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Marcos, not Congress, authored dollar secrecy rule

(Article published in the Feb 15,2012 issue of Manila Standard Today) 

The original text of Section of 8 of R.A. No. 6426, an act instituting a foreign currency deposit system in the Philippines, relating to the secrecy of bank deposits reads as follows:

“The secrecy of deposits under this Act shall be governed in accordance with the provisions of Republic Act Numbered One Thousand Four Hundred Five.”

In other words, the same privilege of secrecy that was accorded to peso deposits under R.A. 1405 was  extended to deposits under the foreign currency deposit system that was being established by the new law; the same general coverage, the same exceptions, including impeachment.

Clearly, had R.A. No. 6426 been left as it originally was, neither the Senate, sitting as an impeachment court, nor the Philippine Savings Bank, now between a rock and a hard place, would have had the quandaries they are respectively facing.


Amendments to R.A. No. 6426, however, were made since its approval on 02 April 1972, and as it now stands and the secrecy provision, Section 8, states that “all foreign currency deposits authorized under this Act, as amended..., are hereby declared as and considered of an absolutely confidential nature, and, except upon written permission of the depositor, in no instance shall foreign currency deposits be examined, inquired or looked into by any person, government official, bureau or office whether judicial or administrative or legislative, or any other entity whether public or private...” (Bold supplied) 

How the original text transformed into the present one is interesting.  The original Section 8 of R.A. 6426 was first amended by P.D. No. 1035 that was issued 30 September 1976.  That amendment did not affect the secrecy regime set up initially: the confidentiality that what was good for the Philippine peso was also considered good enough for foreign currencies.

What brought the text of the secrecy provision to what it is now was the next amendment wrought by P.D. No. 1246, dated 21 November 1977.  Of trivial interest is the fact that the phrase “whether judicial, or administrative, or legislative” was an intercalation in the printed version that submitted for his signature.  The phrase was inserted by hand and initialed by then President Ferdinand E. Marcos himself.  He wanted all the bases covered.

The questions that are of greater significance at this time are (a) why do we have secrecy of deposits, peso or otherwise, in the first place? (b) What prompted the establishment of one secrecy regime for peso deposits and another one for foreign currencies? And, finally, (c) are the circumstances that justified the establishment and maintenance of the regime of secrecy of foreign deposits presently attendant in the foreign currency deposits of Chief Justice Corona in the Philippine Savings Bank?

The reason for secrecy on bank deposits was articulated very early, when the bills that eventually became R.A. No. 6426 were in both the Senate (No. 541) and the House of Representatives (No. 2457).  The legislators then were very aware that the country at that time acutely needed dollars.  The Explanatory Notes of both the bills that passed both chambers of legislature, identical for the most part, said:

“We are spending more dollars than we can earn them. This, in short, is the root of all these (referring to those earlier enumerated in the note) hardships.”  And though the government was seen as “trying its level best”...there is one big source from which we can obtain the much needed dollars by our economy.  They are the Filipinos who are abroad...”

Undoubtedly, the original target depositors were individuals, specifically, Filipinos abroad, the precursors of present OFWs. 

Because Filipino individuals were the ones intended to be attracted, the enticements thought of by the authors of the bill were those that appealed to individuals: (a) withdrawability anytime; (b) exemption from the income tax; and (c) confidentiality of the deposit.  The confidentiality feature the legislators simply crafted as “any deposit shall be absolutely confidential in nature and the depositor shall not be required to reveal or disclose the  source thereof.  In other words, there will be an absolute secrecy and any violation thereof will subject the offender to a stiff prison term or fine or both.” 

Many changes were, as is usual, introduced into the text as the bills went through the legislative mill.  For example, from “individuals”, the targets became “persons”, thereby including juridical entities, like corporations.  Moreover, not only Filipinos but also foreigners were to be accorded the protection of secrecy.  Notwithstanding these changes, however, the rule of secrecy remained.  And for many years, the same rule of secrecy that governed deposits made under R.A. No. 1405 applied also to foreign deposits.

The difference (or what I would like to call “reverse discrimination”) came on 21 November 1977. President Ferdinand E. Marcos, wielding his legislative authority under martial law, issued Presidential Decree No. 1246.  President Marcos wanted not only to attract foreign depositors to help the local economy; he, more grandly, desired to make Manila a financial center in this part of the world at par with, if not better than, Singapore.  He thus made the protective mantle of confidentiality to foreign currency deposits so opaque and impenetrable as to admit only of one exception, namely, the written permission of the depositor himself.

But, lest we forget, the objective of the stricter confidentiality regime was, as the fourth WHEREAS states, to “better encourage the inflow of foreign currency deposits into the banking the Philippines thereby placing such institutions more in a position to properly channel the same to loans and investments in the Philippines, thus contributing to the economic development of the country.”

This predominant intent behind secrecy of foreign currency deposits, namely the protection of the foreign investor thereby inducing him to bring in much needed dollars for economy, was not lost with the Supreme Court.  The Supreme Court has so far twice refused to accorded the secrecy protection when the contrary was demanded by justice.

In the now often quoted case of Salvacion v. Central Bank, GR No. 94723, Aug. 18, 1997, the Supreme Court, recognizing that the demands of justice to correct a wrong done to a girl of tender age were above the need for the foreign offender’s dollars, allowed the looking into, and in fact the garnishing of the foreign currency deposit  of a transient foreigner, a tourist, in order to enforce payment of indemnity due to a young Filipina girl whom he had violated.

More recently, the Supreme Court, in the case of China Banking Corporation v. the Honorable Court of Appeals, G.R. No. 140487, promulgated December 18, 2006, again allowed inquiry  into a foreign currency deposit, this time to settle the real ownership of the funds.  Though pro hac vice, the ruling was clear that “the allowance of the inquiry would be in accord with the rudiments of fair play, the upholding of fairness in our judicial system…”

          Philippine Savings Bank President and its Board of Directors would thus do well to refrain from posing as Horatius at the bridge.  The Impeachment Court is not made up of barbarians knocking at the gates; they are agents of the sovereign people seeking after the truth.  They should not stand in the way of the search light of transparency thereby permitting doubts and dollars to hide in the shadows.