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SEC. 58, NCBA: For purposes of this Act, the term "demand deposits" means all those liabilities of the Bangko Sentral and of other banks, which are denominated in Philippine currency and are subject to payment in legal tender upon demand by the presentation of checks.

SEC. 59, NCBA: Only banks duly authorized to do so may accept funds or create liabilities payable in pesos upon demand by the presentation of checks, and such operations shall be subject to the control of the Monetary Board in accordance with the powers granted it with respect thereto under this Act.

SEC. 60, NCBA: Checks representing demand deposits do not have legal tender power and their acceptance in the payment of debts, both public and private, is at the option of the creditor: Provided,

however, That a check which has been cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor of cash in an amount equal to the amount credited to his account.

SEC. X201, MRB: Banks may accept or create demand deposits subject to withdrawal by check.

A UB/KB may accept or create demand deposits subject to withdrawal by check, without prior authority from the BSP.

A TB/RB/Coop Bank may accept or create demand deposits upon prior authority of the BSP.

SEC. X202, MRB: The following regulations shall govern temporary over-drawings and drawings against uncollected deposits (DAUDs). a. Temporary over-drawings. Temporary over-drawings against

current account shall not be allowed, unless caused by normal bank charges and other fees incidental to handling such accounts. Banks which violate these regulations shall be subject to a fine of one-tenth of one percent (1/10 of 1%) per day of violation, computed on the basis of the amount of overdrawing or fines in amounts as may be determined by the Monetary Board, but not to exceed P30,000 a day for each violation, whichever is lower.

Technical over-drawings arising from “force posting” in-clearing checks shall be debited by banks under “Returned Checks and Other Cash Items Not in Process of Collection” which is part of “Other Assets” in the Statement of Condition. Items to be lodged under this account shall consist only of in-clearing checks which may result in “technical overdrawn” accounts and shall be immediately reversed the following day.

The checks lodged under “Returned Checks, etc.” shall either be returned or honored the following day before clearing. The items to be used as cover for the honored checks should only consist of any of the following:

(1) Cash

(2) Cashier’s, Manager’s or Certified Checks (3) Bank Drafts

(4) Postal Money Orders (5) Treasury Warrants

(6) Duly funded “On us” Checks

(7) Fund transfers/credit memos within the same bank representing proceeds of loans granted under existing regulations.

Peso demand deposit accounts maintained by foreign correspondent banks with commercial banks shall not be subject to the above-mentioned regulations: Provided, That: (a) The maintenance of non-resident correspondent bank’s peso checking accounts and overdrawings therefrom are covered by reciprocal arrangement;

(b) Temporary overdrawings are covered within fifteen (15) days from the date overdrawings are incurred; and

(c) Such accounts are credited only through foreign exchange inward remittance.

b. Drawings against uncollected deposits. DAUDs shall be prohibited except when the drawings are made against

uncollected deposits representing

manager’s/cashier’s/treasurer’s checks, treasury warrants, postal money orders and duly funded “on us” checks, which may be permitted at the discretion of each bank.

SEC. X203, MRB: To complement the provisions of Batas Pambansa Blg. 22, (An Act Penalizing the Making or Drawing and Issuance of a Check Without Sufficient Funds or Credit), the following regulations shall govern:

a. The drawee bank shall stamp, write or print on a dishonored check or on a paper attached thereto the date the check is presented for payment and the reason for the refusal to pay the same to the holder thereof.

b. Where the reason for the dishonor of a check is stamped, written or printed on a paper attached to the checks, the drawee bank shall indicate the pertinent details, such as the names of the drawer, the payee and the drawee bank, the date and amount of the check, the check number and the date of dishonor.

c. The drawee bank shall use only the remark or notation “Drawn Against Insufficient Funds”, “No Funds”, or “Insufficient Funds” stamped, written, or printed on, or attached to the check dishonored or returned byreason of insufficiency of funds or credit.

d. Notwithstanding receipt of an order to stop payment, the drawee bank shall likewise stamp, write, or print on, or attach to the check any of the remarks or notations mentioned in Item “c” hereof indicating that there were no sufficient funds in or credit with such bank for the payment in full of such check, if such be the fact. The bank shall also indicate receipt of a stop payment order.

e. A check and other clearing item (COCI) dishonored by reason of insufficiency of funds or credit shall be returned by the drawee bank to the negotiating bank not later than the next clearing for returned COCI.

(1) For Local Exchanges

There shall be two (2) separate clearing windows for COCIs returned due to insufficient funds or credit in the local exchanges in the

integrated Metro Manila area served by the PCHC and the BSP Regional Clearing Centers (RCCs). (The settlement of interbank transactions vis-à-vis covering reserve requirement/deficiency of banks’ DDA is shown in Appendix 39.)

(a) AM Returned COCI Clearing - The AM returned COCI clearing in the integrated Metro Manila local exchange shall be conducted from 7:30 AM to 10:00 AM on the banking day immediately following the original date of presentation of the COCI to PCHC.

The AM returned COCI clearing window for local exchanges in the BSP RCCs shall be conducted from 8:00 AM to 9:30 AM on the banking day immediately following the original date of presentation of the COCI to the RCC.

Returned COCI in the AM clearing windows shall be given value on the same date as the date of original presentation of the COCI to PCHC and RCC. The amount of debits and credits on the date of original presentation shall be reversed to the extent of the amount of credits and debits arising from the returned COCI. The process restores the balances of the demand deposits of banks with the BSP to their position prior to the settlement of the clearing results affected by the COCI later returned due to insufficient funds or credit.

(b) PM Returned COCI Clearing - The PM returned COCI clearing window shall coincide with the afternoon regular clearing. Other dishonored COCI not returned in the morning clearing session shall be presented by the drawee bank to the negotiating bank in the afternoon regular clearing. Such returned COCI shall be given value on the date the returned COCI was presented to PCHC for the integrated Metro Manila area and to BSP RCCs.

Return of Dishonored COCI - A COCI dishonored by reason of insufficiency of funds or credit shall be returned by the drawee bank to the negotiating bank not later than the next clearing for returned COCI.

(2) For Out-of-town Exchanges

For out-of-town exchanges, a COCI so dishonored shall be returned by the drawee bank to the negotiating bank within the period specified in the clearing Circular Letters issued by BSP.

(3) COCI not coursed through the Clearing System

A COCI dishonored by reason of insufficiency of funds or credit which was not coursed through the clearing system shall be returned by the drawee bank to the holder or the negotiating bank, as the case may be, not later than the business day following the

date the COCI is presented for payment with the drawee bank. The negotiating bank shall, in turn, return a COCI dishonored by reason of insufficiency of funds or credit to the holder not later than the business day following its receipt of the dishonored COCI from the drawee bank.

SEC. X204, MRB: The following officers and employees of banks are prohibited from maintaining demand deposits or current accounts with the banking office in which they are assigned:

a. All officers;

b. Employees of the bank’s cash department/cash units; and c. Other employees who have direct and immediate responsibility in the handling of transactions and/or records pertaining to demand deposits or current accounts.

The above-mentioned prohibition shall include the spouses and relatives within the second degree of consanguinity and affinity of the officers and employees covered by the prohibition, and the business interests of such officers and employees, their spouses and relatives within the second degree of consanguinity and affinity, in single proprietorships, or partnerships or corporations in which such officers and employees, individually or as a group, own or control at least a majority of the capital of the partnership or the outstanding subscribed capital stock (voting and non-voting) of the corporation. BPI FAMILY SAVINGS BANK v. FIRST METRO INVESTMENT CORP, 429 SCRA 30 (2004)

DOCTRINE: Demand Deposits are “all those liabilities of the Bangko Sentral and of other banks which are denominated in the Philippine currecncy and are subject to payment in legal tender upon demand by the presentation of depositor’s checks. Under CB Circular No. 22 (Series of 1994), “demand deposits shall not be subject to any interest rate ceiling.” This, in effect, is an open authority to pay interest on demand deposits, such interest not being subject to any rate ceiling.

FACTS

FMIC, through its Executive Vice President Antonio Ong, opened a current account and deposited a METROBANK check P100 million with BPI Family Bank* (BPI FB). BPI FB, guaranteed the payment of P14,667,687.01 representing 17% per annum interest of P100 million deposited by FMIC. The latter, in turn, assured BPI FB that it will maintain its deposit of P100 million for a period of one year on condition that the interest of 17% per annum is paid in advance. Subsequently, BPI FB paid FMIC 17% interest or P14,667,687.01 upon clearance of the latter’s check deposit.

However, on August 29, 1989, on the basis of an Authority to Debit signed

by Ong and Ma. Theresa David, Senior Manager of FMIC, BPI FB transferred P80 million from FMIC’s current account to the savings account of Tevesteco Arrastre – Stevedoring, Inc.

FMIC denied having authorized the transfer of its funds to Tevesteco, claiming that the signatures of Ong and David were falsified. To recover immediately its deposit, FMIC, on September 12, 1989, issued BPI FB check no. 129077 for P86,057,646.72 payable to itself and drawn on its deposit with BPI FB SFDM branch. But upon presentation for payment on September 13, 1989, BPI FB dishonored the check as it was "drawn against insufficient funds" (DAIF).

FMIC filed with the RTC a civil case against BPI FB. RTC ruled in favor of FMIC, ordering BPI to pay P80M + interest at legal rate. CA modified amount to P65M + interest at 17%

ISSUE

Is it a Time Deposit or interest-bearing current account? HELD

Time Deposit. The parties did not intend the deposit to be treated as a demand deposit but rather as an interest-earning time deposit not withdrawable any time. Both agreed that the deposit of P100 million was non-withdrawable for one year upon payment in advance of the 17% per annum interest.

Ordinarily, a time deposit is defined as "one the payment of which cannot legally be required within such a specified number of days." In contrast, demand deposits are "all those liabilities of the Bangko Sentral and of other banks which are denominated in Philippine currency and are subject to payment in legal tender upon demand by the presentation of (depositor’s) checks."4 While it may be true that barely one month and seven days from the date of deposit, respondent FMIC demanded the withdrawal of P86,057,646.72 through the issuance of a check payable to itself, the same was made as a result of the fraudulent and unauthorized transfer by petitioner BPI FB of its P80 million deposit to Tevesteco’s savings account. Certainly, such was a normal reaction of respondent as a depositor to petitioner’s failure in its fiduciary duty to treat its account with the highest degree of care. Under this circumstance, the withdrawal of deposit by respondent FMIC before the one-year maturity date did not change the nature of its time deposit to one of demand deposit.

i. For UB and KB

SEC. 33, GBL: A bank other than a universal or commercial bank cannot accept or create demand deposits except upon

prior approval of, and subject to such conditions and rules as may be prescribed by the Monetary Board.

ii. For TB

SEC. 10 (B), THRIFT BANKS ACT: Open current or checking accounts: Provided, That the thrift bank has net assets of at least Twenty million pesos (P20,000,000) subject to such guidelines as may be established by the Monetary Board; and shall be allowed to directly clear its demand deposit operations with the Bangko Sentral and the Philippine Clearing House Corporation;

iii. For RB/Coop Bank

SEC. 12 (B), RURAL BANKS ACT: In addition to the operations especially authorized in this Act, any rural bank may:

x x x

Open current or checking accounts, provided the rural bank has net assets of at least Five million (P5,000,000) subject to such guidelines as may be established by the Monetary Board;

iv. For Islamic Banks

SEC. 6, PAR. 7 (A), ISLAMIC BANK CHARTER: To perform the following banks services:

x x x Open current or checking accounts; b. Savings Deposits

SEC. X213, MRB: Banks may be authorized by the BSP to solicit and accept deposits outside their bank premises, subject to the following conditions:

a. The financial condition of the bank applying for authority to solicit and collect savings deposits outside its bank premises is sound and the operations and the quality of the management thereof could reasonably assure the safety of the funds which may be entrusted to its deposit collectors and/or solicitors;

b. The proposed area where applicant bank intends to solicit shall be clearly defined;

c. Solicitation of deposits shall only be confined within a locality where there are no other banks in operation, or where it can be clearly established that the deposit potentials of the said locality are still untapped; and

d. Applicant bank shall institute and maintain the following minimum safeguards:

(1) All deposit solicitors shall be initially bonded for at least P1,000 subject to the increase thereof to approximate their daily collections;

(2) Deposit solicitors shall be provided with proper identification cards with photograph and signature of each respective solicitor, certified to by the appropriate officer of the bank. Said identification cards shall be worn by each solicitor at all times at the upper breast of his outer garment when soliciting deposits; (3) Adequate insurance coverage for funds in transit (representing deposits collected outside banking premises) shall be secured by applicant bank from insurance companies not included in the list of companies blacklisted by the Insurance Commissioner;

(4) Deposit slips shall be in booklet form, pre-numbered, intriplicate copies and in three (3) colors - the original to be issued to the depositor, the second copy to be used for posting reference, and the third copy to be retained in the booklet; (5) All collections shall be turned over to the cashier at the end of each day accompanied by a Collection Summary Report to be accomplished in duplicate which shall contain the following minimum information:

(a) Date of the report

(b) Names and addresses of the depositors (c) Deposit slip numbers

(d) Amounts of deposit

(e) Savings account and passbook numbers

(f) Name and signature of solicitor rendering the report (6) Depositors shall always be required to accomplish a Signature Card when opening an account, which card shall be used always as reference in checking the genuineness/authenticity of signatures affixed on withdrawal slips or authorizations for withdrawal;

(7) Deposits/withdrawals shall be recorded by the bookkeeper or any ledger clerk, except any bank solicitor, in the depositor’s ledger cards and passbooks on the same day that such deposits/withdrawals are accepted. Passbooks shall be returned to the depositors not later than the following business day; (8) At the end of each month, depositors shall be advised in writing of the balances of their deposits with the bank, the advise slips of which shall never be handcarried by the solicitors themselves; and

(9) Places of assignments of bank solicitors shall be rotated at least quarterly.

SEC. X214, MRB: Banks are prohibited from issuing/accepting withdrawal slips or any other similar instruments designed to effect withdrawals of savings deposits without requiring the depositors concerned to present their passbooks and accomplishing the necessary withdrawal slips, except for banks authorized by the BSP to adopt the no passbook withdrawal system: Provided, That banks which are already adopting the no passbook withdrawal system shall be given six (6) months from effectivity of this Manual of Regulations (MOR) to seek approval from the BSP.

The provisions of Sec. X202b shall also apply to withdrawals from savings deposits.

INTERNATIONAL EXCHANGE BANK v. CIR, 520 SCRA 688 (2007) DOCTRINE: A Fixed Savings Deposit (FSD), like a time deposit, provides for a higher interest rate when the deposit is not withdrawn within the required fixed period, otherwise, it earns interest pertaining to a regular savings deposit.

FACTS

International Exchange Bank served a Letter of Authority by the Commissioner of Internal Revenue, directing the examination of the bank’s book of accounts and other account records. The CIR found that it was liable for tax deficiencies, mostly Documentary Stamp Tax (DST). The Bank protested the assessment, arguing that there is no law imposing DST on Savings Account-Fixed Savings Deposit.

CTA Division decided that the bank was not liable for the whole assessment but still liable for the DST. CTA En Banc affirmed.

ISSUE

Whether a Savings Account-Fixed Savings Deposit evidenced by a passbook is subject to Documentary Stamp Tax

RULING

YES, it is subject to DST.

Section 180 of the Tax Code provides DST shall be imposed on “…certificates of deposits drawing interest, or orders for the payment of any sum of money otherwise than at sight or on demand…” a passbook representing an interest earning deposit account issued by a bank qualifies as a certificate of deposit drawing interest.

A document to be deemed a certificate of deposit requires no specific form as long as there is some written memorandum that the bank accepted a deposit of a sum of money from a depositor. What is important and controlling is the nature or meaning conveyed by the passbook and not the particular label or nomenclature attached to it, inasmuch as substance, not form, is paramount.

A depositor of a savings deposit-FSD is required to keep the money with the bank for at least thirty (30) days in order to yield a higher interest rate. Otherwise, the deposit earns interest pertaining only to a regular savings deposit. The same feature is present in a time deposit. A depositor is allowed to withdraw his time deposit even before its maturity subject to bank charges on its pre-termination and the depositor loses his entitlement