Law Summary
Authority to Deposit Foreign Currencies
- Permits any natural or juridical person to deposit foreign currencies with designated Philippine banks.
- Foreign currencies must be acceptable as part of the international reserve.
- Exceptions apply to currencies required by the Central Bank to be surrendered under Republic Act No. 265.
Banks' Authority to Accept Foreign Currency Deposits
- Banks designated by the Central Bank may accept foreign currency deposits and hold foreign currencies in trust.
- Numbered accounts are allowed for the recording and servicing of deposits.
- Banks can issue certificates evidencing foreign currency deposits.
- These certificates can be discounted.
- Deposits may be used as collateral for loans, subject to Central Bank regulations.
- Banks may pay interest on deposits in the same foreign currency.
Foreign Currency Cover Requirements
- Depository banks must maintain a 100% foreign currency cover for their deposit liabilities.
- At least 15% of the cover must be held as foreign currency deposits with the Central Bank.
- The remaining cover must be in foreign currency deposits, loans, or short-term, readily marketable foreign currency securities.
- Foreign currency loans may be extended to export-oriented or Board of Investments-registered domestic enterprises.
- Foreign currency cover must match the currency of the corresponding deposit liability.
- Central Bank may pay interest on the deposits it holds and facilitate exchange of foreign currency notes and coins into foreign currency instruments.
Withdrawability and Transferability of Deposits
- Depositors have unrestricted rights to withdraw or transfer deposits abroad.
- Limitations only arise from the contract between the depositor and the bank.
Tax Exemption on Interests
- Interest earned on deposits by non-residents not engaged in Philippine trade or business is exempt from income tax.
Rules and Regulations
- The Monetary Board of the Central Bank is empowered to issue rules and regulations to implement the Act.
- All new rules take effect after publication in the Official Gazette and a national newspaper for three consecutive weeks.
- If new regulations reduce depositors' rights, the rules existing at the time of deposit prevail.
Secrecy of Deposits
- Deposits under this Act are subject to the secrecy provisions of Republic Act No. 1405.
Deposit Insurance Coverage
- Foreign currency deposits are insured under Republic Act No. 3591, as amended.
- Insurance payments must be made in the same currency as the insured deposits.
Penal Provisions
- Willful violation of this Act or its regulations can lead to imprisonment from one to five years.
- Violators may also be fined between five thousand to twenty-five thousand pesos, or both penalties may apply.
Separability Clause
- If any provision is held unconstitutional, the other provisions remain valid and effective.
Repealing Clause
- Any inconsistent laws, executive orders, rules or regulations are repealed or amended accordingly.
- Existing deposits under prior laws remain unaffected.
Effectivity
- The Act took effect upon approval on April 4, 1972.