Amend the Foreign Currency Deposits Act?

Bank deposits in the Philippines are “absolutely confidential in nature”, which is the general rule. The controversy over the bank deposits of Supreme Court Chief Justice Renato Corona in the current impeachment process against him brings to fore the importance and rationale behind the Bank Secrecy Law, the general rule and the exceptions to the general policy on bank secrecy, and the economic and systemic effects of any effort to disregard this law.

Bank deposits, as a matter of policy and law, are confidential in nature. The basic prohibition against unauthorized access to bank account information is provided in Republic Act No. 1405, also known as the Bank Secrecy Act of 1955. The confidentiality of bank deposits, both peso and foreign currency deposits, is the basic state policy in the Philippines.

The expressed rationale of the Bank Secrecy Law is to discourage private hoarding of money and encourage people to deposit their money in banking institutions. The law rightly recognizes that depositors would hesitate placing money in banks if any Tom, Dick and Harry would have access to the accounts.

The primary benefit is not the interest earned by the depositor because, as compared to direct investments in business, deposit interest is minimal. The bigger impact of pooling the deposit accounts and lending/investing the money, which is the business of banks, is to provide large-scale financing for entrepreneurs, business people and other institutions. The law reflects the State’s policy to encourage savings in banks so the money “may be utilized by way of authorized loans and assist in economic development.”

The Bank Secrecy Law characterizes as absolutely confidential all deposits of whatever nature with banks and other financial institutions in the country. The law provides that “[a]ll deposits of whatever nature with banks or banking institutions in the Philippines . . . are hereby considered as of an absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or office.” The law also imposes criminal penalties against any official or employee of a banking institution, even private persons, to disclose any information concerning bank account deposits.

However, for peso deposits, “absolutely confidential” does not mean it cannot be looked into. Certain exceptions are provided under the Bank Secrecy Law. Account details may be divulged in certain instances, including: (1) upon written permission of the depositor; (2) in cases of impeachment; (3) upon order of a competent court in cases of bribery or dereliction of duty of public officials; and (4) in cases where the money deposited or invested is the subject matter of the litigation. There are other other exceptions provided by separate laws, but the general policy on bank secrecy remains the same.

Dollar-denominated and other foreign currency deposits, unlike peso deposits, enjoy absolute confidentiality in the true sense of the word. The Foreign Currency Deposits Act (Republic Act No. 6426, as amended) provides that disclosure of foreign currency deposits is allowed ONLY upon the written permission of the depositor. The difference in treatment is meant to encourage foreign currency accounts — to draw deposits from foreign lenders and investors. The account cannot be “examined, inquired or looked into by any person, government official, bureau or office whether judicial or administrative or legislative, or any other entity whether public or private.”

The law recognizes that “making absolute the protective cloak of confidentiality over such foreign currency deposits, exempting such deposits from tax, and guaranteeing the vested rights of depositors would better encourage the inflow of foreign currency deposits into the banking institutions authorized to accept such deposits in the Philippines thereby placing such institutions more in a position to properly channel the same to loans and investments in the Philippines, thus directly contributing to the economic development of the country.”

The absolute confidentiality of foreign currency deposits could pose a serious impediment in most cases. This is the very intent and design of the law. In the current impeachment trial, a number of lawmakers, including the prosecution panel composed of members of the House of Representatives and some Senator-judges, believe that there is a need to amend the Foreign Currency Deposits Act so that “officials accused of corruption will not hide behind this bank law.”

[If you are in a position to change banking policies, would you increase bank secrecy or would you make it more lenient? Do you agree with any move to amend the bank secrecy laws to make these laws more lenient? Pros and cons?]

The proposal to amend the bank secrecy laws could be a counterproductive knee-jerk reaction or it could be a needed step in the right direction. Whether to strengthen bank secrecy or allow more access to bank deposits is a delicate balancing act. Regardless of one’s stand on this issue, the fact remains that bank confidentiality is crucial in maintaining public trust in the banking system, an integral component of the country’s financial system.

(Perhaps our bar examinees who are waiting for the exam result could start the ball rolling (this is probably better than arguing about answers to the bar exams?).


  1. I cannot get the thinking of our HONORABLE lawmakers!

    In the first place, there are the ones who make laws. But why is it that when a law they created is not giving them favor, they want to amend it immediately. For what reason/s?

    Remember, bank secrecy laws are not only for politicians who want to hide their “ill gotten wealth”. They are also for the protection of private citizens who silently and diligently work to achieve a Class A or Class B status in the society.

    Laws are created to protect private citizens from intrusions of undesirable government officials or employees most especially politicians who, because of envy, may attack private citizens on baseless accusations.

    Why not rather pass a law to require politicians to make all their banks accounts and SALN local all foreign, to be open to the public at any time? It would be a very good law because as the maxim goes “public service is a public trust”. Politicians should serve as good examples of following the law, but as per observation, “lawmakers now are also the number one law breakers? Right prosecutors of the impeachment trial?

    “He who is clean will cast the first stone”. Prosecutors who are accusing the CJ having amassed ill gotten wealth must also show their bank accounts and SALN to the public so that the public will know if they are coming really with good hands and not that they are envious of the CJ.

  2. @medalofvalor

    superlike to your post….i suggest all those involved in the impeachment (including the prosecutors, congressmen who signed the impeachment, senator-judges, kim henares), etc.) must show their SALN to the public..para magkaalaman na. Tanggalin lahat ng mga kurakot!….

    Sorry another topic but it’s in relation to ill-gotten wealth: sa BIR ba may lifestyle check din? kasi they have a program named Run-After-Tax-Evaders (RATE), icheck kaya nila ang mga tauhan nila kasi baka they are the no. 1 tax evaders

  3. i agree with the move to amend our FCDA..

    when I first read the law during my Law School days, I immediately noticed its loopholes particularly its almost absolute secrecy…

    However, amendments to it must be intelligently crafted so as to suit not only the present impeachment thrilla, but most importantly to future cases.

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