The Monetary Board of the BSP determines whether a person or entity shall perform banking or quasi-banking functions. The GBL requires banks and other financial institutions to be stock corporations with funds obtained from the public (equivalent to deposits/investments of at least 20 persons). There are minimum capital requirements that must be met. In granting authorization/license, the Monetary Board shall take into consideration an entity’s capability in terms of its financial resources, technical expertise and integrity.
Once authorized, the powers and scope of authority of banks shall be based on its classification (i.e., universal bank, commercial bank, thrift banks,1 rural banks, cooperative banks, Islamic banks and quasi-banks2). In addition to the powers authorized for a commercial bank in Section 29 of the GBL, a universal bank generally has the authority to exercise the powers of an investment house, as provided in existing laws, and the power to invest in non-allied enterprises. Commercial banks possess general powers incident to corporations and all such powers as may be necessary to carry out the business of commercial banking.3
An investment company that is engaged solely in investing, reinvesting or trading in securities is not engaged in banking and needs not comply with the requirements of the General Banking Law.4
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1. Further classified into: (a) savings and mortgage banks; (b) stock savings and loan associations; and (c) private development banks.
2. Quasi-banks are entities engaged in the borrowing of funds through the issuance, endorsement or assignment, with recourse or acceptance of deposit substitutes, for purposes of relending or purchasing of receivables and other obligations.
3. These include accepting drafts and issuing letters of credit; discounting and negotiating promissory notes, drafts, bills of exchange and other evidence of debt; accepting or creating demand deposits; receiving other types of deposits and deposit substitutes; buying and selling foreign exchange and gold or silver bullion; acquiring marketable bonds and other debt securities; and extending credit, subject to such rules as the Monetary Board may promulgate. These rules may include the determination of bonds and other debt securities eligible for investment, and the maturities and aggregate amount of such investment.
4. Banas vs. Asia Pacific Finance Corporation, G.R. No. 128703, 18 October 2000.