Foreign Currency Deposit System Law

Section 2 authorizes any person, natural or juridical to deposit foreign currencies with Philippine banks in good standing.
Depositing must be done in accordance with the Act’s provisions.
Deposits must be made with banks designated by the Central Bank for this purpose.
Deposited foreign currencies must be acceptable as part of the international reserve.
Deposits must exclude foreign currencies that are required by the Central Bank to be surrendered under Republic Act No. 265 (Section 2).

Section 3 gives authority to the Central Bank–designated banks to accept foreign currency deposits.
Banks may accept deposits and accept foreign currencies in trust, and numbered accounts for recording and servicing of deposits are allowed (Section 3).
Banks may issue certificates to evidence deposits.
Banks may discount the certificates.
Banks may accept deposits as collateral for loans, subject to Central Bank rules and regulations (Section 3).
Banks may pay interest in foreign currency on such deposits (Section 3).

Section 4 requires depository banks to maintain one hundred percent (100%) foreign currency cover for their deposit liabilities at all times, subject to an exception by the Monetary Board.
The Monetary Board may otherwise prescribe or allow a different arrangement by unanimous vote of all incumbent members (Section 4).
At least fifteen percent (15%) of the cover must be in the form of foreign currency deposit with the Central Bank (Section 4).
The remaining cover must be in the form of foreign currency deposits, foreign currency loans, or foreign currency securities (Section 4).
Foreign currency loans or securities must have short-term maturities and be readily marketable (Section 4).
Foreign currency loans may include loans to domestic enterprises that are export oriented or registered with the Board of Investments, subject to Monetary Board limitations (Section 4).
The foreign currency cover must be in the same currency as the corresponding foreign currency deposit liability (Section 4).
The Central Bank may pay interest on foreign currency deposits, and if requested, shall exchange foreign currency notes and coins into foreign currency instruments drawn on its depository banks (Section 4).

Section 5 provides that there shall be no restriction on withdrawal by the depositor of the deposit.
Section 5 also provides that there shall be no restriction on transferability of the deposit abroad.
Any restriction that exists must arise from the contract between the depositor and the bank (Section 5).

Section 6 exempts from income tax the interests on deposits under this Act belonging to non residents not engaged in trade or business in the Philippines.

Section 7 requires the Monetary Board of the Central Bank to promulgate rules and regulations necessary to carry out the Act.
Section 7 provides that the rules and regulations take effect only after publication in the Official Gazette and in a newspaper of national circulation for at least once a week for three consecutive weeks.
Section 7 mandates that if new rules and regulations decrease the rights of depositors, the rules and regulations at the time the deposit was made govern.

Section 8 provides that the secrecy of deposits under this Act is governed by Republic Act No. 1405.

Section 9 provides that deposits under this Act are insured under Republic Act No. 3591, as amended, and its implementing rules and regulations.
Section 9 requires that insurance payment be made in the same currency in which the insured deposits are denominated.

Section 10 imposes criminal liability for any willful violation of the Act or any regulation duly promulgated by the Monetary Board pursuant to the Act.
Upon conviction, the offender faces imprisonment of not less than one year nor more than five years, or a fine of not less than PHP 5,000 nor more than PHP 25,000, or both, at the discretion of the court (Section 10).

Section 11 declares the Act separable; if one or more provisions are held unconstitutional, the validity of other provisions is not affected.
Section 12 repeals, amends, or modifies all inconsistent Acts, executive orders, rules and regulations, or parts thereof.
Section 12 preserves deposits made under repealed or modified inconsistent rules: repeal/modification is made without prejudice to deposits made thereunder.
Section 13 sets effectivity as upon approval on April 4, 1972.