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PHILIPPINE DEPOSIT INSURANCE CORPORATION v. CITIBANK

FACTS:

The petitioner, Philippine Deposit Insurance Corporation (PDIC), assessed respondent banks Citibank, N.A. (Citibank) and Bank of America, S.T. & N.A. (BA) for deficiency premiums on dollar deposits. PDIC found that Citibank received a total of P11,923,163,908.00 in dollars from its head office and other foreign branches, while BA received P629,311,869.10 in dollars. These funds were not reported as deposit liabilities subject to assessment for insurance by PDIC. PDIC assessed Citibank for deficiency in the sum of P1,595,081.96 and sought the remittance of P109,264.83 from BA. Citibank and BA each filed a petition for declaratory relief before the Regional Trial Court (RTC) seeking a ruling that the money placements were not deposits and therefore not insurable deposit liabilities. The RTC ruled in favor of Citibank and BA, stating that the money placements were not assessable for insurance purposes as they were deposits made outside of the Philippines. The Court of Appeals (CA) affirmed the RTC's decision, finding that the funds were part of the bank's internal dealings and that there was no law or jurisprudence on the treatment of inter-branch deposits for insurance purposes. PDIC now seeks a review of the CA's decision, questioning whether the subject dollar deposits are assessable for insurance purposes under the PDIC Charter.

ISSUES:

  1. Whether the head offices and individual foreign branches of Citibank and BA are separate and independent entities

  2. Whether the funds placed in the Philippine branches should be treated as deposits subject to deposit insurance under the PDIC Charter

  3. Whether the head office of a foreign bank and its branches are considered separate and distinct from their Philippine branches under the Philippine Deposit Insurance Corporation (PDIC) Charter.

  4. Whether the funds received by Citibank and BA are considered deposits under the definition of the PDIC Charter.

  5. Whether the funds received by the respondent banks from their head office and other branches are subject to assessment for deposit insurance as required by the PDIC Charter.

  6. Whether the funds in question are considered deposits within the definition of the PDIC Charter.

RULING:

  1. The head offices and individual foreign branches of Citibank and BA are not separate and independent entities. They are considered as one legal entity under Philippine law.

  2. The funds placed in the Philippine branches should not be treated as deposits subject to deposit insurance under the PDIC Charter.

  3. The head office of a foreign bank and its branches are not considered separate and distinct from their Philippine branches under the PDIC Charter. The Court agrees with the ruling of the CA that there is nothing in the definition of a "bank" and a "banking institution" in Section 3(b) of the PDIC Charter which explicitly states such separation. The head office and its branches are considered as one legal entity, although branches are treated as separate business units for commercial and financial reporting purposes. Therefore, the head office remains responsible and answerable for the liabilities of its branches which are under its supervision and control.

  4. The funds received by Citibank and BA in the form of dollar deposits are not considered deposits under the definition of the PDIC Charter. The PDIC asserts that these funds are deposits, while the respondents argue that they are money placements. The Court notes that the funds were received by the respondents in the course of their banking operations from their head office and foreign branches and were recorded in their books as "Account-Head Office/Branches-Time Deposits." However, the respondents explain that these funds are part of inter-branch transactions for the acquisition of foreign currency. The Court finds that the interest rate and maturity date attached to these funds are only for the purpose of debit and credit entries in the inter-branch accounts. Therefore, the funds are not considered deposits within the meaning of the PDIC Charter.

  5. The Supreme Court held that the funds in question are not subject to assessment for deposit insurance and are excluded from assessment. The Court ruled that the funds received by the respondent banks from their head office and other branches are not deposits within the definition of the PDIC Charter. The funds, which resulted from inter-branch transactions, were payable outside of the Philippines and were not considered a deposit under the PDIC Charter. The Court considered the exclusions provided in the PDIC Charter and the practice of the FDIC, after which PDIC was modeled, in excluding inter-branch deposits from a bank's total deposit liabilities subject to assessment.

PRINCIPLES:

  • A branch of a foreign bank is not a separate legal entity from its head office and other foreign branches.

  • The head office of a foreign bank is required to guarantee the prompt payment of all liabilities of its Philippine branch.

  • The purpose of the PDIC is to insure deposits made by third parties and not funds placed by the foreign bank itself.

  • The head office of a bank and its branches are considered as one legal entity under the PDIC Charter. While branches are treated as separate business units for commercial and financial reporting purposes, the head office remains responsible and answerable for the liabilities of its branches which are under its supervision and control.

  • Funds received by an authorized foreign bank branch in the Philippines may not necessarily be considered deposits under the PDIC Charter if they are part of inter-branch transactions for the acquisition of foreign currency and are not intended for investment purposes.

  • Factual findings of the trial court, when adopted and confirmed by the appellate court, are binding and conclusive on the Supreme Court and will generally not be reviewed on appeal.

  • The definition of "deposit" under the PDIC Charter includes the unpaid balance of money or its equivalent received by a bank, for which it has given or is obliged to give credit, and is evidenced by a certificate of deposit.

  • Funds payable outside of the Philippines are excluded from the definition of deposit liabilities and are not subject to assessment for deposit insurance.

  • Inter-branch deposits, referring to funds of one branch deposited in another branch of the same parent company, are commonly excluded from a bank's total deposit liabilities subject to assessment.