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Another magnum opus from BSP

(Article published in the Aug 10,2011 issue of Manila Standard Today) 

Skipping dinner last Friday was an easy decision to make.  The merienda fare served late afternoon at the Assembly Hall of the Bangko Sentral ng Pilipinas (BSP) during the launch of “Banking Laws of the Philippines, Book II, THE GENERAL BANKING LAW, Annotated” was very filling.  But more than gustatory surfeit, what sent me straight to my study desk was avid appetite to savor the smorgasbord of legal material offered by the latest book on the subject.  After all, banking, like computing, is an activity where practitioners are constrained to be up to date, or else face extinction.

As observed by the event’s Guest of Honor and Speaker, Supreme Court Chief Justice Renato C. Corona, in his Foreword and his address, “no better authors could have been chosen for the job.  They had the experience, the expertise, training and resources for such a daunting task [of writing a series of books annotating the banking laws of the Philippines].  As the legal counsels of the country’s independent central monetary authority, they have a panoramic view of the entire legal landscape of banking, and are uniquely positioned to utilize a wealth of knowledge and understanding of this highly specialized field of law.”

Similarly acknowledging the singular edge that the lawyers of BSP’s Office of the General Counsel and Legal Services, populated by alumni of the country’s top law schools, was Chairman of the Monetary Board and Governor of the BSP Amando M. Tetangco, Jr.  In the Preface he said, “Given their unique vantage point, our lawyers are writers like no other on the subject of banking laws.  They discuss the laws with a clear understanding of policy implications, consideration of operational contexts, as well as a grasp of  the technical concepts and processes.  Equally important, they are able  to present the big picture of the laws along with the detailed provisions of the Manual of Regulations for Banks and the Circulars issued by the Bangko Sentral.  The discussions on the rationale for such provisions enrich these books further.”
 










     

Highly recommended, for instance, is the Introduction which provides the historical development of banks and banking legislations, from Venice, then to Barcelona, Genoa, Amsterdam, Hamburg, London, and, of course, Manila.  It presents the growth of financial innovations in the country so insightfully in three successive episodes, with the decade of 1990-2000 as mid-point, that the reader appreciates the development as almost organic, driven by a force from within rather than by circumstances from without.

Those in the trust business would do well to carefully read Chapter IX on Trust Operations.  Although soft-pedaling the not so noble parentage of the trust device (“Fear and fraud”, it is said in Attorney General v. Sauds, Hard. 488, 491, “are the parents of trust…”) and the unique feature of English judiciary that had a system of two parallel courts, the courts of law and courts of chancery (“…and the courts of chancery” continues Attorney General v. Sauds, “was its nurse” i.e. yaya), still it captures, by its constant invocation of trust law’s recognized authorities, like Austin W. Scott and George G. Bogert, the true nature of the trust device.  It also pays implicit tribute to the Trust Officers Association of the Philippines, Inc. (TOAP), by citing in its footnotes and thereby acknowledging it as authority, TOAP’s “Handbook of Trust Operations in the Philippines” published under the leadership of its then President, the late Victorio Gomez, at least eight times.  No other banking industry publication was similarly recognized in the book.

Of special interest are some of the heretofore uncircularized opinions of the General Counsel relating to trusts.  For instance, while a lawyer who acts as trustee in an isolated transaction would not fall under the supervisory and regulatory authority of the BSP,  it was opined that, if “there are added elements to the transaction, such as the repetition or conduct thereof in a regular manner, which may tend to classify the same as a business activity, the lawyer may now be deemed as engaging in the trust business.”

It was also ruled that a corporation that “has in its articles of incorporation, a provision stating that it shall hold securities ‘in trust absolutely for one or more beneficiaries from time to time’ is considered as undertaking trust activities continuously or regularly…”

Banks, too, were subjects of the General Counsel’s opinions.  Thus, “the representative office of a foreign bank cannot be granted a trust license…[because] it is merely a liaison office…the main function of which is to promote and provide information about the services and products offered…and the transactions generated through its promotional efforts may be booked only by the foreign bank abroad.” 

Another interesting opinion, one which should spur banks to spin off their trust departments into stand-alone trust entities, was issued in 2007.  “The trust department or unit or office of a bank, has no legal personality separate and distinct from the bank.”  The General Counsel then continued; “Should there be a need to make claims against the trust department, it is the bank that should be considered as the ultimate counterparty in transactions with the trust department.”  In short, the entire bank is put at risk by any breach of fiduciary duty of its trust department.  Perhaps, now is the time to rethink the merits of the Stand Alone Trust.

There are many more things, on trust and on banking, to learn from “Banking Laws of the Philippines, Book II, THE GENERAL BANKING LAW, Annotated”.  Indeed, Chief Justice Corona was not exaggerating when he said, “Nothing comes close to the quality and scope of this work in our local legal publications.”

 

     

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