A. The Peso (P)
-unit of monetary value in the Philippines -divided into 100 equal parts: centavos (c)
-legal tender; all monetary obligations shall be settled in Philippine currency
parties may agree to settle such obligation in any other currency at the time of the payment.
B. Currency, defined
-all Philippine notes and coins issued or circulating in accordance with the NCBA.
C. Value of Currency
-has value because people are willing to accept it in exchange of goods, services or payment of debts.
II. Issue of Means of Payment A. Exclusive Issue Power
(i) Bangko Sentral- SOLE power to issue currency
(ii) Monetary Board- may issue regulations to prevent circulation of foreign currency, currency substitutes, or to prevent the reproduction of facsimiles of Bangko Sentral notes.
(iii) Bangko Sentral- has authority to investigate, arrest, search and seize for the purpose of maintaining the integrity of the currency.
(iv) Violation: imprisonment of not less than five years but not more than ten years. In case the RPC provides for a greater penalty, the latter shall prevail.
*An Exception to Territoriality of Penal Laws (RPC)
Art. 2. Application of its provisions. — Except as provided in the treaties and laws of preferential application, the provisions of this Code shall be enforced not only within the Philippine Archipelago, including its atmosphere, its interior waters and maritime zone, but also outside of its jurisdiction, against those who:
1. Should commit an offense while on a Philippine ship or airship
2. Should forge or counterfeit any coin or currency note of the Philippine Islands or obligations and securities issued by the Government of the Philippine Islands;chan robles virtual law library
3. Should be liable for acts connected with the introduction into these islands of the obligations and securities mentioned in the presiding number;
4. While being public officers or employees, should commit an offense in the exercise of their functions; or
5. Should commit any of the crimes against national security and the law of nations, defined in Title One of Book Two of this Code.
*Related Crimes under the RPC 1. Art. 163. Making and Importing and Uttering False Coins
2. Art. 164. Mutilation of Coins; Importation and Utterance of Mutilated Coins 3. Art. 165. Selling of Flase or Mutilated Coin, Without Connivance
4. Art. 166. Forging Treasury or Bank Notes on Other Documents Payable to Bearer;
Importing, and Uttering Such False or Forged Notes and Documents
5. Art. 167. Counterfeiting, Importing and Uttering Instruments Not Payable to Bearer 6. Art. 168. Illegal Possession and Use of False Treasury or Bank Notes and Other Instruments of Credit
7. Art. 169. How forgery is committed. — The forgery referred to in this section may be committed by any of the following means:
1. By giving to a treasury or bank note or any instrument, payable to bearer or order mentioned therein, the appearance of a true genuine document.
2. By erasing, substituting, counterfeiting or altering by any means the figures, letters, words or signs contained therein.
B. Liability for Notes and Coins
(i) Notes and coins issued by the BSP shall be liabilities of the BSP.
Such may be issued only against, and in amounts not exceeding, the assets of the BSP. Such shall be a first and paramount lien on all assets of the BSP.
(ii) The Bangko Sentral’s holdings of its own notes and coins shall not be considered as part of its currency issue and, accordingly, shall not form part of the assets or liabilities of the BSP.
C. Legal Tender Power
-all notes and coins issued by the BSP= Legal Tender for all debts
*coins: a. 25c and above denominations shall not exceed P50.00 b. 10c or less denominations shall not exceed P20.00
-checks representing demand deposits do not have legal tender power: one cannot be compelled to accept the same.
*a check cleared and credited to the account of the creditor = delivery of cash to such creditor.
*Related Civil Code Provisions
Art. 1249. The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in the currency which is legal tender in the Philippines.
The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired.
In the meantime, the action derived from the original obligation shall be held in the abeyance.
Art. 1250. In case an extraordinary inflation or deflation of the currency stipulated should supervene, the value of the currency at the time of the establishment of the obligation shall be the basis of payment, unless there is an agreement to the contrary.
D. Characteristics of the Currency
(i) Monetary Board, with approval of the President, shall prescribe:
1. Denominations 2. Designs 3. Inscriptions
4. Other characteristics of notes
Provided that: the notes state that they are liabilities of the BSP and are guaranteed by the Government; also shall bear the signatures of the President of the Philippines and the Governor of the BSP.
(ii) Monetary Board, with approval of the President, shall prescribe:
1. Weight 2. Fineness 3. Designs 4. Denominations
5. Other characteristics of the coins
The MB shall consider the availability and cost of materials E. Printing of Notes and Minting of Coins
(i) The MB shall prescribe the amount and conditions of notes and coins to be printed and minted. It shall also have the authority to contract institutions, mints or firms for such operations.
(ii) Expenses incurred for the operations shall be for the account of the BSP.
F. Interconvertibility of Currency
-BSP shall exchange, on demand and with no charge, Philippine currency of any denomination to any other denomination of such currency. If BSP is temporarily unable to do so, shall deliver the notes and coins of the denominations which most nearly approximate those requested.
G. Replacement of Currency Unfit for Circulation
-shall be withdrawn and demonitized by the BSP from circulation and replace them with adequate ones.
shall not replace: notes and coins, the identification of which is impossible; filed, clipped, perforated coins; notes which have lost 2/5 of their surface or all of the signatures therein. (mutilated conditions)
H. Retirement of Old Notes and Coins
(i) The BSP may call in for replacement: notes, 5 years old; coins, 10 years old
(ii) Such notes called in for replacement shall remain legal tender for one year since the date of the call. Lapse of one year, may be exchanged at par and without charge during the following year or for a period determined by the MB. Lapse of such period, the notes and coins shall cease to be a liability of the BSP and shall be demonitized. The called in notes and coins shall likewise be demonitized.
III. Domestic Monetary Stabilization
A. Guiding Principle on Monetary Stabilization
-the MB shall endeavour to control any expansion or contraction in monetary aggregates which is prejudicial to the attainment or maintenance of price stability.
B. Power to Define Terms
-MB shall formulate definitions of monetary aggregates, credit and prices and shall make public such definitions and any changes thereof.
C. Action When Abnormal Movements Occur in the Monetary Aggregates, Credit, or Price Level
(i) Whenever abnormal movements in the monetary aggregates, in credit, or in prices endanger the stability of the Philippine economy or important sectors, the MB shall:
a) Take appropriate remedial measures
b) Submit a report to the President and the Congress (also made public, a description and analysis:
1. Causes of the rise or fall of such monetary aggregates;
2. Extent to which such changes have been reflected in the level of domestic output, employment, wages and economic activity in general, and the nature and significance of any such changes;
3. Measures taken and measures proposed to be adopted.
(ii) Whenever:
a. The monetary aggregates, or the level of credit, increases or decreases by more than 15%,
b. The cost of living index increases by more than 10%, or c. When in its judgment, the circumstances warrant,
(With respect to a-c) the MB shall submit reports and state whether such changes represent a threat to the stability of the economy or of its important sectors.
(iii) The MB shall continue to make periodic reports until the disturbances have disappeared or have been controlled.
IV. International Monetary Stabilization
A. International Monetary Stabilization -preserved by the BSP
-maintain convertibility into other currencies primarily for foreign trade and invisibles.
B. International Reserves
-Purpose: to maintain the international stability and convertibility of the Philippine Peso (adequate to meet foreseeable net demands on the BSP for foreign currencies.)
-MB shall judge such adequacy based on: prospective receipts and payments of ForEx by the Philippines.
-MB shall pay special attention to the volume and maturity of:
1. BSP’s own liabilities in foreign currencies
2. ForEx assets and liabilities of other banks operating in the Philippines
3. ForEx assets and liabilities of all other persons and entities in the Philippines
C. Composition of the International Reserves (of the BSP):
(i) May include, but not limited to:
a. Gold
b. Assets in foreign currencies in the form of:
1. Documents and instruments customarily employed for the international transfer of funds
2. Demand and time deposits in central banks, treasuries and commercial banks abroad
3. Foreign government securities 4. Foreign notes and coins (ii) The MB shall:
a. Endeavour to hold the ForEx resources of the BSP
b. Give particular consideration to the prospects of continued strength and convertibility of the currencies
c. Give particular consideration to the anticipated demands (iii) The MB shall issue regulations determining the other
qualifications which the ForEx must meet in order to be included in the international reserves of the BSP.
(iv) BSP is free to convert any asset in its international reserves into other assets as described in a. and b.
D. Action when the international stability of the peso is threatened:
(i) Whenever:
1) The international reserve falls to a level the MB considers inadequate to meet prospective net demands, or
2) The international reserves appear to be imminent in falling to such level, or
3) The international reserve is falling as a result of payments or remittances abroad which are contrary to the national welfare
The MB shall:
a. Take appropriate remedial measures
b. Submit a report to the President and the Congress:
1. Nature and causes of the existing or imminent decline 2. Measures already taken or to be taken by the MB 3. Measures proposed
4. Cooperation required from other government agencies for the execution of policies of the MB
(ii) If such actions fail, the MB shall propose to the President, with notice to the Congress, additional action it deems necessary to restore international balance of payments in the Philippines (iii) The MB shall submit periodic reports until the threat to
international monetary stability has disappeared.
E. Means of Action
-MB shall rely on its moral influence and the powers granted to it under the NCBA.
V. Operations in Gold and Foreign Exchange A. Purchases and Sales of Gold
-by the BSP subject to the regulations of MB
-made in the national currency at the prevailing international market price as determined by the MB.
B. Purchases and Sales of ForEx -by the BSP
-with the following entities or persons only:
1. Banking institutions within the Philippines
2. Government and its subdivisions and instrumentalities 3. Foreign governments
4. International Financial Institutions 5. Others authorized by the MB
-the BSP may buy or sell any quantity of ForEx upon demand or request by any banking institution in the Philippines. Provided, that such are freely convertible into gold or US dollars. (not applicable to demands for foreign notes and coins)
-exchange transactions shall be based on the NCBA.
C. Foreign Asset Position of the Bangko Sentral
-BSP shall maintain NET POSITIVE FOREIGN ASSET POSITION (Gross ForEx assets>Gross ForEx liabilities.
-If ForEx liabilities (in Pesos) > twice the ForEx assets (in Pesos), BSP shall report to the Congress the origin of the liabilities and the manner it shall be paid. (made within 60 days from the date of the occurrence.
D. Emergency Restrictions on Exchange Operations In order to:
(i) Achieve the primary objective of the BSP
(ii) Protect international reserves in the imminence or during and exchange crisis
(iii) Give time to the MB and the Government to take measures to forestall or overcome such crisis
5 members of the MB and the President of the Philippines may:
1. Temporarily suspend sales of exchange 2. Subject all gold and ForEx transactions to license
3. Require that any ForEx obtained by any person or entity in the Philippines be delivered to the BSP at the exchange rates. (Foreign currency deposits made under RA 6426, exempt from this requirements)
E. Acquisition of Inconvertible Currencies -shall be avoided
-may acquire more than the minimum balance necessary to cover current demands for such currencies only when considered by the MB to be in the national interest.
-MB shall determine the procedure F. Exchange Rates
-determined by the MB
-MB shall determine the rates for buying and selling spot exchange and may establish deviation limits from the exchange rates
-MB shall determine the rates for other types of ForEx transactions. But the margins between the effective exchange rates and the rates established may not exceed the margins for spot exchange by more than the additional costs involved in each type of transactions
G. Operations with Foreign Entities
-MB may authorize the BSP to transact with foreign banks or entities. The BSP may also act as agent for such.
-MB may authorize the BSP to pledge any gold or other assets as securities against loans which it receives from foreign entities.
VI. Regulation of Foreign Exchange Operations Of the Banks A. Foreign Exchange Holdings of the Banks
-MB may require the banks to sell to the BSP or to other banks all or part of their surplus holdings of ForEx to maintain international stability and
convertibility of the Peso. Such transfers shall be at the established rates and may be required of certain currencies only.
-MB may determine the net assets and liabilities of banks and consider the bank’s networth, outstanding liabilities, or other ratios it may deem appropriate. Such determination shall be applied in all banks uniformly.
B. Requirement of Balanced Currency Position
-MB may require banks to maintain a balanced position between their assets and liabilities. They shall be granted reasonable time to adjust.
-such powers shall be exercised only under special circumstances which warrant the same
C. Regulation of Non-spot Exchange Transaction
-MB may issue regulations on such transaction to restrain banks from speculating future fluctuations in ForEx
D. Othe Exchange Profits and Losses -banks bear the risks of
1. Non-compliance with the terms of the ForEx documents and instruments they buy and sell.
2. Other commercial or other banking risks
3. Exchange risks not assumed by the BSP regarding non-spot exchange transaction
E. Information on Exchange Operations:
a. Banks shall report to the BSP the volume and composition of their purchases and sales of gold and ForEx each day, and must furnish requested additional info.
b. The MB may also require other persons and entities to report to it all transactions as stated above. It shall prescribe the form such declarations must be made. The BSP may inspect such declarations for verification.
VII. Loans To Banking And Other Financial Institutions A. Guiding Priciples
-rediscounts, discounts, loans and advances which the BSP is authorized to extend shall be used to influence the volume of credit consistent with the objective of price stability.
B. Authorized Types of Credit Operations -carried on by the BSP with banks
a. Commercial Credits- BSP may rediscount, discount, buy and sell bills, acceptances, promissory notes and other credit instruments with maturities of not more than 180 days from the date of rediscount, discount or acquisition and resulting from transactions related to:
1. The importation, exportation, purchase or sale of readily saleable goods and products, or their transportation within the Philippines;
or
2. The storing of non-perishable goods and products, duly insured and deposited.
b. Production Credits- *same* with maturities of not more than 360 days
*same* and resulting from transactions related to the production or processing of agricultural, animal, mineral or industrial products.
Must be secured by:
1. A pledge of the crops or products or
2. A lien or mortgage on real prop, 70% of the appraised value of which equals or exceeds the amount of the loan granted.
c. Other credits- credit instruments not rediscountable under a and b may be rediscounted in accordance with BSP rules and regulations.
- when necessary, BSP may provide funds from non-inflationary sources; MB shall prescribes for additional safeguards for the same.
d. Advances- BSP may grant advances against the following for fixed periods not exceeding 180 days except number 4 (360 days):
1. Gold coins or bullions production credits, and certified as to the amount and liquidity by the institution soliciting the advance
6. Negotiable treasury bills, cert of indebtedness, notes and other negotiable obligations of the Govt maturing within 3 yrs from the date of the advance
7. Negotiable bonds issued by the Govt and its subdivisions and instrumentalities having maturities of not more tan 10 years from the date of the advance
Notes:
(i) The rediscounts, discounts, loans and advances made in accordance with the above provisions may not be renewed or extended unless extraordinary circumstances fully justify such renewal or extension.
(ii) Advances made against the collateral in 6 and 7 may not exceed 80% of the current market value of the collateral
C. Loans for Liquidity Purposes
-BSP may extend loans and advances to banks for a period not exceeding 7 days without collateral to provide liquidity in times of need
VIII. Emergency Loans and Advances
A. Nature of Emergency Loans or Advances
-intended to assist a bank with serious liquidity problems arising from causes beyond the control of the management.
-discretion of MB
-only a temporary remedial measure -must be on a fully secured basis B. When Granted
a. Whole banking community is threatened with the financial crisis -national/local emergency or imminent financial panic
-directly threatening the monetary and banking stability
The MB (vote of 5 members) authorize the BSP to grant the same.
While such loans are outstanding, the debtor cannot expand the total volume of its loan or investments without authorization from the MB
b. Bank with uncertain financial condition but is not insolvent
-MB may authorize the BSP to extend such loans even during normal times to assist a bank in a precarious financial condition brought by unforeseen events or though foreseeable, cannot be prevented.
-MB must first ascertain that the bank is not insolvent and has assets to secure the advances.
-5 votes of MB members must concur C. Limits
-amount o loan must not exceed 50% of total deposits or deposit substitutes of a bank -shall be disbursed in 2 or more tranches
D. First Tranche
1. Limited to 25% of the total deposits or deposit substitutes
-secured by govt securities and other unencumbered first class collaterals the MB may approve
2. If MB determined that the emergency warrant a greater loan, it may exceed 25%
-must be secured by govt securities and other unencumbered first class collaterals the
-must be secured by govt securities and other unencumbered first class collaterals the