c. Receivership

Receivership

The PDIC manages the affairs of the closed bank and preserves its assets for the benefit of creditors. (New PDIC Charter, Sec. 10[a][b])¹

Note: The receiver also has the duty to continue with the liquidation; thus, PDIC as receiver is also the liquidator. (Id., Sec. 4[c])²

The appointment of a receiver operates to suspend the authority of the bank and of its directors and officers over its property and effects. (Villanueva v. Court of Appeals, G.R. No. 114870, 26 May 1995)³

Requisites for Placement of a Bank under Receivership

• Report of the head of the supervising department involving the bank;
• Finding of the Monetary Board of the existence of any of the grounds for receivership;
• Decision of the Monetary Board to forbid the institution from doing business which decision may be done summarily and without need of prior hearing; and
• Notice in writing to the Board of Directors informing the institution of the Order of the Monetary Board.

Grounds for Receivership

When the Monetary Board finds that a bank or quasi-bank:

• Notified the BSP or publicly announced a unilateral closure; (Sec. 30[a])⁴
• Has been dormant for at least sixty (60) days; (Id.)
• Suspended the payment of its deposit or deposit substitute liabilities continuously for more than 30 days; (GBL, Sec 53)⁵
• Is unable to pay its liabilities as they become due in the ordinary course of business (“Equity test”)

Exception: Inability to pay caused by extraordinary demands induced by financial panic in the banking community (bank run). (Sec. 30[a])

• Has insufficient realizable assets to meet its liabilities (“Balance Sheet Test”); (Sec. 30[b])⁶
• Cannot continue in business without involving probable losses to its depositors or creditors; (Sec. 30[c])⁷
• Has willfully violated a cease-and-desist order under NCBA, Sec. 37⁸ (Administrative Sanctions) that has become final and involves acts or transactions which amount to fraud or a dissipation of assets; (Sec. 30[d])⁹
• If a bank persists in conducting its business in an unsafe or unsound manner. (GBL, Sec. 56)¹⁰