  if  the conservatorship   is   terminated   on   other   grounds,   the conservator   shall   not   be   entitled   to   such   remaining balance. 
     The Monetary Board may appoint a conservator connected with  the  Bangko  Sentral,  in  which  case  he  shall  not  be entitled  to  receive  any  remuneration  or  emolument  from the   Bangko   Sentral   during   the   conservatorship.   The expenses attendant to the  conservatorship shall  be  borne by the bank or quasi-bank concerned.

WHEN   CAN   THE   MONETARY   BOARD   TERMINATE   THE CONSERVATORSHIP?

1.   The  Monetary  Board  shall  terminate  the  conservatorship when  it  is  satisfied  that  the  institution  can  continue  to operate  on  its  own  and  the  conservatorship  is  no  longer necessary. 
2.   The  conservatorship  shall  likewise  be  terminated  should the  Monetary  Board,  on  the  basis  of  the  report  of  the conservator  or  of  its  own  findings,  determine  that  the continuance  in  business  of  the  institution  would  involve probable  loss  to  its  depositors  or  creditors,  in  which  case the provisions of Section 30 shall apply.
 

RECEIVERSHIP: RECEIVER

1.   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;
2.   Has  insufficient  realizable  assets,  as  determined  by  the Bangko Sentral, to meet its liabilities; or
3.   Cannot  continue  in  business  without  involving  probable losses to its depositors or creditors; or
4.   Has  willfully  violated  a  cease  and  desist  order  that  has become final, involving acts or transactions which amount to fraud or a dissipation of the assets of the institution. *PDIC IS THE ONLY RECEIVER.
 

WHY IS THE INTEREST OF PDIC IN LINE WITH THE BANK?

     Failure on the part of the bank to pay means that they will pay
     Upon payment, they will be subrogated to the rights of the debtor
 

DUTIES OF RECEIVER

1.   Gather  and  take  charge  of  all  the  assets  and  liabilities  of the institution
2.   Administer the same for the benefit of its creditors 

3.   Exercise  the  general  powers  of  a  receiver  under  the Revised Rules of Court but 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:  Provided,  That  the  receiver  may  deposit  or place  the  funds   of  the  institution  in  non-speculative investments. 
4.   The receiver  shall determine as  soon  as possible,  but  not later  than  ninety  (90)  days  from  take  over,  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 creditors and the general
public.

 

LIQUIDATION: LIQUIDATOR (PDIC)

     If  the  receiver  determines  that  the  institution  cannot  be rehabilitated    or    permitted    to    resume    business    in accordance   with   the   next   preceding   paragraph,   the Monetary  Board  shall  notify  in   writing  the  board  of directors of its findings and direct the receiver to proceed with the liquidation of the institution. The receiver shall:
 
a.    File ex parte with the proper Regional Trial Court, and without requirement of prior notice or any other action, a  petition  for  assistance  in  the  liquidation  of  the institution  pursuant  to  a  liquidation  plan  adopted  by the   Philippine   Deposit   Insurance   Corporation   for general  application  to  all  closed  banks.  In  case  of quasi-banks,  the  liquidation  plan  shall  be  adopted  by the Monetary Board.
 
b.   Convert  the  assets  of  the  institutions  to  money, dispose of the same to creditors and other parties, for the  purpose  of  paying  the  debts  of  such  institution  in accordance   with   the   rules   on   concurrence   and preference  of  credit  under  the  Civil  Code  of  the Philippines and he may, in the name of the institution, and  with  the  assistance  of  counsel  as  he  may  retain, institute  such  actions  as  may  be  necessary  to  collect and  recover  accounts  and  assets  of,  or  defend  any action against, the institution. 
 
c.    The  assets  of  an  institution  under  receivership  or liquidation  shall  be  deemed  in  custodia  legis  in  the hands of the receiver and shall, from the moment the institution  was  placed  under  such  receivership  or liquidation, be exempt from any order of garnishment, levy, attachment, or execution.
 
     The actions of the Monetary Board taken under this section or  under  Section  29  of  this  Act  shall  be  final  and executory,  and 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  petition  for  certiorari  may  only be  filed  by  the stockholders  of  record  representing  the  majority  of  the capital  stock  within  ten  (10)  days  from  receipt  by  the board  of  directors  of  the  institution  of  the  order  directing receivership, liquidation or conservatorship.